Punjab’s plight

Punjab is sinking deeper into the fiscal mire. Every political party that has ruled the state during the past two decades must take its due share of the blame for making things reach such a pass. The writing was right there on the wall when the Comptroller and Auditor General (CAG) tabled a damning audit report on the debt-ridden state’s finances in the Assembly in September last year. The report flagged a worrying trend — expenditure growing at a much faster rate compared to revenue receipts. Now, in another embarrassment on the financial front, Punjab has finished last among 18 major states on the NITI Aayog’s Fiscal Health Index (FHI).

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The state has turned out to be a laggard on key sub-indices such as quality of expenditure and fiscal prudence. In simple terms, Punjab is not spending enough to boost development, for which a marked improvement in infrastructure and social services is a must. This has adverse implications for the state’s long-term economic growth as well as its potential as an investment destination. The indiscriminate rollout of subsidies and freebies has brought the state exchequer to its knees. According to the CAG report, subsidies constituted 11-18 per cent of the revenue expenditure during 2018-23. Successive governments have shied away from discontinuing or rationalising subsidies for an obvious reason — the fear of a backlash from the farming community, which is a major vote bank. The AAP government’s ‘zero bill’ guarantee for electricity consumers has not been matched by all-out efforts aimed at revenue mobilisation.

There are just two years to go for the Assembly elections. In its bid to woo voters and regain power, the ruling party will be tempted to fiscal discipline the go-by. This is a vicious cycle that is stifling Punjab’s growth. The least that can be done is to find out how top performers like Odisha, Chhattisgarh and Goa have got it right. Hopefully, the FHI wake-up call will shake the state government out of its self-congratulatory reverie.