Haryana’s rising debt set to catch up with Punjab

The Budgets of 2025-26 for Haryana and Punjab were presented in March, with outlays of Rs 2,05,017 crore and Rs 2,36,080 crore, respectively. Haryana shows an increase of 13.7 per cent compared to 8.38 per cent in the previous year’s revised estimate (RE). On the other hand, Punjab shows an increase of 4.8 per cent compared to 15.05 per cent the previous year.

The Haryana Budget speech created a buzz with the announcement of a new Department of Future, a hub for innovation and entrepreneurship and a Sankalp Authority to control the drug menace. Comparatively, the Punjab Budget emphasises eradicating the drug menace on a war footing, support for sports, health and education.

However, no substantive measures have been proposed to improve fiscal health or strengthen governance in both states.

The department-wise budget in Haryana is skewed in favour of industries and commerce, with increases in allocation by more than twofold, followed by a 39 per cent increase for town and country planning, 36 per cent for agriculture allied activities, 30 per cent for panchayats and rural development and 28 per cent for social welfare. Health, education and police have got moderate increases from 7 to 12 per cent. The allocation for the public health and public works departments remains almost unchanged, while it has decreased for energy by about 25 per cent.

The Punjab Budget is not explicit in department-wise allocation but gives bifurcation for main items like salary, pension and devolution for local rural and urban bodies.

The major concern in the Haryana Budget is that repayment of interest, salaries, pensions, devolution to rural and urban bodies, and power subsidies together account for 65 per cent of total revenue expenditure (RE) — or 76 per cent of revenue receipts (RR). Besides, as much as 15 per cent of the RRs is used in social security pensions. The remaining revenue expenditure is managed by only 10 per cent of RRs and a revenue deficit (RD) of Rs 20,600 crore.

Further, the implementation of the Lado Laxmi Yojana of Rs 2,100 per month for women is still looming large on the state budget.

In Punjab, the above five items of expenditure account for about 82 per cent of the total RE or 99 per cent of the RRs. The remaining RE, including social security pensions, is managed by 1 per cent of the RRs and the RD of Rs 23,957 crore. The Rs 1,000 support to housewives is still a headache for Punjab.

The projected capital expenditure (CE) in Haryana is Rs 20,812 crore, which will come from borrowings net of RD and repayment of debt instalments of Rs 35,788 crore in 2025-26.

Similarly, in Punjab, the CE of Rs 10,302 crore during 2025-26 will be from the borrowings net of RD and debt repayment to the extent of Rs 18,199 crore.

Surprisingly, the debt repayment of Punjab in 2025-26 is about half of Haryana despite its higher outstanding debt. Even the interest payment by Haryana is more than that of Punjab. One of the reasons may be that the loans availed of by Punjab may be long-term ones compared to the recent short-duration loans by Haryana. This fact has been kept under the veneer by Haryana’s lower debt to GSDP (Gross State Domestic Product) ratio, as discussed next. It indicates the need to probe debt management by Haryana.

The debts of Punjab and Haryana are Rs 3,82,935 crore and Rs 3,17,257 crore, respectively, as of March 31, 2025. From March 2015 to March 2025, Punjab’s debt increased by about 3.4 times compared to the rise by 4.5 times in Haryana. This means Punjab has tried to check the debt, but its increase is still unchecked in Haryana. However, it is camouflaged in terms of the lower debt-GSDP of Haryana at 26 per cent than the 33.1 per cent allowed under the FRBM ( Fiscal Responsibility and Budget Management) Act, whereas Punjab’s debt-GSDP ratio is about 45 per cent.

It is to be noted that this illusion has been created due to a 2.78 times increase in the GSDP of Haryana at current prices compared to just 2.2 times in Punjab during the above period. Those familiar with the economy of Haryana may have observed some green spots in Gurugram and along the GT Road, but the rest of Haryana’s economy is static, especially in industry.

The Haryana Government is well aware of its debt problem, that is why the FM-cum-CM tried to defend the fiscal situation in the eight initial pages of the Budget speech. It corroborates with a saying of the local Bagar area, ‘Taakar waala unt pehle hi karhata hai’ (a camel with a knee problem cries before sitting).

The comparison of the budgets of Punjab and Haryana brings out that repayment instalment by latter is almost double of the former. The rate of increase in debt of Haryana has been higher than Punjab over the last few years; hence their absolute amount of debt may synchronise in the next two years.

However, the much higher increase in Haryana’s GSDP is enabling its compliance with the FRBM Act. The higher increase in its GSDP is not substantiated by subdued non-farm activities in the state except in Gurgram and along the GT Road. It indicates the need for a study to probe the methodology and norms applied in the estimation of GSDP in Haryana.

Punjab has a wider economic base but its Directorate of Economics, like that of Haryana, may put its GSDP data in a better perspective. It must also target the electricity subsidy for domestic and agricultural consumers for rationalisation. A betterment cess on employees and creditworthy citizens may be considered in both the states.

In fact, at the all-India level, the Supreme Court should ban cash support to one section of society in any state with a revenue deficit as its puts an unwarranted debt burden on the other sections.