Number Theory: Has Punjab trailed country in its economic recovery after Covid?

Updated on Feb 11, 2022 02:45 AM IST

According to Reserve Bank of India (RBI) data, Punjab is ranked 14th among Indian states by gross domestic product (GDP) and 17th by per capita GDP. Its GDP growth slowed to 4% in 2019-20, from 6% in the two preceding years. In 2020-21, the state’s GDP contracted 7%.

Even before Covid-19 struck, Punjab was economically stressed. (HT FILE PHOTO)
Even before Covid-19 struck, Punjab was economically stressed. (HT FILE PHOTO)

When Punjab votes on February 20, it will do so as a state in political churn. It will also do so as a state facing acute and widespread economic distress, as highlighted by district-level data released at a monthly frequency for indicators representative of consumption and employment.

According to Reserve Bank of India (RBI) data, Punjab is ranked 14th among Indian states by gross domestic product (GDP) and 17th by per capita GDP. Its GDP growth slowed to 4% in 2019-20, from 6% in the two preceding years. In 2020-21, the state’s GDP contracted 7%. While its farmers led the recent pitched farm protests, only about 26% of workers in Punjab were involved in agriculture and allied activities, against the all-India average of 46%, as per the 2019-20 periodic labour force survey (PLFS). Agriculture contributes 14% to the state’s total gross value added.

Even before Covid-19 struck, Punjab was economically stressed. Post the hard lockdown, its economic recovery has trailed all-India averages, and this is the position across most, if not all, of its 22 districts.

Trailing Consumption

One indicator of economic affluence and pickup, across urban and rural areas, is the number of new two-wheelers registered across regional transport offices (RTOs). Compared to January 2017, from which point this data is available, the number of two-wheelers registered in India was increasing every month.

Of the 12 quarters completed till March 2020, when India went into a hard lockdown, all-India numbers were higher compared to the January-March 2017 quarter in 11. By comparison, Punjab showed growth in only five of those 12 quarters. Further, in the seven quarters since, Punjab has consistently trailed India on growth in two-wheeler registrations, even failing to capitalise on the pent-up demand after the lifting of the first lockdown.

Punjab has consistently trailed India in growth in new two-wheeler registrations.
Punjab has consistently trailed India in growth in new two-wheeler registrations.

Rural Distress

Converse to two-wheeler registrations, the number of people seeking work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is a measure of rural distress. MGNREGS is a fallback option, offering lower wages than the market. Even before Covid-19, benchmarked to the April to June 2017 quarter, Punjab was seeing greater growth in MGNREGS demand than all-India figures.

Right after lockdowns were eased, India saw a spike in people demanding MGNREGS work. As economic activity recovered and gathered pace, demand growth under MGNREGS eased nationally. But not in Punjab, where the number of people demanding work has consistently been at least 30% higher than the April-June 2017 quarter.

Growth in people demanding MGNREGS work in Punjab exceeds all-India growth.
Growth in people demanding MGNREGS work in Punjab exceeds all-India growth.

District Disappointments

The economic morass reflected in these two indicators is pervasive across Punjab’s districts. The quarter from October to December covers the festive period, and is a gauge of consumer demand at its peak. Just five of its 22 districts account for half the two-wheelers registered in Punjab. All five recorded lower numbers in this quarter in 2021 as compared to 2020: Ludhiana (-4.3%), Jalandhar (-3%), Amritsar (-4.4%), Gurdaspur (-10.8%), and Patiala (-0.6%). Just one district recorded growth: Shahid Bhagat Singh Nagar (Nawanshahr). At an all-India level, two-wheeler registrations decreased 9% in this quarter, with 20% of districts recording growth.

Districts in Punjab that fared particularly poorly belong to the Malwa region in south Punjab. This region accounts for 69 of the 117 assembly seats in the state. Of the 20 seats won by the Aam Aadmi Party in the 2017 elections, 18 were from the Malwa region.

During the same quarter, as many as 13 of Punjab’s 22 districts also saw a year-on-year increase in people demanding work under MGNREGS. They were led by Muktsar (77%), which also saw an 18% drop in two-wheeler registrations, and Patiala (57%). Several districts of the Malwa region saw MGNREGS demand surge.

Most districts are showing acute economic stress, especially in the Malwa region.
Most districts are showing acute economic stress, especially in the Malwa region.

Job Losses

Punjab also trails all-India numbers in recovery in employment in the formal sector. A measure of this is the number of organisations depositing, on a monthly basis, a percentage of their salaries with the Employees’ Provident Fund Organisation (EPFO). This is a statutory requirement for organisations with above 20 employees. In January 2020, India had about 584,000 such organisations — an increase of 3.8% over January 2019. By comparison, the count of such organisations in Punjab increased by a slower 1.2% to 22,397.

For April 2020, the first full month of the lockdown, the number of organisations from Punjab that made EPF contributions fell 10% over January 2019 levels, to 19,845. This was twice the all-India decline of 5%. Subsequent recovery has been slow, with the second wave wiping out gains made since the first lockdown. As of September 2021, the number of organisations in Punjab depositing EPF is still 7% below January 2019 levels.

On either side of the pandemic, Punjab has trailed all-India in formal sector growth.
On either side of the pandemic, Punjab has trailed all-India in formal sector growth.

In Punjab, employees of EPF-mandated firms are evenly distributed in manufacturing (45%) and services (50%) sectors. Some of the largest employing sectors are consulting services (15%), textile manufacturing (14%), education (12%) and general engineering (10%). While consulting services now has 5% more employees than two years ago, a reduction in count is seen in textiles (-11%) and education (-18%). Ludhiana, a prime district for textile and education, has seen employee count fall 13% in textiles and 9% in education over the past year.

(howindialives.com is a database and search engine for public data)

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