Maharashtra's Spending May Push Fiscal Deficit Beyond Target: Report

The Maharashtra government's increased welfare spending, introduced just before the elections, could push the fiscal deficit beyond its target. This situation may result in a reduction in capital expenditure, according to a recent report.

India Ratings and Research projected that the fiscal deficit for fiscal 2025 will reach 3%, exceeding the budget target of 2.5%. The report notes that the state is likely to increase borrowings to cover the shortfall.

The government presented the final budget for Fiscal 2025 of Rs 6.12 lakh crore on June 28, and also tabled supplementary demands of Rs 94,889 crore on July 10 primarily toward social welfare schemes, it said.

The supplementary demands include Rs 25,000 crore for Mukhyamantri Majhi Ladki Bahin Yojana, Rs 6,056 crore for skill development, Rs 4,317 crore towards social justice, Rs 4,185 crore on public health, it said.

The revenue deficit will come at 1.3% as against the budget target of 0.5%, it said.

"The fiscal deficit is expected to be around 3% in Fiscal 2025 with a nominal GSDP growth assumption of 9.5%," it said.

The rating agency also noted that to manage the fiscal deficit and accommodate increased revenue expenditure, there might be a reduction in capital expenditure in fiscal 2025 compared to the initial budget estimates.

The state would be availing fresh market borrowings worth Rs 75,917 crore, which would finance 68.8% of its budgeted fiscal deficit in Fiscal 2025, the agency said.

(With inputs from PTI)