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Punjab: The state’s economy remains in limbo due to the burden of debt

Punjab: Punjab’s economy continued to hang by a thread all through 2024. As the burgeoning power subsidy bill ate into the state’s limited revenue receipts and the Center held back some grants for want of compliance, the state government struggled to meet its liabilities.

The state’s public debt burgeoned, and is expected to reach Rs 3.53 lakh crore by March 2025. Punjab has already raised loans worth Rs 23,836.30 crore between April to November to meet the gap between revenue and expenditure. It will raise another Rs 6,628 crore till March 2025.

This year, while 21 percent of the state’s income is going towards paying just the power subsidy bill, 22.9 per cent of the revenue is being used only towards servicing of the huge public debt. The biggest spending is on the salaries and wages of government employees — 52.88 per cent of the total income. This leaves just 3.22 per cent of the income to be spent on infrastructure and for other social securities.

No wonder that there has hardly been any capital investment in Punjab and the infrastructure has started crumbling. The rural link roads are constructed using the Rural Development Fund that the state would collect for procuring foodgrains on behalf of the Centre. However, since there is a dispute over the percentage of RDF that can be charged between the state and Centre, the state has not received its dues, which are now worth Rs 8,000 crore. As a result, the rural link roads and other physical infrastructure are in a mess.

Even the urban infrastructure and state highways are in need of repair, but the state is struggling with resources. Realizing that the state’s fiscal health was sliding at a pace faster than ever before, AAP made some amendments by withdrawing some power subsidy announced by the previous Congress government and increasing the taxes on retail fuels in September. The step was taken after the state government struggled to pay the salaries for the month of August.

The government also got on board two eminent economists — Arbind Modi and Sebastian James — as advisors on economic affairs. Will their suggestions be implemented by the state government in the coming days? Only time will tell.

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