Punjab debt to zoom past Rs 4 lakh crore in 2025-26

Punjab’s public debt will be over Rs 4 lakh crore by the end of March 2026, when the next financial year draws to a close. This translates into adding Rs 1.33 lakh crore in the state’s “burgeoning at the seams’ debt burden by the end of four years of the Aam Aadmi Party.

When AAP assumed power in the state in March 2022, Punjab’s outstanding debt was Rs 2.83 lakh crore.

This year alone, the state government will be raising a loan of Rs 49,900 crore and repaying Rs 18,198.89 crore. Servicing of the state’s debt will take up another Rs 24,995.49 crore. This shows that 86 per cent of the fresh loan that Punjab will raise will go only towards repayment of old loan and servicing of the legacy debt.

While these figures point that Punjab is in acute debt stress, the state government denies that the situation is grim. “In the past three years, we have borrowed Rs 1.32 lakh crore and repaid Rs 1.05 lakh crore. A sum of Rs 46,200 crore has been repaid towards the principal amount, while Rs 59,000 crore interest on loans has also been paid. We are constantly restructuring loans taken by the previous governments, negotiating with financial institutions to reduce the rate of interest on loans from 11-12 per cent to capping it at 7 per cent,” said outgoing Finance Secretary Ajoy Kumar Sinha.

Though a report on debt-stressed states, tabled in Parliament earlier this week by Union Minister of State for Finance Pankaj Chaudhary, claimed that Punjab’s debt-to-gross state domestic product (GSDP) ratio during the ongoing fiscal was the second highest in the country at 46.6 per cent, the Punjab Budget proposals claimed it was 44.77 per cent. Budget figures say that the debt-to-GSDP ratio in the coming year would be 44.50 per cent.

“The increase in debt is in consonance with the increase in the GSDP,” he said, adding that the GSDP has been expanding year-on-year and it is expected to grow by another 1 per cent next fiscal. “We are on the path to fiscal consolidation, with effective fiscal and revenue deficit expected to be 3.84 per cent and 2.51 per cent, respectively,” Cheema said.