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NITI Aayog’s recent report, Macro and Fiscal Landscape of the State of Punjab, reveals a troubling economic picture. Between 2012-13 and 2021-22, Punjab’s real Gross State Domestic Product (GSDP) grew at an average annual rate of just 5%, lagging behind the national average of 5.6%. More concerning, Punjab’s contribution to India’s nominal GDP has declined from 3.7% in 1990-91 to 2.6% in 2021-22. The report further highlights the state’s worsening debt situation, with a debt-to-GSDP ratio of 47% in 2022-23—well above the median state’s ratio of 32.1%. Revenue collection remains weak, with revenue receipts comprising only 13.9% of state finances. Meanwhile, the expenditure-to-GSDP ratio stands at 18.9%. These figures underline the urgent need for Punjab to overhaul its economic strategy, improve revenue generation, and manage its growing debt to achieve sustainable growth and development.

In this challenging context, Finance Minister Harpal Singh Cheema unveiled a Rs.2.36 lakh crore budget for FY 2025-26, themed “Changing Punjab.” The budget promises initiatives such as a ‘Drug Census,’ an expanded ‘Sehat Card’ program, and increased allocations for health, education, and infrastructure. However, opposition parties swiftly dismissed the budget as a “bunch of lies,” criticizing it for neglecting key constituencies such as farmers, laborers, employees, and industrialists.

They also pointed to delayed action on the state’s drug crisis and the absence of the promised Rs.1,000 monthly allowance for women. As a result, the budget has sparked intense debate, leaving the public uncertain about whether these initiatives will deliver meaningful change. A closer exa-mination of the budget’s provisions and fiscal strategy is critical to assess its true impact.

At first glance, the headline figure of Rs.2.36 lakh crore is misleading. The actual estimated expenditure for FY 2025-26 is Rs.1.65 lakh crore, with Rs.71,250 crore to be managed through Ways and Means Advances (WMA). Notably, the WMA allocation has risen sharply from Rs.57,000 crore the previous year, raising concerns about Punjab’s cash balance and liquidity. The Rs.1.65 lakh crore in actual spending reflects a modest increase of Rs.17,000 crore over the previous year. To finance this, the government is banking on a combination of higher tax and non-tax revenue (Rs.5,350 crore), increased central tax devolution (Rs.3,600 crore), and additional borrowings (Rs.8,000 crore)—further underscoring Punjab’s fiscal fragility and dependence on borrowing.

Given these realities, the government’s claim of presenting a “tax-free” budget warrants scrutiny. Although no new direct taxes were announced in the budget speech, past experience shows that the state has consistently resorted to indirect revenue enhancement measures. In June 2024, for instance, electricity tariffs were hiked, increasing costs for domestic and industrial consumers. In September 2024, the state raised VAT on petrol and diesel, generating an additional

Rs.545 crore. Around the same time, it revoked the former Congress government’s Rs.3-per-unit electricity subsidy for domestic users with loads up to 7 kW, saving an estimated `1,500–1,800 crore annually. Furthermore, GST revenue is projected to rise from Rs.25,750 crore to Rs.27,650 crore, offering no immediate tax relief to citizens. Clearly, while new direct taxes may be absent, indirect cost burdens on the public are increasing.

On the expenditure side, the budget projects a slight decline in the expenditure-to-GSDP ratio to 18.49%, down from 19.02% the previous year—suggesting some attempt at fiscal restraint. However, committed expenditures, including salaries, pensions, and interest payments, consume about 50% of total receipts. Factoring in electricity subsidies to households and farmers, this figure rises to a staggering 60%. Debt servicing alone accounts for 15.39% of total receipts. Given Punjab’s already precarious debt situation, the proposed `49,900 crore borrowing plan

for this fiscal year—a rise of Rs.8,000 crore—raises  alarm  bells. Punjab now ranks just ahead of Arunachal Pradesh among Indian states in terms of debt-to-GSDP ratio, highlighting the urgent need for fiscal reforms and more responsible borrowing.

The state’s debt trajectory under the current government is deeply concerning. Since assuming office in 2022, Punjab’s total debt has ballooned from Rs.2.82 lakh crore to Rs.3.83 lakh crore, with projections suggesting it will reach Rs.4.17 lakh crore by March 2026. If this trend persists, Punjab’s debt could cross Rs.4.50 lakh crore by the end of the government’s term—an addition of approximately Rs.1.70 lakh crore during this period. This alarming rise emphasizes the urgent need for prudent fiscal management to avert long-term damage to the state’s economy.

Meanwhile, the government has spent a massive Rs.59,000 crore on power subsidies over the past three years, with this figure expected to touch Rs.80,000 crore by March 2026. Redirecting even half of this expenditure towards capital investments could have significantly strengthened Punjab’s economy, spurring infrastructure growth and creating employ- ment opportunities. Yet, capital expenditure remains modest: for 2024-25, Rs.7,445 crore was budgeted, but only Rs.5,818 crore had been utilized by February 2025.

This underutilization and policy focus on subsidies over investment highlight how fiscal mismanage-ment is deepening Punjab’s economic ma-laise. Without setting up expert committees comprising eminent figures from diverse fields and implementing their recommendations, the government risks perpetuating a cycle of rising debt, indirect taxation, and expenditure cuts—ultimately worsening the state’s financial health and economic prospects.