Mumbai, March 9 (NationPress) The Medium Term Fiscal Policy (MTFP) report for Maharashtra for the fiscal year 2026-27 unveils a state grappling with a growing debt crisis while pursuing intensive infrastructure investments. Despite the positive fiscal indicators, deeper analysis reveals significant long-term challenges. Following the state Budget announcement, the report highlights a rapid contraction of the state’s discretionary fiscal capacity.

Total allocations for salaries amounting to Rs 1,75,951 crore, pensions at Rs 92,379 crore, and interest payments of Rs 70,055 crore now consume 54.93% of the state’s overall revenue.

In other words, for every Rs 100 earned by the state, over Rs 55 is earmarked for fixed expenses before any funds can be allocated for new initiatives like schools, hospitals, or welfare schemes.

“This substantial fixed cost structure renders the state budget significantly inelastic, hampering its ability to withstand economic fluctuations,” the MTFP report noted.

The forecast reveals Maharashtra entering a new phase characterized by increasing debt, with total liabilities anticipated to reach Rs 11,02,654 crore by 2026-27. The state’s debt has more than doubled in the past eight years, up from Rs 4.07 lakh crore in 2018-19.

“The absence of immediate alarm is due to the state’s projected GSDP of Rs 51 lakh crore for 2025-26. The debt ratio stands at 20.38%, well under the 25% FRBM limit, providing the government a technical green light to continue its borrowing spree,” it elaborated.

Interest obligations are escalating at an annual rate of approximately 11 to 12%. By 2027, the state is projected to incur interest costs of around Rs 192 crore daily.

Furthermore, the MTFP anticipates a revenue deficit of Rs 40,552 crore for the period of 2026 to 2027.

“A revenue deficit indicates the state is borrowing not only for infrastructure development but also for daily operational costs and subsidies, which fall under revenue expenditure. Major initiatives like the Ladki Bahin Yojana (Rs 36,000 crore) and the Namo Shetkari Yojana (Rs 6,000 crore) are now entrenched commitments. To sustain these programs while adhering to the 3% fiscal deficit limit, the state has resorted to quiet cuts in other areas,” the document stated.

While the government contests claims of budget reductions, data reveals a Rs 27,000 crore decrease in spending on social welfare and nutrition relative to revised estimates for 2025-2026. This suggests a transition from comprehensive social support initiatives to targeted cash transfer programs.

The state's economic framework heavily leans on the multiplier effect theory. According to the MTFP, major infrastructure projects like the Vadhavan Port and the Thane Borivli link road are expected to generate three to three and a half times their investment in economic activity.

The document forecasts a 7.9% growth in real Gross State Domestic Product. However, preliminary estimates reveal a significant disparity between intended investments of Rs 1.16 lakh crore and current operational projects totaling just Rs 27,357 crore.

If these projects fail to commence promptly, the state may find itself faced with escalating debt without the necessary tax revenues from GST and stamp duty to manage it.

Finance department sources indicated that these projections rely on robust nominal GSDP growth, which could be jeopardized by global disturbances. The recent conflict in the Middle East has already impacted Maharashtra’s exports of onions and grapes.

Should revenue collections from GST and stamp duties fall short of expectations, the fiscal deficit could surpass the 3% threshold.

Experts assert that the 2026-27 Budget embodies a strategy of “growth through borrowing”, laying out a vision for a “Viksit Maharashtra 2047”. However, they warn that success hinges on the speed at which infrastructure spending begins translating into tax revenues to support the state’s burgeoning Rs 11 lakh crore debt.

Sanjay Jog can be reached at sanjay.j@ians.in