 "Pre-poll welfare schemes may not hit Maharashtra govt's fiscal health: ICRA")
The series of welfare schemes announced by the Maharashtra government ahead of the assembly elections is unlikely to hit the fiscal health of the state in the financial year 2025 (FY25), according to rating agency ICRA.
The agency said that the state’s market borrowings remain within prudential norms.
Responding to queries at a webinar on state finances, Aditi Nayar, chief economist, ICRA said Maharashtra specifically has had many years of running a fiscal deficit, which was well below the threshold.
If you see over a period of time, their debt levels also did not grow at the same pace as many other states. It is one of the states with the lowest debt to GDP ratio in the entire sample (13 states), Nayar added.
The debt to Gross State Domestic Product (GSDP) ratio for Maharashtra stood at 15.5 per cent in FY24. It was 14.7 per cent in FY23 and 15.5 per cent in FY22, ICRA data showed.
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Ahead of assembly polls, the coalition government led by chief minister Eknath Shinde in the state has announced a number of welfare schemes, including crediting Rs 1,500 per month in accounts of women from low-income category.
Even on the guarantee point of view, the ICRA chief economist said Maharashtra fares quite well. As of now, their leverage levels are amongst the lowest in the sample.
There was a long period where they were not extending any fresh guarantees and the earlier guarantees which were there got extinguished over a period of time.
The ratio of guarantees to GSDP stood at 1.9 per cent in FY24. The ratio was 1.4 per cent for FY23 and 1.6 per cent in FY22, ICRA data showed.
ICRA has projected the combined capital spending of a sample of 13 major state governments to expand by 13 per cent to Rs 6.5 trillion in FY25. However, it is lower than the budget estimate (BE) of Rs 7.2 trillion for FY25, following a dull start to the capex in the initial months of this fiscal as well as the anticipated undershooting in states’ revenues.
The rating agency foresees a modest slippage in the combined revenue and fiscal deficits of 13 states in FY25 to Rs 2.2 trillion and Rs 8.8 trillion, respectively, from Rs 1.9 trillion and Rs 8.5 trillion, respectively, in the BE.