Fiscal situation in Maharashtra: An assessment, a critique, and some policy suggestions

This paper - focusing on Maharashtra - is part of a broader programme that is trying to understand the fiscal problems being faced at the level of state governments. This paper provides a brief overview of the economic environment in Maharashtra including the socio-economic development of the state as a backdrop. Within this context, we assess and analyse the fiscal situation in Maharashtra, which forms the main thrust of this paper. This is done in two ways, one, by examining its relative performance vis-à-vis other major states of the Indian union and two, by looking at its temporal performance over a ten year period. Fiscal indiscipline on the expenditure front, large interest payments, additional borrowing to meet current expenditures are all sins that the GoM is found to have been guilty of. The power sector has been discussed as a bottleneck to growth of Maharashtra's economy thereby adding to the fiscal woes of the state. EGS, Cotton Monopoly Scheme and sugar cooperative have also been touched upon. For the reform package to be comprehensive, we would like to see policy measures being initiated at three levelspolicies at the level of the state, which are financial and administrative in the main; policies that the central government must pursue in its dealing with the states; and the third type that are overarching in a sense that they concern the governments at all levels and have to do with capacity building as well as having pragmatic regulatory framework in place.