Punjab: Mounting debt burden a worry, 4 lakh-cr mark to be breached
For 2024-25, the government initially projected an outstanding debt liability of ₹3,74,091.31 crore, but it ended borrowing an additional ₹8,844 crore. “These extra funds were raised with the approval of the Union finance ministry, which allowed us some additional borrowing,” said principal secretary, finance, Ajoy Kumar Sinha.
Punjab’s outstanding debt of Punjab is projected to surpass the ₹4-lakh crore mark in the 2025-26 financial year.
The state government is expected to borrow ₹34,201 crore, taking the total state debt liability to ₹4,17,136.10 crore by March 31, 2026, according to the ‘Budget at a Glance’ document tabled by finance minister Harpal Singh Cheema in the state assembly on Wednesday. This marks an approximate 9 per cent increase from the current fiscal’s outstanding debt of ₹3,82,934.98 crore.
For 2024-25, the government initially projected an outstanding debt liability of ₹3,74,091.31 crore, but it ended borrowing an additional ₹8,844 crore. “These extra funds were raised with the approval of the Union finance ministry, which allowed us some additional borrowing,” said principal secretary, finance, Ajoy Kumar Sinha.
While the additional borrowing provided the state with much-needed financial wiggle room, a closer look at the budget arithmetic revealed that much of these borrowings have been going into debt servicing — that is, repaying existing loans — rather than creation of income-generating capital assets.
As per the budget documents, the outgo on account of debt servicing (both principal and interest) is projected to amount to ₹43,194 crore in the 2025-26 financial year, with interest payments alone estimated at ₹24,996 crore. The state debt liability has gone up by ₹1 lakh crore in the past three years. The state’s interest liability has been constantly rising due to its growing debt. In 2024-25, the state government paid ₹23,953.72 crore in interest on the outstanding state debt, accounting for 23% of its total revenue receipts. “The annual interest liability on borrowings made to repay older loans or meeting day-to-day expenditure has been going up each year. This cannot go on for long,” said a senior bureaucrat, who did not want to be named.
Second-most indebted state
With a debt-gross state domestic product (GSDP) ratio of 46.6%, Punjab is already among the second-most indebted states in the country behind Arunachal Pradesh, which stands at 57%. As per the projections made by the National Council of Applied Economic Research (NCAER), an economic research think tank, in a recent study, the state’s debt situation is likely to worsen in the coming years. In the study, ‘The State of the States: Federal Finance in India’, it stated that debt levels seem set to rise further with states like Rajasthan, Bihar, Himachal Pradesh and Kerala crossing 40% debt-to-GSDP ratio by 2027-28 and Punjab’s debt ratio going above the 50% mark. However, the AAP government has been blaming the legacy debt of previous governments for fiscal woes of the state.