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Maharashtra's financial landscape presents a complex picture, as revealed in the lead-up to the 2025 budget. The state boasts impressive GST collection figures, topping the charts nationally with Rs.30,637 crore for February 2025. Yet, this achievement is juxtaposed against the Finance Minister Ajit Pawar’s request for a supplementary Rs.6,486 crore just days before the budget presentation, highlighting underlying fiscal pressures. The central challenge facing Pawar is instilling financial discipline, particularly given the spending patterns of the Mahayuti alliance, which comprises the BJP, Eknath Shinde’s Shiv Sena, and Pawar’s own Nationalist Congress Party. This alliance secured victory in the 2024 Assembly elections but has since been criticized for prioritizing populist schemes over fiscal prudence. Several high-profile initiatives, including the Ladki Bahin scheme (costing Rs.46,000 crore), the Tirth Darshan scheme, the Anandacha Shidha scheme (free ration distribution), and the Chief Minister Internship scheme (stipends for graduates), have collectively burdened the state exchequer with expenses exceeding Rs.1 lakh crore. This significant expenditure marks a substantial increase from the Rs.85,000 crore deficit recorded between 2022 and 2024, during which the government approved numerous infrastructure projects across sectors like health, public works, medical education, and rural development. In light of these financial realities, Pawar's primary task during the 2025-26 budget presentation will be to articulate a credible strategy for reducing the state's fiscal deficit. The government has ostensibly taken steps to enhance financial oversight and control. The Budget Estimate Allocation Monitoring System (BEAMS) within the finance department is designed to provide real-time visibility into fund allocations and their utilization status across different departments. This system aims to improve transparency and accountability in government spending. However, despite these efforts, disparities between budget allocations and actual expenditure persist. While Pawar announced an allocation of over Rs.4 lakh crore to various departments in the interim budget of June 2024 (representing 54% of the total budget), only approximately Rs.3 lakh crore (43% of the budget) had been spent by March 1, indicating potential inefficiencies or delays in implementation. Furthermore, there is speculation that the government may resort to curtailing or discontinuing certain schemes, such as the Anandacha Shidha and Shiv Bhojan Thali, to alleviate financial strain. The Ladki Bahin scheme is also undergoing scrutiny, with reports indicating that approximately five lakh women have been deemed ineligible for the program. Additionally, beautification projects initiated by Chief Minister Shinde are likely to be put on hold, reflecting a broader effort to prioritize essential spending over discretionary initiatives. The escalating debt burden is a major concern for Maharashtra. The state is now classified as one of the most indebted in the country. NITI Aayog's financial health index has cautioned that the state's development is being hampered by its debt levels. The state's debt is projected to exceed Rs.7 crore in FY 2024-25. NITI Aayog has observed that the state's debt has grown at an average rate of 9.92% per year between 2018-19 and 2022-23, and that new loans are increasingly being used to service existing debt obligations, creating a cycle of indebtedness. The Prime Minister's Economic Advisory Council has also noted a decline in Maharashtra's share of the national gross State domestic product (GSDP), falling from 15% in 2014 to 13% in 2024. Despite the state government's claims of attracting significant foreign direct investment, data suggests a more nuanced picture. Maharashtra's economic survey, released in June 2024, reveals a decline in the state's share of the service sector over the past five years. Moreover, the manufacturing sector, once a cornerstone of the state's economy, has experienced negative growth of -1% between 2019 and 2024. This decline is particularly concerning given Maharashtra's historical role as a manufacturing hub. The state government faces the dual challenge of addressing its fiscal deficit and fostering economic growth. To achieve these objectives, it will need to diversify its revenue sources. In 2024, approximately 45% of the state's revenue came from GST. Taxes on vehicles and electricity were also significant contributors. The government is reportedly considering a new excise policy to augment its revenue streams. In addition to fiscal measures, the budget is expected to prioritize investment in agriculture. The 2024 budget allocated Rs.35,000 crore to the agricultural sector, and a further increase in funding is anticipated to address the sector's needs. Chief Minister Devendra Fadnavis is actively pursuing initiatives to address water scarcity in the Western Vidarbha region, including projects to divert water from Gosikhurd in eastern Vidarbha and to connect rivers in eastern and western Vidarbha, with a total investment of Rs.70,000 crore. Ajit Pawar's reputation as a disciplinarian is expected to influence the budget's priorities and approach. The budget will serve as a crucial test of his ability to balance fiscal responsibility with the need to support economic growth and social welfare programs. The success of the budget will depend on the government's ability to implement reforms effectively, attract investment, and address the underlying structural issues that have contributed to the state's financial challenges.
