Mahayuti's mandate: Delivering on promises without derailing growth

Focus now shifts to promises for women, farmers, and youth. They raise fiscal concerns despite Maharashtra's disciplined finances, writes Indivjal Dhasmana

As the Mahayuti alliance decisively routed the Maha Vikas Aghadi (MVA) in Maharashtra’s Assembly elections, attention has shifted to the promises that propelled its victory. The coalition of the Bharatiya Janata Party (BJP), the Shiv Sena, and the Nationalist Congress Party (NCP) has pledged significant financial support to women, farmers, youth, and senior citizens.  These commitments, while politically potent, pose complex challenges for the state’s fiscal management.

  Maharashtra’s fiscal health offers some leeway. The state’s fiscal deficit remains well within the 3 per cent of gross state domestic product (GSDP) limit, while its revenue deficit is below 1 per cent.

  This fiscal discipline ensures that additional spending on electoral promises may not immediately trigger alarm. However, this may raise the revenue expenditure component — which is already 80-90 per cent of total spending of the past five years — ever further, leaving little room for capital expenditure for long-term growth. 

Capital expenditure has averaged around 3 per cent of GSDP (gross state domestic product) for five years, with capital outlay — funds allocated for asset creation — even lower. For instance, in 2022-23, capital outlay accounted for just 1.7 per cent of GSDP, compared to 1.9 per cent of GSDP for total capital expenditure.

  Among the key promises by the Mahayuti is the expansion of the Mukhyamantri Majhi Ladki Bahin Yojana (MMLBY). Monthly assistance for eligible women aged 21-65 is set to rise from Rs 1,500 to Rs 2,100. Modelled on Madhya Pradesh’s CM Ladli Behna Yojana, the MMLBY — which, according to political experts, proved instrumental in swaying voters in that state —is estimated to cost the exchequer an additional Rs 18,400 crore annually, taking the total burden to Rs 64,400 crore.  Union Road Transport & Highways Minister Nitin Gadkari had last month cautioned industry against relying too much on subsidies and grants as the state government also needed money for schemes such as the MMLBY.

  Farmers stand to gain from a proposed hike in assistance under the Namo Shetkari Mahasanman Nidhi, with annual payments rising to Rs 15,000 per household from Rs 12,000. So far, the state gives Rs 6,000 per household for the scheme, with the rest coming from the PM-Kisan Samman Nidhi. 

  This increase, benefiting 9.24 million farming families, would impose an additional Rs 2,772 crore annual cost. Debt waivers, another major promise, remain undefined, with fiscal implications contingent on the programme's contours.

  Youth and education have also been targeted. The alliance pledged a Rs 10,000 monthly stipend to one million students, adding Rs 12,000 crore to annual expenditure. Similarly, farmers are promised a minimum of Rs 6,000 per quintal for soybean crops, though the scheme’s cost will depend on procurement volumes and supplementary payments above the Centre’s minimum support price.

  Other commitments, such as higher monthly pensions for the elderly (from Rs 1,500 each to Rs 2,100), 20 per cent price alignment on minimum support price, food security and pucca houses for poor families, interest-free loans up to Rs 15 lakh for entrepreneurs from scheduled castes, scheduled tribes, and other backward classes, will collectively strain finances further.

  However, this year's Budget may not see a major impact on the revenue expenditure with only four months left for FY25 to end.  The full budgetary impact will become apparent next year, potentially nudging the fiscal deficit upward unless offset by robust revenue growth or cuts to capital expenditure. 

Much would depend on tax buoyancy of the state, as well as central transfers. Other streams of revenues — barring grants-in-aid from the Centre — are minor constituents.

 

Inflation is another pressing concern. While Maharashtra’s headline retail inflation stood at 4.2 per cent in the first seven months of this financial year — below the national average of 4.8 per cent — food and beverage inflation in the state remains high at 7.47 per cent, nearly the same as the all-India rate of 7.5 per cent. In October, food and beverages inflation rate in Maharashtra was 9.58 per cent, a shade lower than 9.69 per cent national average. 

The Mahayuti has assured of price stabilisation for essential commodities, even as the impact of this on the state's financial health remains unclear with details of the scheme awaited.