Mumbai, March 9
Maharashtra's Medium Term Fiscal Policy statement for 2026-27 presents a picture of a state trying to outpace a rising debt burden through aggressive infrastructure spending.
Although the headline figures suggest fiscal discipline, the underlying numbers indicate mounting long-term pressures. The document, released after the state Budget, shows that the state's discretionary fiscal space is shrinking rapidly.
Combined spending on salaries of Rs 1,75,951 crore, pensions of Rs 92,379 crore and interest payments of Rs 70,055 crore now absorbs 54.93 per cent of the state's total revenue receipts.
In effect, for every Rs 100 the state earns, more than Rs 55 is spent before funds can be directed to new schools, hospitals or welfare programmes.
"This high fixed cost base makes the state's budget extremely 'inelastic'. It cannot easily absorb economic shocks," the MTFP noted.
The document also projects that Maharashtra is entering a new phase of rising debt, with total liabilities expected to reach Rs 11,02,654 crore in 2026-27. The state's debt has more than doubled in eight years (rising from Rs 4.07 lakh crore in 2018-19).
"The only reason this isn't sounding alarm bells is the state's massive GSDP projected at Rs 51 lakh crore for 2025-26. The ratio sits at 20.38 per cent, which is safely below the 25 per cent FRBM ceiling, giving the government a 'technical' licence to continue borrowing," it said.
Interest payments are rising at roughly 11 to 12 per cent each year. By 2027, the state is expected to pay about Rs 192 crore every day only in interest.
The MTFP also projects a revenue deficit of Rs 40,552 crore for 2026 to 2027.
"A revenue deficit means the state is borrowing money not just to build bridges, which is capital expenditure, but also to fund day-to-day operations and subsidies, which fall under revenue expenditure. Flagship schemes like the Ladki Bahin Yojana (Rs 36,000 crore) and the Namo Shetkari Yojana (Rs 6,000 crore) are now semi-permanent commitments. To keep these running while staying within the 3 per cent fiscal deficit limit, the state has been forced into 'silent cuts' in other sectors," the document noted.
While the government denies reductions, budget data indicate a Rs 27,000 crore drop in spending on social welfare and nutrition compared with the revised estimates for 2025 to 2026. This points to a shift from broad social support programmes to targeted cash transfer schemes.
The state's economic strategy relies heavily on the multiplier effect theory. According to the MTFP, infrastructure investments such as the Vadhavan Port project and the Thane Borivli link road are expected to generate three to three and a half times their value in economic activity.
The document projects real Gross State Domestic Product growth of 7.9 per cent. However, advance estimates reveal a wide gap between intended investments of Rs 1.16 lakh crore and operational projects worth only Rs 27,357 crore.
If projects do not become operational quickly, the state could be left with rising debt without the tax revenue from GST and stamp duty needed to service it.
Finance department sources said the projections assume strong nominal GSDP growth, which could be vulnerable to global disruptions. The early 2026 conflict in the Middle East has already affected Maharashtra's onion and grape exports.
If revenue collections from GST and stamp duties fall short of projections, the fiscal deficit could cross the 3 per cent threshold.
Experts say the 2026-27 Budget represents a strategy of "growth through borrowing" and sets out a roadmap for a "Viksit Maharashtra 2047".
However, they caution that its success depends on how quickly infrastructure investments begin generating tax revenue to service the state's expanding Rs 11 lakh crore debt
Sanjay Jog can be contacted at sanjay.j@ians.in
- IANS
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