Punjab: High debt level, at Rs 1.25L crore, a major challenge for new government

One of the key issues that any incoming government in Punjab has to immediately grapple with is high state debt estimated at Rs 1.25 lakh crore in the last year’s budget.

By: ENS Economic Bureau | New Delhi | Published: March 13, 2017 1:55:53 am
Punjab, Punjab Congress victory, Punjab elections, Punjab election results, Punjab debt, BJP loss Punjab, Punjab GSDP, Punjab RBI, Punjab agriculture, drugs Punjab, India news Congress will have to grapple with the high state debt of Rs 1.25 lakh crore in the last year’s budget. (PTI Photo/File)

One of the key issues that any incoming government in Punjab has to immediately grapple with is high state debt estimated at Rs 1.25 lakh crore in the last year’s budget. A clutch of other key reforms such as improving land allotment process and streamlining property registration would also need the attention of the new government. Punjab has steadily accumulated the debt over the years, resulting in its interest payments jumping over time.

Under the Shiromani Akali Dal-Bharatiya Janata Party (SAD-BJP) government that won power in 2007 and then retained it in 2012 Assembly polls, Punjab’s outstanding debt has more than doubled. Barring the year 2009-10, when it raised nearly Rs 12, 317 crore, marginally less than the nearly Rs 12,500 crore it had borrowed in 2008-09, the state’s borrowings have steadily risen over the years.

According to the RBI report on study of state government budgets, Punjab’s annual debt is running at 31.4 per cent of the gross state domestic product (GSDP) in 2015-16, marginally lower than 32.4 per cent in the Revised Estimates of 2014-15. This is the second highest rate of indebtedness, with West Bengal topping the charts with a debt to GSDP ratio 32.9 per cent in 2015-16.

The ratio for other states which went to elections was 30.6 per cent for Goa and 30.1 per cent for Uttar Pradesh. The debt-to-GSDP ratio was 24.4 per cent for Uttarakhand and 41.9 per cent for Manipur. Putting its finances in order will be an uphill task for incoming government, which will need to spruce up its resources and look to cut unplanned expenditure.

On the matrix of business reforms, however, the state has improved its rank from 16 in 2015 to 12 in 2016. This ranking is based on the assessment of state implementation of business reforms 2016 prepared by the DIPP. Reforms in environment registration, construction permits, single-window approval system for business proposals and access to information are among the key steps implemented by the government. Among the pending reforms that the new government may have to pursue are defining objective criteria for land allotment, making e-Stamps available at the sub-registrar’s office, digitisation of land record, integrating mutation process with property registration and enacting a comprehensive building code for the entire state.

The other reforms yet to be pursued by the state include reducing the number of documents required to obtaining electricity connection to only two and providing the electricity connection within 15 days. “Punjab has scored well in terms of completed projects (worth Rs 33,660 crore), though new investments undertaken were much lower (Rs 8,768 crore). In contrast, Maharashtra had Rs 34,682 crore of completed projects and new investment of Rs 1.94 lakh crore,” according to a CARE Ratings report.

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