The recently-announced Common Minimum Programme (CMP) of the Maha Vikas Aghadi, or the Shiv Sena-NCP-Congress alliance, reads like a hurriedly rewritten socialist budget that used to be common during the UPA years. The CMP promises too much for the farmer, giving an upfront assurance on an immediate farm loan waiver, tweaking of the crop insurance scheme, remunerative prices for farm produce and solutions for irrigation problems in rural Maharashtra’s drought-affected areas. The promises sound too good to be real, and therein lies the danger for the Udhhav Thackeray-led administration. Implementation is the crucial part.
Maharashtra, one of the largest states in the country, has a complex economic structure, with both industries and agriculture forming major parts of its economy. Agrarian distress is a recurring theme almost every year on account of either unseasonal rains or severe drought conditions. The outgoing Devendra Fadnavis government had unsuccessfully experimented with a large Rs 34,000 crore loan waiver scheme originally announced in June 2017, the implementation of which was as messy as the idea of the loan waiver itself. Due to implementation issues, the Fadnavis government could disburse just Rs 18,613 crore till date, covering 43.91 lakh farmers' accounts, according to the latest data shared by the Department of Co-operation, Textiles and Marketing of the Maharashtra government. Now, by committing to an immediate farm loan waiver scheme, the Aghadi has promised a similar exercise in just two years after the BJP-led government's loan waiver. The question is whether large states can afford farm loan waivers as an annual ritual.
The Aghadi also promises fair market pricing for the farmer. This is another tricky area. Already there is a NITI Aayog-led high powered committee examining the overhauling of market-pricing mechanism linking to online trading, and transformation of the sector into a more efficient system. Much of its work is only on paper as of now. During the BJP-led government's tenure, there had also been an attempt to enact a law that would have exempted agriculture produce from the APMC Act, but this was quietly buried later. The promise of ensuring irrigation facilities for all has been there for many years. In Maharashtra, this has been a messy affair and a subject of a major financial scandal, ironically involving NCP leader Ajit Pawar who is now part of the Aghadi. The Sena-Congress-NCP alliance will find it tough to walk the talk on all these promises.
The CMP ticks all the right boxes of a socialist narrative by offering free education for girls from economically weaker families, women’s safety measures, interest-free education loans to children of farm labourers, one rupee clinics at taluka levels, more super specialty hospitals and medical colleges and health insurance cover to all citizens. Besides, there is a bid to attract more entrepreneurs promising ease of doing business, something the Narendra Modi government at the Centre has been stressing on for the last six years.
The promises of another round of a farm loan waiver, minimum support prices for farmers and interest-free education loans are tough promises to implement, and will also have an impact on the state’s fiscal health. As this writer pointed out in an article, Fadnavis is handing over a relatively healthy state economy to Uddhav Thackeray. In terms of debt, fiscal deficit and overall Gross Domestic Product (GDP) contribution to the national income, Maharashtra is performing better than other major states. According to the state economic survey 2018-19, Maharashtra's fiscal deficit for the year 2018 stood at 1.8 percent as a percentage of the Gross State Domestic Product (GSDP). The fiscal deficit is the difference between revenue earned and money expended and is an important indicator of the health of that particular economy. Maharashtra has mostly maintained the fiscal deficit as a percentage of the GSDP within the stipulated limits recommended by the Fourteenth Finance Commission till now.
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Also, the state has a healthy distribution of resources as well. During the 2018-19 revised estimates (RE), of the total development expenditure on social services, the share of general education is 41.0 percent, followed by welfare of Scheduled Castes, Scheduled Tribes, Other Backward Classes and minorities (12.0 percent), medical services and public health (10.5 percent), whereas the share of agriculture and allied activities is the highest (37.2 percent) in economic services. The liabilities (debt stock) of the state comprise accumulated unpaid loans. Also, the average cost of borrowings of Maharashtra has come down over the years to 8.4 percent in the fiscal year 2019 from 9.1 percent in the fiscal year 2018. The Uddhav Thackeray-led government will have the responsibility to maintain this track record.
Prima facie, the CMP of the alliance makes all the right noises to appease the crisis-ridden sections of rural Maharashtra. But fiscal balancing and implementation will be the key. The Aghadi, in its bid to present a socialist CMP, will run the risk of harming the state’s fiscal health, with promises such as a farm loan waiver and interest-free loans. This can have adverse effects not just on the state’s fiscal health but also on the banking sector. The implementation of promises, especially on issues like the farm loan waiver, fair market pricing to farmers and irrigation schemes, will test the political will of the alliance.
November 28, 2019 at 06:53PM
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