Punjab Fiscal Crisis, and Non-Governance

The finances of the Punjab government are in extremely bad shape. A state, once known for its model financial management, is being bracketed with poorly managed states like Bihar and UP. The state is finding it difficult to discharge routine responsibilities such as paying salaries to its employees and pensions to the retired ones. As a temporary measure the funds earmarked or borrowed for development are being diverted for revenue expenditure. The credit rating of the state has gone so low that no international agency is ready to lend money to the state. Even nationalised banks are refusing to lend to the state government. The government has become ‘poor’ in a prosperous state. The state government is not in the position to meet its obligations towards local bodies and autonomous institutions like universities. Consequently, there are a large number of the government departments which have become non-functional (for want of funds) and vital institutions are moving towards being paralysed. The capability of the government is so undermined that it has no funds for development purposes and no credibility to mobilise from financial institutions.

The crisis has come at a time when the government is expected to play an active role in putting the economy back on rails. There is general deceleration in the rate of growth of the economy in 1990s compared to even the bleeding years of the 1980s. Agriculture is stagnating and experiencing negative growth rate in alternative years. The rural poverty levels have jumped from 3.20 per cent of the population in 1988-89 to 12.50 per cent in 1993-94. There are nearely 15 lakh unemployed youth in the state. In the matter of unemployment and its increasing dimension, the Planning Commission (in the Ninth Plan) has bracketed the state with Bihar, UP and Kerala. Punjab is likely to lag much behind Maharashtra and Gujarat in the next few years. Both the latter states are experiencing high growth rates. They are growing at 9.5 per cent and 8.0 per cent (during 1991-92 to 1996-97) per annum respectively compared to 4.7 per cent growth rate of Punjab. There is an urgent need to attend to the problems of the economy of Punjab and accelerate its growth process. The government must come forward to provide a leading role as it did in the past. This requires that the financial health of the state must be restored.