Finances Not So 'Ladli' As Maharashtra's Freebie Spending Climbs Ahead Of Elections
Populist schemes have seen an allocation of Rs 96,000 crore in the state budget, which is a substantial 2.2% of GSDP.
Faced with elections, the Maharashtra government's new flagship welfare programme 'Ladki Bahin' and other measures have increased burden on the state's finances even as growth in capital expenditure stagnates, according to a report from Emkay Global Financial Services Ltd.
The Eknath Shinde-led government has bumped up revenue expenditure, largely on sops and freebies, by 0.3 percentage point in its July budget. This takes the fiscal deficit target to 2.6%, compared to 2.3% set earlier.
Among the major schemes announced in the budget, the 'Ladki Bahin'—a financial assistance scheme modelled on Madhya Pradesh's 'Laadli Behna'—will cost the exchequer Rs 46,000 crore a year (1.1% of GSDP) for an estimated 2.5 crore beneficiaries. The funding is far more than the Rs 35,600 crore allocated to agricultural spending, Emkay noted.
This is in addition to the youth work training programme that will cost Rs 10,000 crore and free electricity scheme for farmers that will amount to Rs 14,800 crore.
In total, populist schemes have seen an allocation of Rs 96,000 crore in the budget, which is a substantial 2.2% of GSDP, and 19% of the state revenue.
India Ratings and Research has projected that the fiscal deficit for financial year 2024-25 will reach 3%, exceeding the budget target, and revenue deficit will come at 1.3% as against the target of 0.5%.
The populist commitments contrast sharply with Maharashtra's capital expenditure over the past five years. Despite being India's largest state by economic size, Maharashtra's capex-to-GSDP ratio averaged just 1.5% from fiscal 2019 to 2024, placing it at 16th out of 19 large states.
With committed expenditures like salaries, pensions, and interest payments consuming 55% of revenue, only 26% remains for discretionary spending. This limited discretionary budget is likely to further constrain Maharashtra's already relatively low capex, Emkay said.
'Ladki Bahin' Faces Challenges
Emkay said the 'Ladki Bahin' scheme is already facing administrative and implementation challenges, which could backfire on the ruling coalition’s electoral prospects, even as it would bode well for the state’s fiscal health.
Among the issues flagged is the infrastructure setup for the scheme. The applications can be made online but the software has not been tested, while internet connectivity remains extremely poor in rural areas, from where most applications will originate.
Processing the large volume of paper applications within the tight deadline of Aug. 31 will be challenging. Each district collector’s office is expected to handle over 20,000 forms each day to meet the deadline, a target that is highly unlikely to be achieved.
Maharashtra CM Eknath Shinde hands out 'Ladli Bahin' certificates to beneficiary women at an event in Kolhapur. (Source: X profile)
Elections are yet to be announced for the Maharashtra Legislative Assembly, but it is largely expected to be held in November after the festive season ends.
The ruling NDA coalition of Shiv Sena, BJP and NCP (led by Ajit Pawar) faced a drubbing in the Lok Sabha polls this year, as the opposition INDIA bloc parties comprising Shiv Sena-UBT, Congress and NCP-SP secured more parliamentary seats. Political observers have noted the Shinde government's massive welfare splurge as a means to build popularity ahead of assembly polls.
