At ₹3.74 lakh crore, Punjab’s debt pile set to get bigger

The state government is estimated to borrow ₹30,465 crore in the financial year 2024-25 and close the year with an outstanding debt of ₹3.74 lakh crore as per budgetary estimates (BE) and a debt to gross state domestic product (GSDP) ratio of 46:60

The Aam Aadmi Party (AAP) government has been blaming the legacy debt of previous governments for the fiscal woes of Punjab, accusing them of pushing the state into a debt trap.

The state government is estimated to borrow ₹30,465 crore in the financial year 2024-25 and close the year with an outstanding debt of ₹3.74 lakh crore as per budgetary estimates (BE) and a debt to gross state domestic product (GSDP) ratio of 46:60.

The expectation, therefore, was that it would whittle down borrowings, but the budget numbers show that debt has been spiralling each year. The state government is estimated to borrow ₹30,465 crore in the financial year 2024-25 and close the year with an outstanding debt of ₹3.74 lakh crore as per budgetary estimates (BE) and a debt to gross state domestic product (GSDP) ratio of 46:60%. The GSDP is expected to be ₹8.02 lakh crore, according to the ‘Budget at a Glance’ document tabled by finance minister Harpal Singh Cheema in the state assembly.

In the current fiscal year, the outstanding debt was to climb to ₹3.47 lakh (BE), but it has been revised to ₹3.43 lakh crore in the revised estimate (RE). A closer look at the budget arithmetic reveals that the bulk of the borrowings is going into debt servicing – payment of principal and interest. In FY25, the total outgo on debt servicing has been pegged at ₹36,766 crore, including a whopping ₹23,900 crore on interest payments and ₹12,866 crore on repayment of principal. This is substantially more than the estimated net borrowing during the year. In the financial year 2023-24, the debt servicing BE was ₹38,626 crore, but has been increased to ₹39,126 crore in the revised estimates for the year.

Successive governments have, in their white papers, blamed unproductive borrowings for the state’s lack of fiscal space.

Considering a longer period, the state’s debt burden has more than trebled in the past ten years — from ₹1,12,366 crore in 2014-15 to ₹3.43 lakh crore in the current fiscal (RE). The funds were mostly used by the government for the redemption of past debts, interest payments and day-to-day needs of the state instead of the creation of capital assets.

The CAG, in its report on the finances of Punjab during the previous regime, had said that the government needs to use the borrowed funds as far as possible only to fund the capital expenditure and revenue expenditure should be met from revenue receipts. Last year, the debt issue was also raised by governor Banwarilal Purohit, who sought from chief minister Bhagwant Mann details of the utilisation of the debt raised by the AAP government during its tenure. In his reply, Mann, while blaming his predecessors, wrote that lingering issues left behind by previous governments were dealt with on priority, and his government used both debt and its own revenue resources to fund organisations/schemes ignored by them, utilised the new debt to create capital assets and undertake development activities in the state.

Ballooning debt

₹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

₹2,58,032 crore 2020-21

₹2,81,772 crore 2021-22

₹3,14,220 crore 2022-23

₹3,43,626 crore 2023-24 (Revised estimates)

₹3,74,091 crore 2024-25 (budget estimates)