Maharashtra, Karnataka join other states to report revenue deficit for first time in years

Updated : March 08, 2021 11:01 PM IST

Maharashtra announced an estimated revenue deficit of around Rs 10,200 crore for FY21-22, while Karnataka estimated to be over Rs 15,134 crore

The COVID-19 pandemic has cast a long shadow on financial situation of various states as most have reported a revenue deficit for the first time in many years. Maharashtra announced a Rs 1.3 lakh crore budget on March 8 and estimated that the revenue deficit would be around Rs 10,200 crore for FY21-22.

The fiscal deficit has been estimated at over Rs 66,641 crore for the fiscal 2021-22.

Ajit Pawar, Deputy CM and state's FM highlighted that for the current fiscal there is over Rs 14,300 crore reduction in state share tax received from central government this year and hence revenue targets for this year are lower.

In FY20-21, Maharashtra's gross state domestic product (GSDP) declined by 8 percent. The state budget made a provision of Rs 58,748 crore for infrastructure development. Pawar said, "To revive the economy and generate employment this year, Rs 58,748 crore will be spent on infrastructure projects. Hence, the ensuing fiscal deficit can be viewed favourably."

The state budget for FY22 also provided a one percent concession in stamp duty for women homebuyers.

With a focus on agriculture, Maharashtra FM Pawar also announced interest free crop loans to farmers who seek loans of up to Rs 3 lakh and repay on time. In FY20-21, despite the deficit growth in the industry and services sector, agriculture and allied sectors grew by 11.7 percent. He highlighted that after debt relief, crop loans amounting to Rs 42,433 crore were disbursed in 2020-21.

To meet some of the revenue shortfall, Maharashtra proposed to increase state excise duty on liquor – classified as branded and non-branded -- at 220 percent of manufacturing cost or Rs 187 per litre, whichever is higher, only on branded country liquor. This would help the state generate additional revenue of Rs 800 crore.

As liquor would become more expensive, Pawar proposed to increase value added tax (VAT) on liquor sales, which could generate an additional Rs 1,000 crore.

Meanwhile, Karnataka stopped short of increasing excise duty on liquor or implementing additional sales tax on petrol or diesel. The state announced a revenue deficit budget on March 8, for the first time in over a decade. The deficit for FY21-22 is estimated to be over Rs 15,134 crore. The fiscal deficit is estimated to be over Rs 59,000 crore, which is 3.48 percent of the state's GDP.

Karnataka CM B S Yediyurappa, who also holds the finance ministry portfolio said that while there are clear indications of green shoots, challenges still remain in the economy. "The 14 percent expected growth we were considering year on year in revenue receipts will not be there during the next year."

Initial estimates suggests Karnataka's GSDP contracted by 2.6 percent in 2020-21 year on year.

Karnataka allocated Rs 31,028 crore for the agriculture sector, Rs 62,150 crore for the welfare and inclusive growth sector, Rs 27,386 crore for urban development, Rs 52,529 crore is allocated for providing stimulus to economic activities among others.

Another large state that saw fiscal deficit swell was Tamil Nadu crossing the Rs 1 lakh-crore mark.

Tamil Nadu's fiscal deficit projected to touch 5 percent of GSDP by end FY21 against 2.84 percent last year. Tamil Nadu fiscal deficit exceeds 3 percent of GSDP only for the second time in 5 years.

Recently, Uttar Pradesh reported a revenue deficit after a gap of 14 years (as per RE FY21). The revenue deficit was at Rs 13,161 crore versus a projected surplus of over Rs 27,400 crore. The state is however expecting to turn revenue surplus by next fiscal again.

Numbers from these large states show how the coffers have been stretched thin during the pandemic.

Published : March 08, 2021 10:52 PM IST

Maharashtra, Karnataka join other states to report revenue deficit for first time in years

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