Fiscal health of Punjab: need to go beyond symptoms

The recent publication of a series of articles in Hindustan Times has initiated a meaningful debate on the fiscal health of Punjab. However, most of the articles have revolved around the controversy between Manpreet Badal and Harcharan Bains. Ranjit Singh Ghuman writes

chandigarh Updated: Oct 14, 2013 10:41 IST
Ranjit Singh Ghuman
Ranjit Singh Ghuman
Hindustan Times

The recent publication of a series of articles in Hindustan Times has initiated a meaningful debate on the fiscal health of Punjab. However, most of the articles have revolved around the controversy between Manpreet Badal and Harcharan Bains.

Some of the articles did focus on the core issues responsible for the fiscal mess. They, too, did not go beyond the fiscal crisis and fiscal solution. Their mighty pen stopped somewhere before touching the nerve-centre of the real crisis which relates to the development and governance model of the state.

They have conveniently forgotten to point out that the present crisis is only one of the symptoms of some serious disease(s) which has been ailing Punjab for well over three decades. Nonetheless, the contributors and the newspaper deserve appreciation for starting the debate on a vital issue.

Fiscal health
The debate has been able to establish the fact that all is not well with Punjab's fiscal health, in spite of the denial by the government. The fiscal crisis stares the government in the face.

The political leadership of every shade and colour, their bureaucracy as well as their advisers from academia and other walks of life have greatly contributed in bringing Punjab and its economy to such a crossroads. Most of them thought the success of the green revolution would continue to be the growth engine for times to come. Even now they are of the view that agriculture is the key growth driver.

The institutions, which set the rules of the game for governance and development, have been eroded to the stage of redundancy. This manmade erosion and collapse of the institutional set-up is so serious that there are hardly any rules of the game.

Planning is vital
Planning and rules of the game are sine qua non for a meaningful economic development and effective governance. Unfortunately, Punjab is facing a serious deficit in rules of the game, planning and governance for well over three decades. All this has eroded the credibility of political leadership.

This, in turn, has weakened the political will. Thus, it is the political leadership of the state who is responsible for the erosion of institutions, rules of the game and the governance.

The deceleration of growth rate and development since early 1990s is also the result of the above facts. This, along with lack of will to mobilise resources, has pushed the state into the fiscal crisis. The fiscal mismanagement, spending without proper planning and wrong priorities in development have decreased the state's intervention capacity. In the process, the investment climate and economic growth have been adversely affected. The state's orientation has changed from development to law and order.

The narrow political ends and vested self-interests have ruined Punjab. In the process, the ruling parties have lost even their enlightened self-interest. The intellectuals also forgot their fundamental responsibility towards societal issues for reasons best known to them. It is because of this that not only the growth and development agenda got derailed but the people of Punjab got derailed.

Certainly, the myopic view of governance and development by the political leadership, bureaucracy, academia and the media is responsible for the present situation of Punjab. The people of Punjab, too, cannot be absolved of their responsibility.

Economic growth and development, inter alia, is a function of state policies and governance. Unfortunately, the policies and governance have not been investment-friendly. The state is facing a low growth syndrome since 8th Five Year Plan. The projected growth rate for Punjab during the 12th Five Year Plan (2012-17) is at the lowest rank. Punjab is beleaguered in the vicious circle of low growth, investment deficiency, low capital formation and low growth.

The real issue is to break this vicious circle and put the state on the growth and development track which should be faster and inclusive.

Limitations of state
There are many limitations of the state, such as geographical location and a landlocked and border state, but these are here to stay. At the most, it can be expected that improvement in our relations with Pakistan and the completion of the proposed dedicated rail corridor may improve Punjab's situation.

But these limitations are there since the beginning, even when Punjab's growth rate and per capita income were the highest in the country. This must compel us to introspect as to when and where did we go wrong? Only then sustainable corrective measures can be taken.

It is high time to get rid of the burden of history and the limiting and external factors (such as
role of the Centre), and to introspect and move forward. There is an urgent need to have a vision and set the development agenda with right priorities keeping in view the state's resources and capabilities.

SWOT (strengths, weaknesses, opportunities and threats) analysis is must to focus on our strengths and opportunities to translate threats into opportunities and overcome weaknesses. A big push is needed for Punjab to come out of the vicious circle of low growth.

Foremost strengths
The foremost strengths of Punjab are its human resources and fertile land. Both need to be nurtured and developed. Agriculture is already pushing out workforce so there is a need to create employment in non-agricultural sectors, preferably in rural locations. This is what is known as rural non-farm sector (RNFS).

In view of the low employability of the agricultural work force in the RNFS, they would have to be equipped with appropriate level of skill and education. This would require focus on quality education, skill development and health delivery system, with accessibility and affordability. The development of compatible physical infrastructure is of equal importance. The secondary and tertiary sectors would also have to be developed.

The foremost pre-requisite to achieving these goals and putting Punjab on the fast track to development is to change the state's orientation from law and order to development. The institutional framework would have to be in place. The governance and political will are more important for achieving growth and restoring the fiscal health of the state. In short, there is need to send the signal that we mean business.

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

First Published: Oct 14, 2013 09:38 IST