Admit the ailment, then look for cure

  • RS Ghuman, Hindustan Times, Chandigarh
  • Updated: Feb 01, 2015 10:39 IST

Every Punjabi would like to feel proud of the economic development in the state and rightly so, because Punjab has been occupying the pride of place in terms of GSDP (gross state domestic product) growth rate and per capita income (highest for about 25 years till the mid-1990s). However, in 2012-13, Punjab stood eight among the states in terms of per capita income. And it is always true that no state can remain at the top forever.

Nonetheless, we must continue to struggle to regain our place, and there should be no place for complacency, as has been aptly said by Prof SS Johl in his article in Hindustan Times (January 29). At the same time, instead of being basking in past glory, there is an urgent need to strive for maintaining our glory.

It is true that while comparing growth rates of GSDP one must take into account the base of the state’s economy. Growth rate does enlarge the size of the cake and hence helps in increasing the base. This has exactly happened in many other states of India who have overtaken Punjab in growth rate and per capita income since the mid-1990s.

The long-term dynamics of growth also tell us that with economic growth and development the share of agriculture in GSDP and in overall employment declines. Punjab is no exception. Currently, the share of agriculture and allied activities in Punjab’s GSDP is around 22%, and its share in employment is around 35%. Thus, the state of Punjab is no more an agrarian economy.

GSDP and sectoral growth

One may like it or not, but GSDP growth rate is a necessary condition for increasing the size of the pie and the level of per capita income. And, if a state lags behind for a considerably long period, it must be a matter of serious concern. But we did not admit that we have been facing a serious deceleration in growth rate for about two and a half decades. Something similar was wrong with our understanding that the colour of Green Revolution shall continue to be green forever. We did not make the much-needed effort to translate the success of that revolution in other sectors.

It is a hard fact that Punjab started lagging behind in GSDP growth since the Eight Five Year Plan (1992-97). With its 4.7% growth rate, the state ranked 13th among the 17 non-special category states. During the Ninth Five Year Plan (1997-2002), the growth rate was 4.4% percent and the state stood ninth. Punjab’s growth rate was 4.5% and rank was 16th during the 10th Plan (2002-2007). During the 11th Plan (2007-12), the sate experienced 6.8% growth and stood 17th.

Clearly, Punjab not only continued to slide down in the relative rankings but did not improve upon its own growth rate between 1992 and 2007. During 2007-12, it did improve its growth rate but was at the lowest rank among the non-special category sates. The targeted growth rate of Punjab for the 12th Five Year Plan is also not very encouraging. During 2005-06 and 2013-14, Punjab’s GSDP growth rate was behind 23 states and UTs.

Even its agricultural growth rate, both in absolute and relative terms, during 1990-91 and 2009-10 as compared to 1970-1990, was lower than many states. During the 1970s and 1990s, Punjab’s agricultural growth rate was 4.14% and 5.46%, respectively, ranked second among the major states. During 1996-97 and 2004-05, the state’s agricultural growth was 2.42%, and during 2005-06 and 2013-14 it was 1.49%. Its relative ranking was 15th and 29th, respectively. The all-India average agricultural growth rate during these two periods was 2.72% and 3.67%, respectively.

Punjab’s industrial growth rate during 2000-01 and 2004-05, and during 2005-06 and 2013-14, was 1.9% and 8.45%, respectively. It was much below the national average of 6.38% in the former period but higher than that of 6.87% in the latter period. The relative ranking was 26th and 11th, respectively.

Service sector in Punjab registered an annual average growth rate of 8.81%, lower than the all-India average of 9.07%, during 2005-06 and 2013-14. Its ranking was 26th. However, in terms of poverty eradication, Punjab has performed much better than many other states. Only six states are better placed than Punjab in poverty eradication.

Financial scenario

Less said the better about the financial position of the state. However, some statistics are not only revealing but perturbing. During 14 years between 1997-98 and 2012-13, 10 to 16 states had higher share of own tax revenue as percentage of GSDP than Punjab. For six years in that period, 7-9 states performed better than Punjab; for five years, 16-20; and for nine years, 21-25 states were better placed than Punjab, in terms of total revenue receipts as share of GSDP. The state’s performance in terms of outstanding liabilities as percentage of GSDP and as percentage of revenue receipts has been even worse. The position in fiscal and revenue deficit is no better.

It is unambiguously clear from the foregoing revelations that something serious has gone wrong with economic management in Punjab, and there is an urgent need to tackle it like an emergency. But, before that, we shall have to admit that Punjab’s economy is down with some serious ailment. Only then we shall be able to treat and cure. As long as we do not recognise this hard fact, policy orientation is not going to change. But, let us hope for the best.

(The writer is Nehru SAIL Chair professor at Centre for Research in Rural and Industrial Development (CRRID), Chandigarh. Views expressed are personal.)

Tomorrow: KR Lakhanpal, former chief secretary, Punjab

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