Amid concerns over mounting state debt, the Punjab government plans to raise loans worth ₹13,000 crore between July and September to meet its financial requirements.
The state will raise ₹5,500 crore in July, ₹3,500 crore in August, and ₹4,000 crore through market borrowings during the second quarter of the 2026-27 financial year.
Of the planned borrowing, ₹3,000 crore has already been raised in July so far with another tranche scheduled for next week. The funds will be mobilised through the auction of state government securities with maturity periods ranging from 2-5 years to 16-20 years, according to the borrowing plan shared by the state government with the Reserve Bank of India.
Punjab’s planned borrowing accounts for about 5% of the total ₹2.37 lakh crore that states and Union territories expect to raise through bond sales during the quarter. With this, the state’s borrowing between April and September will reach ₹18,142 crore. For the 2026-27 financial year, the state’s net borrowing is estimated at ₹39,970.65 crore according to budget estimates. This is expected to take the outstanding debt to ₹4.47 lakh crore by the end of the fiscal.
The state’s growing subsidy bill, coupled with freebies such as free travel and a ₹1,000 monthly cash allowance for women, is cited as a key factor behind rising debt. The increasing debt has drawn criticism from opposition parties, which have repeatedly accused the AAP government of pushing the state into a “debt trap” through “reckless financial mismanagement.” Addressing a rally in Jalandhar on July 17, Prime Minister Narendra Modi also said that Punjab was borrowing heavily and a large portion of the budget was going into debt servicing.
{{/usCountry}}The state’s growing subsidy bill, coupled with freebies such as free travel and a ₹1,000 monthly cash allowance for women, is cited as a key factor behind rising debt. The increasing debt has drawn criticism from opposition parties, which have repeatedly accused the AAP government of pushing the state into a “debt trap” through “reckless financial mismanagement.” Addressing a rally in Jalandhar on July 17, Prime Minister Narendra Modi also said that Punjab was borrowing heavily and a large portion of the budget was going into debt servicing.
{{/usCountry}}A finance department official, requesting anonymity, said that government borrowing remains within the limit prescribed under the FRBM Act. “We have earmarked ₹18,380 crore for capital expenditure this year – nearly 80% more than last year. The funds will also be used for debt repayment and other financial requirements,” he said. Finance minister Harpal Cheema has repeatedly attributed the mounting debt burden to liabilities inherited by the present government as well as the fiscal mismanagement and profligacy of previous regimes.
To be sure, a major portion of the government’s borrowings goes into debt servicing – the repayment of principal and interest. According to the budget estimates for 2026-27, the outgo on debt servicing is expected to be ₹42,481 crore this year, including ₹13,726 crore towards debt repayment and ₹28,755 crore on interest payments. A study conducted by a Mohali-based institution for the 16th Finance Commission in 2024-25 noted that Punjab has the highest debt-to-GSDP ratio among non-special category states with interest payments consuming about 20-25% of the state’s revenue receipts. “If the present trend continues, the state’s fiscal stress will worsen,” the study warned.