Punjab’s debt pile puffs up
Punjab is among the most indebted state with a debt-gross state domestic product ratio of 40%. The rising debt, which is widely perceived to be the cause of its fiscal woes, means a hefty outgo on interest payments. The state shelled out ₹17,625 crore – 24% of its revenue receipts totaling ₹73,975 crore in the current fiscal – in interest payments.
But this has not stopped the state government from increasing its borrowings. The outstanding debt will stand at ₹2.29 lakh crore as per revised estimates for 2019-20 is estimated to rise to ₹2.48 lakh crore at the end of financial year 2020-21 – an increase of ₹19,330 crore. The bigger worry is that these borrowings would go into debt servicing, and not in creation of income-generating capital assets.
The outgo on account of debt services – repayment of debt (excluding ways and means advances) and interest payments – is estimated to be ₹32,002 crore, including interest payments of ₹19,075 crore as per budget estimates for 2020-21. In the next fiscal, the interest payments in alone will see an increase of ₹1,450 crore over the current year estimates. In comparison, the capital expenditure has been pegged at ₹10,280 crore as against the current year’s revised estimate of ₹19,641 crore.
These unproductive borrowings are the prime reason for the debt-trap situation where interest liability plus debt repayment is substantially higher than its fiscal deficit. Punjab’s debt burden has nearly doubled in the past six years, going up from ₹1.28 lakh crore in 2015-16 to ₹2.48 lakh crore in 2020-21 as per budget estimates.
“If the borrowed funds are invested on capital formation, the asset so created pays for itself over a period of time. But the actual capital expenditure has been much below the estimates. The government needs to change this and use borrowed funds for asset creation instead for debt servicing and meeting its day-to-day needs,” a former finance secretary said, requesting anonymity.
₹92,282 crore – 2012-13
₹1,02,234 crore – 2013-14
₹1,12,366 crore – 2014-15
₹1,28,835 crore – 2015-16
₹1,82,526 crore – 2016-17
₹1,95,978 crore – 2017-18
₹2,11,917 crore – 2018-19
₹2,28,906 crore – 2019-20
₹2,48,236 crore – 2020-21 (budget estimates)