Ahead of assembly polls, CAG warned of severe debt strain for Maharashtra: Report

The Comptroller and Auditor General of India (CAG) raised serious concerns over Maharashtra's fiscal health in July this year, cautioning that the state's financial position may face severe strain in the coming years due to its mounting debt, The Indian Express reported on Monday. This warning came in July, and since then the Mahayuti and the Maha Vikas Aghadi (MVA) have announced a slew of costly welfare measures for the November 20 Assembly elections.

In its State Finances Audit Report for the financial year ending March 31, 2023, tabled in the Assembly on July 12, the CAG pointed out that 59.54% of Maharashtra’s outstanding public debt, amounting to Rs 2.75 lakh crore, is repayable over the next seven years. This is expected to put significant pressure on the state's budget, leaving limited room for any future government to fulfill its election pledges.

The report revealed that Maharashtra's total outstanding liabilities were Rs 6.61 lakh crore at the end of the 2022-23 fiscal, constituting 18.73% of its Gross State Domestic Product (GSDP). Public debt comprised Rs 5.32 lakh crore, with detailed maturity information available for Rs 4.62 lakh crore.

“The maturity profile of the outstanding public debt indicates that 59.54% (Rs 2,75,650.4 crore) of the total outstanding public debt for which maturity details are available (Rs 4,62,991.49 crore) are repayable within the next seven years, which may put a strain on the Government budget during that period. The State government would have to work out a well thought out borrowing repayment strategy and increase their own tax and non-tax revenue resources,” the report stated according to IE.

The financial obligations outlined by the CAG are crucial as both the ruling Mahayuti and the opposition MVA have proposed major welfare schemes. The MVA alliance — consisting of the Congress, Shiv Sena (UBT), and the Nationalist Congress Party (SP) — has promised a “five guarantees” package, including Rs 3,000 per month and free bus rides for women, a farm loan waiver of up to Rs 3 lakh, and a monthly support of Rs 4,000 for unemployed youth.

The ruling Mahayuti coalition has also announced its own set of promises, such as increasing the monthly payout under the Majhi Ladki Bahin Yojana from Rs 1,500 to Rs 2,100 and enhancing the Namo Shetkari Mahasanman Nidhi Yojana for farmers from Rs 12,000 to Rs 15,000 annually, alongside a farm loan waiver.

The financial implications of these promises are significant. The Mahayuti’s proposal to increase the Majhi Ladki Bahin Yojana payouts would result in an annual expenditure of Rs 63,000 crore to cover 2.5 crore women, a 40% increase from the current cost of Rs 45,000 crore. In contrast, the MVA’s proposed Rs 3,000 monthly payout would require an even higher budgetary outlay of Rs 90,000 crore annually, surpassing the Union government’s allocations for schemes like MGNREGS and the PM Kisan Samman Nidhi Yojana.

The CAG report underscored that the state's repayment obligations are set to escalate. By 2025-26, Maharashtra must repay Rs 94,845.35 crore in market loans and pay interest totaling Rs 83,453.17 crore. Over the next five years, the average annual outgo for principal and interest repayment will be approximately Rs 60,201.70 crore. For the period from 2028-29 to 2032-33, the state will need to pay an average of Rs 52,135.83 crore annually, including Rs 2,09,412.35 crore in market loan principal and Rs 51,266.80 crore in interest.

Highlighting the rising debt burden, the CAG noted, “Internal debt of the State Government increased by Rs 51,650.66 crore (201.08%) from Rs 25,686.29 crore in 2018-19 to Rs 77,336.95 crore in 2022-23. An amount of Rs 36,634.32 crore was paid toward interest on internal debt during 2022-23. Further, during 2022-23, 47% of internal debt raised was utilised for repayment of earlier debt as against 48% in 2021-22.”

The state’s fiscal liabilities as a proportion of GSDP have shown a rising trend, increasing from 17.27% in 2018-19 to 18.73% in 2022-23. The budget estimates for 2024-25 project the total debt stock at Rs 7,82,991 crore, or 18.35% of GSDP.