Fiscal regulation and expenditure pattern in Maharashtra state

The Fiscal Responsibility and Budgetary Management Act of 2004 has improved state finances of Maharashtra, India. It has also reduced fiscal deficit for state. The sources of income from various state own tax revenue have increased except other taxes on income and expenditure. There is further scope for improving sources of state own tax revenue. After the FRBM Act, the development expenditure on irrigation and flood control, industry and mining has declined in the state. It is statistically significant and negatively co-related. The development expenditure on education sports, arts & culture, science, technology & environment, and transport & communication has significantly increased. In order to control the fiscal deficit, state government should apply strict methods to reduce the non development expenditure. It should increase development expenditure which has long term effect on overall economic development.