Finance Commission to visit Maharashtra from 17th Sep, Intra state disparity and issues related to urbanisation to be focussed

The Fifteenth Finance Commission of the Government of India is visiting the state of Maharashtra from 17^th to 19^th September 2018. The Commission led by the Chairman Shri N.K.Singh, Members – Sh. Shaktikanta Das, Dr. Anoop Singh, Dr. Ashok Lahiri, Dr. Ramesh Chand and Secretary Shri Arvind Mehta along with other officials will have meetings with Chief Minister, Ministers and other officials of the state in Mumbai. There will be meetings with the leaders of various political parties, representatives of Trade and Industry, Urban Local Bodies and Panchayati Raj Institutions to understand the issues concerning the state.

Commission had also held a consultation meeting with economists in Pune in the month of August to understand the issues in the region. Ahead of the visit, Commission understood in New Delhi, various aspects of its finances and issues related to socio-economic spheres from Accountant General of Maharashtra.

Maharashtra is a high income State of the Indian Union. It is a leading industrial State and also one of the most urbanized States in India. It is also known as the host State to several leading educational institutions in the country. Maharashtra contributes around 15 per cent of the Gross Domestic Product of India. Service sector contributes 57 per cent of the state income, followed by industrial sector with 33 percent and remaining 9 per cent originates in the agriculture and allied sectors. However, high inter regional disparity has been a characteristic feature of the State since its inception in 1960. The state seems to have faltered in translating its high economic growth into commensurate human development.

The State is a front runner in terms of better fiscal management in the country since the enactment of state FRBM Act in 2006. The fiscal deficit of the state continues to be well within the limit of 3 per cent of GSDP. The debt stock to GSDP ratio is also well within the 17.5 per cent limit set by the Maharashtra Fiscal Responsibility and Budgetary Management Rules (MFRBM, 2011). Yet, a revenue deficit of 0.5 per cent of GSDP continues to be a worrisome factor for Maharashtra; the revenue deficit to GSDP ratio has increased even as the fiscal deficit to GSDP ratio has fallen. This indicates that debt is being used for revenue expenditures. Revenue expenditures show rigidities due to the presence of high levels of salary and interest payments. More stringent steps would be required to achieve complete sustainability. Complete sustainability would require a huge increment in the revenue generation capacity of the State. Inter-se Shares of the state for Tax Devolution has been on rise in past four finance commissions. Central transfers increased from 11 per cent to 16 per cent of total revenue receipts during 2012-17.

GST could well be a game- changer in this respect. No revenue loss to the state on implementation of GST. The tax to GSDP ratio for the State stands at about 6.24, which is far lesser than other comparable, large-sized developed States. It is also worrisome to note that the targeted Budget Estimate of the tax-GSDP ratio shows a secular decline over the past decade. Debt sustainability should be addressed through higher revenue generation rather than through expenditure contraction.

The pace of decentralization needs to be increased. As of March 2015, only 14 functions out of the indicated 29 functions have been fully transferred to the local bodies. The State Government allocates about 20 per cent of its revenues to local bodies; within the allocated funds, there is a heavy bias towards Panchayat Raj Institutions which receive 78 per cent of the allocated funds. The ratio of funds allocated to Urban Local Bodies is far lesser than the ratio of population residing within the urban areas in Maharashtra.

 Main Issues which the Commission will focus upon: 

• The State could not maintain the momentum of growth of revenue receipts during 2009-13 to 2014-17. The trend growth declined from 17.69% during 2009-13 to 11.05% in 2014-17.
• The trend growth of States own tax revenue declined from during 19.44% in 2009-13 to 8.16% in 2014-17
• The percentage of capital expenditure to total expenditure remained between 11 and 12 during 2013-17
• 5^th SFC recommendations are ideally required to be implemented from 2014-15 onwards, and it appears in Maharashtra that even Report of the 4^th SFC is pending

 Sharp Social and Economic Social Disparity across various districts

• The state had a urbanisation rate of 45.23 in census 2011 as compared to All India Average of 31.16%. Mumbai city which is the commercial and financial capital contributes to around 2.5% of India’s GDP and 30.5% of the total tax collection in the Country.
• On the other hand, of 34 districts in Maharashtra, 16 districts of Vidarbha and Marathawada have per capita income below the state and national average.
• Of the 351 Development Blocks, 125 blocks in the State have been identified as socially backward on Human Development Index.

• Poverty Rate of 17.35 as compared to 21.92 All India as per 2011-12 Tendulkar Estimates, though districts in north and east Maharashtra have high poverty.
• 21.2% of the State Population is SC/ST. The state is home to 7.9% of the total SC/ST Population in the Country (4^th Rank after UP(14.07), WB(8.8%)and MP(8.8%)
• High poverty rates and slow poverty reduction and illiteracy among the STs in Maharashtra

 Issue of Rural Distress and Farmer Suicides

1. Status of formal lending to farmers

2. Irrigation- only 18% of Maharashtra’s total cultivable land is irrigated while the national average is over 35%. This is despite Maharashtra accounting for 35% of the total number of irrigation projects in India. Maharashtra is spending less on irrigation than All India average.

3. Issue of Escalation of Costs in Irrigation Project and land acquisitions.

State govt. has also submitted a detailed memorandum to the Commission for consideration. Commission expects to gain an in-depth understanding of the peculiar issue related to the economic growth and development in Maharashtra during its interactions and meetings with the state govt.