Growing economy, growing debt

Maharashtrarsquos 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 79 per cent these numbers once again underline Maharashtrarsquos role as one of the key drivers of Indiarsquos economic growthIn 201718 Maharashtrarsquos nominal Gross State Domestic Product GSDP stood at Rs 2352 lakh crore while the per capita income was Rs 172663 Today the picture looks very different The statersquos economy is projected to reach around Rs 51 lakh crore and the per capita income is expected to rise to Rs 347903But while this growth story looks impressive another number deserves equal attention the statersquos rising debtAccording to the latest figures Maharashtrarsquos 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 debtIf the state is earning more but also borrowing more it must ensure that the borrowed money is used wisely for development and longterm assets The real challenge for the government will be to balance growth with responsible spending avoiding excessive splurging on shortterm giveaways for political gains Only then can Maharashtra continue to prosper without placing a heavy financial burden on future generationsDebt 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 longterm benefits for peopleFor 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 debtHowever problems arise when borrowing is mainly used for shortterm spending or subsidies that do not create longterm 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 servicesThis is why economists often look at an important indicator called the debttoGSDP ratio which shows how large the statersquos debt is compared to the size of its economy In Maharashtrarsquos case this ratio is pegged at around 185 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 Maharashtrarsquos 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 statersquos economyThe 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 longterm economic value and help sustain growth in the years ahead Cities like Mumbai Pune Nashik Nagpur and Aurangabad continue to drive much of Maharashtrarsquos 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 statersquos economic foundationBut 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 growthRecognising 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 gapsMaharashtrarsquos economic journey over the past decade shows that the state has the strength and potential to remain one of Indiarsquos 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 tomorrowrsquos financial stabilitySanjeev Shivadekar is political editor midday He tweets SanjeevShivadekSend your feedback to mailbagmiddaycomThe views expressed in this column are the individualrsquos and donrsquot represent those of the paper