Maha Vikas Aghadi govt in Maharashtra could focus on farm debt waivers

The state govt can go for a waiver of Rs 50,000 crore spread over a couple of years, said Macquarie

The change of guard in Maharashtra could lead to large farm debt waivers and projects getting stalled, warned Macquarie. Farm distress and debt waivers were part of the election campaign by the Opposition parties in Maharashtra against the ruling Bharatiya Janata Party (BJP) government. Now, an alliance of the Shiv Sena, the Nationalist Congress Party (NCP) and the Congress, is set to form the government and expected to address the farm distress. And, they will have adequate fiscal space to do so, Macquarie estimated.

“Farm loan waiver can potentially be the first order of the business of the new government,” the brokerage said. Maharashtra’s GDP of Rs 26.603 trillion had a fiscal deficit of 2.1 per cent in fiscal year 2018-19 (FY19) and targets were set to keep it at the same level for FY20.

“The Maharashtra government can do a waiver of Rs 500 billion (Rs 50,000 crore) spread over a couple of years without breaching limit of 3 per cent set under FRBM Act,” the brokerage said, adding that most of the public sector banks would have exposure to Maharashtra’s agriculture sector. Even as there were no large micro finance institutions, smaller cooperative banks dominate the agriculture loan market.

Projects at high risk of getting stalled includes the Mumbai-Ahmedabad high-speed rail along with the Mumbai Nagpur Expressway. L&T was the front runner in getting the high speed rail contract, but that may get negated now. The Mumbai-Nagpur Expressway is split into 16 packages, all of which have already been awarded…

Read More: Maharashtra Assembly Elections