AAP govt. in Punjab borrowing on lines of previous govts., say economists 

Noted economists from the State have urged government to revive institutional arrangements of policy making, and big bang actions for sustainable development

Ahead of Punjab’s annual Budget for the year 2023-24, noted economists from the State have raised concern surrounding States — what they term “slow growth trap and debt trap” — urging the Aam Aadmi Party government to swiftly act to revive institutional arrangements of policy making, and big bang actions for the sustainable development of its economy.

In a set of suggestions to the State government, the economists associated with a forum — Economist for Public Interest, pointed out that Punjab’s economy had entered a slow growth trap over the last two decades, which had replaced the Punjab State among the major Indian States from a first rank at the turn of the 21st century, in terms of per capita income, to the tenth rank in 2019-2020.

The economists included Dr. Lakhwinder Singh, visiting professor, Institute for Human Development, New Delhi; Dr. Sukhwinder Singh, former consultant, Punjab Finance Commission, Chandigarh; and Dr. Kesar Singh Bhangoo, former professor, Punjabi University, Patiala.

Pointing out that a key factor for the slow growth of the Punjab economy was the low gross fixed capital formation (capacity to produce output) due to lack of capital investment, Mr. Lakhwinder, said the fiscal policy of the State government had turned dysfunctional over time and the government did not have the resources (capacity) to make a new capital investment.

“The story of non-functional fiscal policy is visible when we look at the accumulated debt of Punjab State. According to the Reserve Bank of India (RBI) statistics, Punjab has borrowed from various sources more than ₹3 lakh crore up to March 2022, which amounts to 53.3% of the Gross State Domestic Product (GSDP). If we include the pending liabilities, non-guarantee loans and expected borrowings of the current fiscal year (2022-23) by the Punjab government, the total accumulated debt in end March 2023 will be exceeding ₹3.80 lakh crore. Compared to other States of India, Punjab has the highest debt-GSDP ratio, and is ranked number one. This position has been mainly due to successive governments who have borrowed beyond the means,” he said, adding that the present (AAP) government was also borrowing on the lines of previous governments and thus expected to add more debt, when it would demit office.

“Despite all claims to fill the coffers of the government, the present government incurred revenue deficit of the order ₹15, 348.55 crore in the first nine months, after assuming the reins of power against its own revenue deficit target of ₹12,553.80 crore for the year 2022-23,” he stated.

“Above all, there is a dire need to rationalise subsidies and reorientation of the expenditure pattern towards a faster transition of the economy as a knowledge-based economy. The suggestion needs to be worked out in fine details by setting up a financial advisory committee,” he added.