Fiscal Consolidation Impact on Social Sector Expenditure Experience and Challenges: Evidence from Maharashtra

This article empirically analyse whether the government of Maharashtra maintained its public debt position on a sustainable path during the period 2002–16. This article attempts to analyse the fiscal sustainability and recent trends in social sector expenditure outlay of state government of and assesses the impact these had on the social sector in Maharashtra. The budgetary allocations to the social sector as a whole have been affected after the FRBM (Fiscal Responsibility and Budget Management) and the recommendations of the Fourteenth Finance Commission (FFC). Fiscal sustainability is essential for economic growth and comprises a set of fiscal policies that result in financial solvency over the long run. An important feature of social sector expenditures in India is that they are incurred mainly by state governments. In the constitutional division of responsibilities between centre and states, sectors that ensure the provision of basic needs are the primary responsibility of state governments; though the centre may provide leadership, direction and support. The social indicators for Maharashtra are not in consonance with its economic achievements. Although there is an urgent need to improve delivery and the quality of public service in the social sectors such as primary education and health, persistence of present trends will imply a continuation of the modest spending these areas.