HP raises ₹453 cr loan for development, paying salaries

The total salary bill of the state government is around ₹12,500 crore, which turns into a monthly cost of ₹1,000 crore, on average

With economic activity at a standstill due to the covid-19 outbreak, resource generation for governments has also stalled. To fund important development work and also pay salary bills of its 2.7 lakh employees for March, the Himachal Pradesh government has raised a loan of Rs 453 crore from the Reserve Bank of India (RBI), taking the total debt burden on it to Rs 58,253 crore. The total salary bill of the state government is around Rs 12,500 crore, which turns into a monthly cost of Rs 1,000 crore, on average.

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The state’s debt has doubled since 2012, when it was Rs 28,207 crore and has now translated into a a per capita debt of Rs 73,000 on each state resident. Dearness allowance is also payable to 1.8 lakh (around 66%) of employees.

The state spends 32% of its budget on paying pension to its employees and another 10% on salaries. Another 15% goes in interest payments. Disbursal of loans to farmers takes up another 10%. Finally, only around 25% is spent on development works.

Successive state governments have failed to mobilise resources and tax collection also dipped after the good and services tax (GST) was implemented across the country in July 2017.

It will be a difficult climb back for the state’s economy after restrictions end, as the state economic survey, this year, had already predicted a slower pace of 5.6% from 7.1% in the previous fiscal. The only positive in the survey was the 6.6% increase (by approximately Rs 12,000) in per capita income in the state to Rs 1.95 lakh in 2019-20 over 2018-19.