Mumbai, Aug 17 (IANS) Maharashtra’s ballooning public debt reaching Rs 9.37 lakh crore, has placed it second in absolute terms behind Tamil Nadu.
While absolute numbers paint a stark picture, critical analysis reveals a structural squeeze on the state’s public finances, as the expenditure is systematically crowding out capital expenditure (Capex), posing major risks to the state’s target of reaching a $1 trillion economy by 2030.
The higher public debt needs to be scrutinised against the backdrop of some key economic indicators and how does it help the administration to implement its further strategies.
Maharashtra’s present Debt-to-GSDP Ratio stands at 18.3% to 18.4%. which is well within the Fiscal Responsibility and Budget Management (FRBM) ceiling of 25%, indicating solvency, but the fiscal space is tightening rapidly. The Revenue Deficit is ranging between Rs 40,000 to Rs 45,000 crore annually.
The state government’s committed outlays including salaries, pensions, and interest payments gobble up over 55–60% of revenue receipts while interest burden for servicing the accumulated debt costs over Rs 64,000 crore annually. The core issue is how debt is being deployed. Healthy fiscal management relies on borrowing to fund infrastructure that generates long-term economic output.
However, Maharashtra’s structural revenue deficit means that a growing portion of fresh market borrowings goes toward covering current operational expenses and welfare subsidies rather than asset-creating capital projects.
With committed costs (salaries, pensions, interest) absorbing the lion’s share of revenue receipts, the state’s budget for net capital outlay sits around Rs 97,000 crore to Rs 1.2 lakh crore. This creates a vicious cycle.
Public infrastructure investments (irrigation, industrial corridors, freight links) get delayed or scaled back. The state is increasingly relying on off-budget borrowings via public entities (like MMRDA, MSRDC, and MSEDCL), shifting state liabilities off the main balance sheet without reducing actual risks, said the government sources.
Economists argue that achieving a $1 trillion economy requires sustained annual growth rates above 13–14% in nominal terms. If public capital expenditure remains constrained, private investment may hesitate to fill the infrastructure gap including last-mile road networks, power distribution, port linkages. Flagship cash-transfer and subsidy schemes create rigid, long-term spending commitments that are politically difficult to roll back.
Servicing Rs 9.37 lakh crore in market loans consumes money that could otherwise build hospitals, schools, or tech parks. Guarantees extended to state corporations (exceeding Rs 1.2 lakh crore) threaten to pull on the main budget if these entities default, observed the economists.
Finance department experts suggest that the government can tackle the situation by exploring various options. The government may consider monetisation of land banks around major transit corridors including Samruddhi Mahamarg, Metro hubs and existing brownfield infrastructure to unlock non-tax revenue.
The government can shift funding of large capital projects (ports, expressways, industrial hubs) to Public-Private Partnership (PPP) frameworks, using state funds strictly for Viability Gap Funding (VGF).
Furthermore, the government may aggressively implement administrative and pension reform forms through transition towards contributory pension structures, rationalisation of redundant government departments, and leveraging digital governance to curb administrative overheads.
According to sources, the government will increase its focus on enhancing state’s Own Tax Revenue (SOTR) by streamlining GST compliance, revising land registration values, and adjusting levies on non-essential services.
It may re-evaluate open-ended subsidies by introducing income caps and direct benefit transfer (DBT) leakage checks to ensure welfare funds reach intended recipients without inflating the revenue deficit.
–IANS
sj/mr
