Outstanding debt of Punjab has risen by nearly 170% in last eight years

CHANDIGARH: The outstanding debt of the fund-crunched Punjab government now stands around Rs 2.5 lakh crore and with the fall in the state gross domestic product (SGDP), the revenue to the SGDP ratio is anticipated to reach nearly 46% by this fiscal year end. The agrarian state’s outstanding debt was at Rs 92,081 crore in financial year 2012-13 and it has witnessed nearly 170% increase.
At the same time, the public expenditure is expected to increase with a higher percentage of state population falling below the poverty line with the decline in opportunities for livelihood because of the adverse impact of Covid-19 pandemic. Much of Punjab’s borrowing goes into debt servicing, as it had spent over Rs 17,567 crore to clear loan interest in the financial year 2019-20.

Revenue receipts of the Punjab government, like the Centre and other states, also witnessed a steep fall owing to the Covid-19. However,the worrisome part is exploration of almost negligible new avenues to generate state’s own revenue and the laxity in arresting revenue loss caused mainly due to illegal mining and illicit liquor trade.
The state government is definitely not going to meet Rs 88,004-crore budgeted revenue receipt targets this fiscal, just like previous years. According to the available monthly key indicators, the state government could hardly achieve 31% target of its Rs 49,845-crore budgeted tax revenue and just 13% of its Rs 8,045 crore non-tax revenue budget estimates in the first two quarters of this financial year.
It has had a direct negative impact on the capital expenditure in the first two quarters as the state could gather the courage to spend just Rs 648 crore on this account out of the total budget estimates of Rs 10,279 crore for the fiscal and this is a worrisome trend for the health of an economy. As the state government spent Rs 4,412 crore on developing income generating capital assets in the fiscal year 2016-17, it hardly shelled out Rs 2,224 crore in 2019-20 as it aimed at bringing the state economy back on track.
Professor of economics at the Institute for Development and Communication (IDC) Chandigarh, Jatinder Singh Bedi, who has been closely monitoring the Punjab economy, says: “If one look at the budget estimates of the Punjab government over the years, it becomes clear that there is candid admission by various governments that the state wishes to withdraw and leave everything to the market forces.” He says though the fall in collection of the non-tax revenue was still acceptable as there were limited opportunities to expand, but the slowdown in state’s own tax revenue was the cause of major worry and required careful analysis.
Decline in own tax revenue
The share of Punjab’s own tax revenue, excluding the Goods and Services Tax (GST), declined from 27.4% in financial year 2019-2020 (revised estimate) to 22.7% in financial year 2020-2021 (budget estimate). Whereas the share of state’s own non-tax revenue in total tax revenue declined from 10.8% in financial year 2019-2020 (revised estimate) to 9.9% in financial year 2020-2021 (budget estimate). Professor Bedi points out that the GST implementation has eroded Punjab’s fiscal autonomy by 18.1 percentage points. In the absence of GST, the Punjab government would have enjoyed autonomy on 56.4% of its revenue resources during FY 2020 as against 49.9% during FY 2021. “Despite inflated revenue receipts in budget estimates, it falls short of Rs 19,000 crore compared to the committed expenditures of the state,” he added.
As state finance minister Manpreet Singh Badal had highlighted in April, the state government was suffering Rs 1,700 crore per day loss of gross state domestic product (GSDP) due to Covid-19 induced curfew, chief minister Amarinder Singh had ordered cut in expenditure by all government departments so that urgent expenses could be met to deal the crisis.