Himachal economy: Dangerously downhill

Pratibha Chauhan in Shimla

THE extent to which a government can go about conducting the business of a state’s economy depends largely on its ways to meeting populist demands. The irony is governments do it only at the expense of a larger cause: a dynamic economic equilibrium. So, we have a state like Himachal Pradesh where, no matter the geographical size, it becomes a case of tugging at the phantom-sized Central pool of grants, without even a hint of a going-over. The situation has come to such a pass that Himachal Pradesh’s debt burden has gone up to Rs 46,500 crore, and its nascent BJP dispensation — after the previous Congress government was left scraping the bottom of the barrel — is again looking for some sort of a rescue package. 

The only silver-lining is the ruling party has no inhibition in asking its own party-government at the Centre to do something quick. And the latter looks so generous, at a time when the party top leadership has already started scanning the 2019 general election horizon. 

There are several home-truths; one is the state’s limited revenue generation and unemployment. The figure for the jobless has touched almost 10 lakh in a state with over 70-lakh population. The state has about 2.25 lakh government employees and has the highest employee ratio (jobs-to-employable population) at 28 in the country. Its neighbours, Punjab and Haryana, are better off with 11 and 14 ratios respectively. The national figure is 12. A World Bank report ‘Scaling the Heights’ mentions as much about Himachal’s figure.

Former PM Atal Bihari Vajpayee, who had a special affinity with Himachal, gave Rs 450 crore special plan assistance to the hill state in 2008-09. The former Prime Minister owns a house in village Prini near Manali and would spend a few days there every summer even while he was the PM.

Himachal which was given Rs 14,450 crore, based on the recommendation by the 12th Finance Commission, received a hike of 52% by the 13th Finance Commission. The 13th Finance Commission gave Rs 21,691 crore, one of the lowest hikes among all the states in the country. The allocation of Rs 40,625 crore recommended by the 14th Finance Commission came as a major relief to the fund-starved state. 

Managing things under the given circumstances is nothing short of wizardry. So, the first thing that new chief minister Jai Ram Thakur had to do immediately after taking over was to apprise himself and his cabinet colleagues about the grim scenario. A detailed presentation was made after which the CM made a plain, uninspiring comment: the situation is far from being easy, but that would not hamper development works.

The easiest way for him is to look for Central help. “I have taken up a bailout package with the Prime Minister. We are hopeful the Centre will come to our rescue,” said Thakur. The officials have since been zealously engaged in preparing the department-wise figures to be placed before the BJP-led NDA government. 

The figures are frightening: 65% of the revenue expenditure is devoted to meeting the committed liabilities of salaries, pensions and interest payment. “The committed annual liability on the salary burden of government employees is Rs 9,500 crore besides Rs 4,900-crore pension bill,” says an official. 

The finance department has some plans on paper. It has spelt out areas that need a major fillip to generate revenue. “Six core areas includes power, infrastructure, industry, tourism, agriculture-horticulture and allied sector and services,” a source said. “There is immense potential in the yet to be tapped tourism and agriculture-horticulture sectors, which can be very productive and revenue generating,” said Srikant Baldi, additional chief secretary, finance, whose task is to keep the industrial wheels well-oiled. The inhibiting factors are limited land availability, difficulty in environmental clearances, finance constraint and ever-demanding panchayats, from whom NOCs are to be obtained for land. 

“Himachal has a significant share in the fruit business. It is time to look at ways to enhance productivity and marketing. We must also address concerns of farm and fruit growers and think of incentives to this big sector,” says Devinder Sharma, food policy analyst. 

Experts and analysts have one point to contend with: the political blame game between the BJP and Congress. The government has invited public opinion about the next budget. This is done to reflect the aspirations of various stakeholders in the budget and make to more people centric and participative. Yet no one knows if the government has received any suggestion, and if it has, what it plans to do. 

The exception to the overall gloomy scenario is the power sector. The state has a hydro-power potential of almost 28,000 MW. In 2016-17, the state earned revenue of about Rs 700 crore from the power sector. In 2017-18, the revenue has already touched Rs 850 crore. Though the power rates remain far from satisfactory around Rs 2.50 per unit, the fact is that some new projects have come up to net more revenue.