Punjab CM Bhagwant Mann
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Punjab has accumulated a debt of over ₹47,000 crore in the past a year and a half, prompting calls from economists to rationalise freebies amid lack of resources to make fresh capital investments as the State’s outstanding debt hovers over 50% of its GDP.
Chief Minister Bhagwant Mann, responding to a letter from Governor Banwarilal Purohit on Tuesday, said a “mammoth” amount of ₹27,000 crore went into paying interest on the debt that was inherited from the past regimes.
He said the State borrowed around ₹32,447 crore in 2022-23 and ₹14,660 crore from April to August 2023.
The CM’s reply came after the Governor last month sought details about the utilisation of the borrowed amount.
Since coming to power in Punjab last year, the Aam Aadmi Party (AAP) government has taken several populist measures, including free power up to 300 units per household and a financial assistance of ₹1,000 for every woman aged 18 or above.
Earlier in the year, the Reserve Bank of India had flagged that Punjab’s outstanding debt was more than 50% of its GDP and more than four times its revenue for the financial year 2022-23.
‘Mobilise resources’
Expressing concern over the situation, economists said the government should prepare a road map to come out of the crisis.
Dr. Ranjit Singh Ghuman, Professor at Guru Nanak Dev University in Amritsar, said the government must provide a rationale for its populist programmes. “With the debt at 334% of total revenue receipts, the State is caught in a debt trap and it needs serious attention,” he added.
Mr. Ghuman stressed that the sixth Punjab Finance Commission in its report had highlighted an untapped economic potential that may help the State earn an additional ₹28,000 crore annually. “If the government succeeds in mobilising these resources, it will have additional funds for capital expenditure,” he said.
Noted economist Dr. Lakhwinder Singh too said that Punjab’s fiscal policy has turned dysfunctional over time and the State does not have the resources for fresh capital expenditure. “The current government is running on the lines of the previous regimes and borrowing to pay its interest on the debt accumulated over the years. The government should develop a road map for initiating a new era of development,” he said.
He said people had great expectations from the AAP when it was voted to power last year. “After one-and-a-half years at the helm, people of Punjab are questioning the government as AAP has failed to unveil any solid programme to deal with mounting debt and rejuvenate the State’s economy. The marginal rise in revenue goes towards meeting new subsidies even as the State’s finances continue to remain in a state of flux,” he said.