The complexities facing Maharashtra's financial health require a multi-faceted approach that goes beyond mere fiscal consolidation. While reducing the deficit and controlling expenditure are crucial, they are insufficient without a corresponding focus on stimulating economic growth and enhancing revenue generation. The dependence on GST as the primary source of revenue creates vulnerabilities, making the state susceptible to fluctuations in economic activity and consumption patterns. Diversifying the revenue base is, therefore, paramount. Exploring new avenues for taxation, such as property taxes, professional taxes, and environmental levies, could provide a more stable and resilient revenue stream. However, implementing such measures requires careful consideration of their potential impact on businesses and individuals, ensuring that they do not stifle economic activity or disproportionately burden vulnerable populations. The decline in Maharashtra's manufacturing sector is a significant cause for concern, given its historical importance to the state's economy. Revitalizing this sector requires a comprehensive strategy that addresses the underlying factors contributing to its decline, such as infrastructure bottlenecks, regulatory hurdles, and skill gaps. Investing in infrastructure development, particularly transportation networks and industrial parks, is essential to improve the competitiveness of Maharashtra's manufacturing sector. Streamlining regulations and reducing bureaucratic red tape can also create a more conducive environment for businesses to thrive. Addressing skill gaps through vocational training programs and partnerships with industry can ensure that the workforce is equipped with the skills needed to meet the evolving demands of the manufacturing sector. The agricultural sector, despite its significant contribution to the state's economy, often faces challenges related to water scarcity, climate change, and market access. Investing in irrigation infrastructure, promoting water-efficient farming practices, and providing access to modern technologies can enhance agricultural productivity and resilience. Furthermore, strengthening market linkages and ensuring fair prices for agricultural produce can improve the livelihoods of farmers and encourage greater investment in the sector. The Ladki Bahin scheme, while intended to empower women and improve their financial well-being, has faced scrutiny due to concerns about eligibility and implementation. Streamlining the application process, strengthening verification mechanisms, and ensuring that benefits reach the intended beneficiaries are crucial to maximize the scheme's effectiveness. Additionally, integrating the scheme with other programs aimed at promoting women's education, healthcare, and economic empowerment can create a more holistic and sustainable impact. The state government's efforts to enhance financial oversight through the BEAMS system are commendable, but their effectiveness depends on the system's ability to provide accurate, timely, and actionable information. Strengthening the system's data analytics capabilities, enhancing user training, and ensuring that it is integrated with other government systems can improve its ability to monitor expenditure, identify inefficiencies, and inform decision-making. Addressing the state's debt burden requires a proactive and sustainable debt management strategy. This includes refinancing existing debt at lower interest rates, diversifying funding sources, and implementing measures to control borrowing and reduce expenditure. Furthermore, improving the state's credit rating can reduce borrowing costs and attract more investment. In addition to these specific measures, a broader focus on good governance, transparency, and accountability is essential to build trust and confidence in the state government's financial management. This includes strengthening anti-corruption measures, promoting citizen participation in budget planning, and ensuring that government decisions are based on evidence and sound economic principles. The Maharashtra budget 2025 presents a critical opportunity for the state government to address its financial challenges and set a course for sustainable economic growth. By adopting a comprehensive and integrated approach that combines fiscal discipline, economic diversification, and social inclusion, Maharashtra can overcome its challenges and realize its full potential.
Furthermore, the state government should foster a culture of innovation and entrepreneurship. Supporting startups and small businesses through incubators, accelerators, and access to funding can create new jobs and drive economic growth. Encouraging research and development in emerging technologies, such as artificial intelligence, biotechnology, and renewable energy, can position Maharashtra as a leader in these fields. Investing in education and skills development is crucial to prepare the workforce for the future. This includes improving the quality of education at all levels, promoting vocational training programs, and providing opportunities for lifelong learning. Encouraging collaboration between academia and industry can ensure that education and training programs are aligned with the needs of the labor market. Infrastructure development is essential to support economic growth and improve the quality of life for citizens. This includes investing in transportation networks, energy infrastructure, and digital infrastructure. Prioritizing sustainable infrastructure projects that minimize environmental impact can ensure that development is both economically and environmentally sound. Social inclusion is essential to ensure that all citizens benefit from economic growth. This includes addressing poverty, reducing inequality, and promoting access to education, healthcare, and other essential services for marginalized communities. Investing in social programs and safety nets can provide support for vulnerable populations and help them to participate fully in the economy. Addressing climate change is a critical challenge that requires urgent action. This includes reducing greenhouse gas emissions, promoting renewable energy, and adapting to the impacts of climate change. Investing in climate-resilient infrastructure and promoting sustainable agricultural practices can help to mitigate the risks of climate change and protect the environment. The state government should also promote public-private partnerships to leverage private sector expertise and investment in infrastructure and other development projects. Ensuring that these partnerships are transparent, accountable, and aligned with the public interest is essential to maximize their benefits. Finally, the state government should engage in effective communication and outreach to inform citizens about its policies and programs and to solicit their feedback. Building trust and confidence in government is essential to ensure that citizens are supportive of the government's efforts to address the state's challenges and promote economic growth. In conclusion, the Maharashtra budget 2025 presents a complex set of challenges and opportunities. By adopting a comprehensive and integrated approach that addresses fiscal discipline, economic diversification, social inclusion, and environmental sustainability, the state government can overcome its challenges and set a course for long-term prosperity. Success will hinge on effective implementation, transparency, accountability, and a commitment to engaging with citizens and stakeholders.
Source: Maharashtra Budget 2025: Ajit Pawar’s Strategy to Tackle Debt, Review Schemes, and Spur Growth