Punjab’s debt burden

The projection by the Comptroller & Auditor General of India that Punjab’s public debt would double in the next five years is a matter of grave concern. The CAG report says that new borrowings are being used to repay the earlier loans, leaving little for capital expenditure, and points out power subsidy given to the agriculture sector as one of the main reasons behind the state’s poor economic condition. The report comes soon after NITI Aayog figures about Punjab’s per capita income having slid to below the national average and its per capita capital expenditure being among the lowest in the country, affecting the state’s development.

Power subsidy to the agriculture sector has for long been a bone of contention in Punjab, given its importance as the mainstay of the state’s economy as also because of the politically sensitive nature of the constituents it caters to. Punjab faces handicaps in development on account of being a border state and the shifting of industries to neighbouring states has only added to the problem. The government’s plans to engage its NRI population as a partner in development, for which a separate department of NRI Affairs was set up, have also been affected because of Covid and the lockdown, making additional resource mobilisation a challenge. Good governance and digital reforms have aimed at cutting costs even as the state claims inadequate financial compensation by the Centre.

The state has been demanding fiscal stimulus on the ground that states alone cannot meet all expenditure and that the Centre should fund all Central schemes and provide alongside non-fiscal aid to protect lives and livelihoods. The state should also explore the possibility of setting up ancillary units to supplement the industries being set up in its neighbourhood and also devise ways to reinvent its agriculture on a more ecologically sustainable model and incentivise it. The Centre, on its part, should not just identify debt-stressed states, but also formulate ways to look into their just demands.