Mumbai, Maharashtra
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Mumbai: The spate of welfare schemes and guarantees announced by the Eknath Shinde-led Maharashtra government is unlikely to dent the state's financial position, a domestic rating agency said.
Icra Ratings' chief economist Aditi Nayar also expects that there will not be a "runaway increase" in spending even though the "rhetoric may be very high".
She explained that Maharashtra fares well on the state debt front, and the leverage levels are among the lowest in the country.
Concerns have been raised in the recent past over schemes like the Rs 46,000-crore Ladki Bahin Yojana of providing cash handouts to women or the decision to discontinue tolls for cars while entering or exiting the financial capital.
The rating agency's assistant vice president Neetika Shridhar said Maharashtra has a sizeable amount of fiscal space because it has not been doing a lot of welfare spending in the last few years, which can limit the sacrifices that it may have to make to accommodate the financial pressure coming from new schemes.
"I don't think so because of this recent announcement there will be any major hit to the state, at least in FY25," she added.
Nayar explained that a government has to make a balancing act when it takes any decisions, which may put pressure on the finances, and may opt either to roll back revenue spending or defer capital expenditure to a later time, just to balance the books.
Additionally, there is also a possibility that the announcements done by the state do not necessarily go through from an implementation perspective.
States used to resort to off-budget borrowings in the past, but that is not possible any more because of the change in norms from the Centre, she added.
The nature of guarantees given by state governments has evolved over the last two decades, starting with commitments for capital expenditure items for works like irrigation projects in the 1990s to the power sector in the 2000s but have widened across lately.
Meanwhile, an analysis of 13 major states contributing over 82 per cent of India's GDP by the agency said their capital expenditure is set to rise by 13 per cent to Rs 6.5 lakh crore in FY25, which will be lower than the budgeted projections of Rs 7.2 lakh crore.
This is largely due to a dull start to the fiscal year with a 13.5 per cent contraction in the first four months of the fiscal, and also revenue collections of states undershooting expectations, the agency said.
The rating agency said it foresees a modest slippage in the combined revenue and fiscal deficits of the 13 states in FY25 to Rs 2.2 lakh crore and Rs 8.8 lakh crore, respectively, from Rs 1.9 lakh crore and Rs 8.5 lakh crore in the budget estimates.
The debt levels will rise marginally to 30 per cent of GSDP from 29.2 per cent in FY25, it added.