Growing economy, growing debt

Maharashtra’s economic journey shows that the state has the strength and potential to remain one of India’s leading growth engines. Representation pic/iStock

Maharashtra's economy has more than doubled in size in less than a decade, and the average income of its people has also nearly doubled. With the state now projected to grow at 7.9 per cent, these numbers once again underline Maharashtra's role as one of the key drivers of India's economic growth.

In 2017-18, Maharashtra's nominal Gross State Domestic Product (GSDP) stood at Rs 23.52 lakh crore, while the per capita income was Rs 1,72,663. Today, the picture looks very different. The state's economy is projected to reach around Rs 51 lakh crore, and the per capita income is expected to rise to Rs 3,47,903.
But while this growth story looks impressive, another number deserves equal attention: the state's rising debt.

According to the latest figures, Maharashtra's total debt is expected to reach over R1s 0 lakh crore. This raises an important question: can the state continue to maintain strong economic growth while also managing this steadily rising debt?

If the state is earning more but also borrowing more, it must ensure that the borrowed money is used wisely for development and long-term assets. The real challenge for the government will be to balance growth with responsible spending, avoiding excessive splurging on short-term giveaways for political gains. Only then can Maharashtra continue to prosper without placing a heavy financial burden on future generations.

Debt by itself is not necessarily a bad thing. Governments often borrow money to build infrastructure, improve public services, and invest in areas such as education, healthcare, and welfare schemes. If this borrowing is used wisely for productive investments, it can actually help the economy grow faster and create long-term benefits for people.

For example, building highways, Metro networks, ports or industrial parks requires large upfront investments. Such projects not only create jobs but also attract private investment and boost overall economic activity. Over time, increased business activity and higher incomes generate more tax revenues, which help the government manage and repay its debt.

However, problems arise when borrowing is mainly used for short-term spending or subsidies that do not create long-term economic value. Over time, rising interest payments can take up a larger share of the state budget, leaving less money available for development and public services.

This is why economists often look at an important indicator called the debt-to-GSDP ratio, which shows how large the state's debt is compared to the size of its economy. In Maharashtra's case, this ratio is pegged at around 18.5 per cent. The borrowing ratio remains relatively moderate compared to many other states and the prescribed upper limit of 25 per cent. When the economy is growing strongly, as in Maharashtra's case, the state has a better ability to manage its debt because a larger economy generates higher revenues. At the same time, it is important to remain cautious so that borrowing is managed carefully and the debt burden does not grow faster than the state's economy.

The focus must remain on ensuring that borrowing is directed towards productive sectors such as infrastructure, manufacturing, logistics, technology, and job creation. Investments in these areas create long-term economic value and help sustain growth in the years ahead. Cities like Mumbai, Pune, Nashik, Nagpur, and Aurangabad continue to drive much of Maharashtra's economic growth, with sectors such as finance, automobile manufacturing, IT services, logistics and infrastructure expanding rapidly. Major investments in highways, Metro rail networks, ports and industrial corridors are expected to further strengthen the state's economic foundation.

But at the same time, balanced regional development is equally important. While cities like Mumbai and Pune remain major economic powerhouses, regions such as Vidarbha, Marathwada and parts of North Maharashtra still require stronger industrial and infrastructure growth.

Recognising the importance of spreading development more evenly across the state, during his recent visit to the World Economic Forum in Davos, Chief Minister Devendra Fadnavis said Maharashtra is working to attract investments beyond traditional hubs like Mumbai and Pune. Several proposed projects are expected to come up in North Maharashtra and Vidarbha, which could help generate jobs and reduce regional development gaps.

Maharashtra's economic journey over the past decade shows that the state has the strength and potential to remain one of India's leading growth engines. The challenge now is to ensure that this growth remains sustainable, inclusive, and financially responsible, so that prosperity today does not come at the cost of tomorrow's financial stability.

Sanjeev Shivadekar is political editor, mid-day. He tweets @SanjeevShivadek

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