GUEST COLUMN: Reflections on the state of Punjab economy
Paradoxically, in a relatively rich Punjab, the government is steeped in debt, an odd combination of a high-income state with low quality of public finances; this needs structural change
Punjab pioneered green revolution and served as India’s food basket during the 1960s and 70s, with an enterprising farming community and the state’s pragmatic policies facilitating the transformation. The government provided infrastructure, institutional support and extension services for promoting modern methods of cultivation. High-yielding varieties of wheat were introduced and concessional credit facilities were offered through cooperative banks. A network of tubewells brought the entire area under irrigation.
The marketing of produce was not a problem due to the countrywide shortage of foodgrain and assured minimum support price (MSP). Agriculture, thus, became an engine of growth for generating employment and reducing poverty. The state held top position in per capita income across the country for a long time. Resilience, buoyancy and hope for a better future marked these times.
However, assured demand for foodgrain over a long period generated complacency and stalled structural transformation of the agrarian economy. The downhill journey of Punjab’s economy began in the early 1990s, when agricultural growth started losing momentum.
FACTORS BEHIND LOW GROWTH TRAJECTORY
Over the past 10 years, the state’s growth rate has been lower than the national average. Its rank in per capita income has slid from the top to the 10th position among major states. Neighbouring Himachal Pradesh and Haryana have higher per capita income; Haryana has 50% higher figure than Punjab.
The state’s development trajectory has been adversely impacted by a host of factors. These include turmoil during the 1980s, skewed developmental priorities biased in favour of agriculture, inadequate investment in human capital, neglect of urban development and profligacy in state spending.
Agri-centric policies pursued over a long time, to the neglect of industry, trade and tourism have led to a lopsided economic structure of the state. Free power for agriculture incentivised planting of paddy as a second crop. Use of ground water in excess of recharging facility has resulted in a fall in water table between 2metre and 4metre, destruction of aquifers and land degradation.
The solution lies in crop diversification, but till free power is available, there will be little incentive to switch to other crops. The MSP, by incentivising production of foodgrain, shifted land away from pulses and oilseeds necessitating their import. Free power is costing the state dear with yearly subsidy burden of over ₹12,000 crore. It is an emotive issue and political parties of all hues swear by it.
Unregulated and excessive use of pesticides has caused chemical toxicity and pollution, resulting in rising incidence of cancer in Malwa. Burning of stubble for early sowing of wheat is causing health hazard and pollution. The recent farm stir was symptomatic of the serious agrarian crisis.
Fragmentation of land holdings due to the rising population has made farming unviable for small and marginal farmers,with most rendered landless labourers. The indebtedness among farmers has assumed alarming proportions, with the rising number of suicides deepening the crisis.
Widespread drug addiction is incapacitating the youth causing depression, family tensions, unrest and virtual ruination of a generation. The aspirations of Punjabi youth are high, and do not match their capabilities. Punjab’s unemployment rate in 2018-19 was 7.4% against the national figure of 5.8%.
INDUSTRY TREATED AS POOR COUSIN
The powers-that-be have treated industry as a poor cousin. Tariff for industry is kept high for cross-subsidising agriculture. Developed infrastructure, fiscal incentives and operational ease have not been adequately provided for industrial development. Labour intensive small and medium enterprises, the backbone of industry in the state, are languishing. Ludhiana, the industrial, is highly polluted. The high growth of agriculture ought to have been accompanied by industrial development for job creation to absorb surplus labour.
Well-planned cities with requisite infrastructure become magnets for setting up industrial conglomerates and skill development. The state has excellent infrastructure of power, arterial roads, transportation facilities and means of communication, planned development of cities has not been a priority. Urban population in the state now accounts for 37%, half of which lives in four districts of Jalandhar, Amritsar, Ludhiana and Mohali; today, all have glaring pockets of slums. Again, Haryana has fared far better.
Surveys have revealed that the quality of school education in the state leaves much to be desired. Reading, writing and arithmetic skills of children are lower than the better performing states. Teachers in government schools lack passion and commitment, though their salaries are four-fold of what private schools pay. Around 50% of school going children seek admission in private schools.
It is not surprising that even poor parents prefer getting their wards admitted in private schools, notwithstanding the high fee, disregarding the mid-day meals, free uniforms and textbooks provided in government schools.
THE PARADOX AND GOVERNANCE CRISIS
Paradoxically, in a relatively rich Punjab, the government is steeped in debt, an odd combination of a high-income state with low quality of public finances. The state’s debt burden has skyrocketed to ₹2.7 lakh crore as a result of fiscal profligacy and subsidies. The debt ratio to Gross State Domestic product (GSDP) has gone up to 44%.The burden of interest payment is over ₹30,000 crore per annum. Committed expenditure on salaries of burgeoning bureaucracy, interest repayments, pensions and subsidies add up to more than 90% of revenue receipts, leaving little for development.
All governments have been following populist competitive policies and doling out freebies While population below poverty line in the state is 11.3%, more than 50% is beneficiary of Atta-Dal scheme entitling them to monthly ration of 5kg of wheat per person at ₹2 a kg. Sops and subsidies have sapped the enterprising spirit of self-respecting Punjabis.
It is time to empower our youth by skilling them and creating jobs for effecting structural transformation of the economy beyond agriculture. The state is facing challenges relating to youth, drug addiction, rural indebtedness, land degradation, farm distress and unemployment; these cannot be wished away. The governance crisis in Punjab is a harsh reality and it will be a herculean task for the new government to set things right.
(The writer is a retired Punjab cadre IAS officer and a former secretary to government of India)