Maharashtra, which has the single largest share in national GDP with close to 16 percent and the worst hit with the pandemic, has fallen into the worst debt trap with fiscal deficit hitting the highest since 2005-06 at 3.3 percent, up over 175 percent, according to a report.
In line with higher-than-budgeted deficit ratios, the state's debt-to-GSDP ratio has jumped to 20.2 percent in 2020-21, up from 16 percent in 2019-20, and the 2020-21 Budget Estimate of 16.2 percent, India Ratings said in the report quoting revised budget estimates for FY21.
The most-industrialised state's fiscal deficit jumped to 3.3 percent of gross state domestic product (GSDP) in 2020-21 as against the Budget Estimate of 1.7 percent, which was 1.9 percent in 2019-20, and this is the highest fiscal deficit since 2005-06.
India Ratings Principal Economist and Public Finance Director Sunil Kumar Sinha said that at 3.3 percent deficit, the state saw a fiscal slippage of 175.2 percent in FY21, primarily due to a massive shortfall in revenue receipts.
The agency's analysis suggests that revenue receipts were significantly impacted due to the pandemic. The state was the worst hit with the highest number of infections of three million and the highest death toll of over 54,500 and still tops the lists in the second of the wave of the killer virus.
Being the first and the worst affected by the pandemic, the state had announced several measures to help ease the public and business from stress, such as stamp duty cut, annual tax exemption to transport vehicle owners and concession on licence fee under excise duty, leading to a lower revenue collection.
With such a higher-than-budgeted deficit ratios, the state's debt-to-GSDP ratio jumped to 20.2 percent in 2020-21, up from 16 percent in 2019-20, and the 2020-21 Budget Estimate of 16.2 percent.
According to the Revised Estimate, revenue account has a deficit of 1.7 percent of GSDP in 2020-21 as against Budget Estimate of 0.3 percent which in 2019-20 was 0.6 percent.
The state has projected a reduction in the revenue and fiscal deficits to 0.3 percent and 2.2 percent of GSDP, respectively, in the FY22 Budget.
Though the agency expects the state to be able to maintain fiscal deficit under 3 percent, the debt burden is likely to be jump to 20.6 percent in 2021-22.
The fiscal slippage originated entirely from the revenue side. Revenue receipts were lower by Rs 57,960 crore of the shortfall in state's own tax revenue.
As against such a high revenue shortfall, total expenditure was lower only by Rs 24,880 crore. Of this, revenue expenditure was compressed by Rs 21,290 crore and capex by Rs 3,590 crore.
But, the plunge in revenue receipts was much higher, resulting in a fiscal slippage of Rs 33,078 crore in FY21, which is 60.6 percent higher than FY21 budget estimate, it added.