Guest column | What should Amarinder govt do to rejuvenate the Punjab economy?
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Guest column | What should Amarinder govt do to rejuvenate the Punjab economy?

The Punjab government should mobilise resources by engaging institutions, Union government, corporates and diaspora. The Union government’s new opportunity to borrow from international agencies can also be harnessed.

punjab Updated: May 09, 2017 11:41 IST
Lakhwinder Singh
Lakhwinder Singh
Hindustan Times
Amarinder govt,Punjab economy,Union government
Punjab chief minister Captain Amarinder Singh(HT File Photo)

The intense election campaign and promises made in manifestos by the three main political parties heightened the aspirations and expectations of the people of Punjab. The new government led by Captain Amarinder Singh has borrowed time of 90 days for taking concrete decisions and formulate policies that will fulfil the promises made to the people.

The Punjab government is facing substantial challenges, both short and long term, that needs to be overcome to rejuvenate the state’s economy. The first and foremost challenge is to recover from the chronic investment deficiency. Punjab economy occupies the bottom position among the major Indian states in terms of investment made over the time. Even compared with the overall average of the Indian economy, Punjab lags far behind. The investment gap between Punjab and India widened during the period of economic reforms and to fill this deficiency, Punjab requires nearly Rs 15,000 crore of annual net investment for capital formation in the next five years. This was mainly caused by profligacy of various governments in the past and dysfunctionality of the fiscal policy. The mounting debt burden (Rs 2.5 lakh crore) and difficulty in servicing it has resulted in the compression of investment that forms productive capital assets direly needed for achieving higher levels of economic development and transformation of the economy.


Another core challenge is deficiency of intellectual capital. The performance of any government is fundamentally dependent on innovative ideas matching to neck-deep crisis ranging from formulation of policy to ways and means to deliver it at the grassroots level. This requires, as suggested by Joseph Stiglitz, a Nobel laureate in economics science and a well-known public intellectual, the engagement of intellectuals who are working on the problems faced by the local economy. The policies suggested by the ivory tower experts generate a gap between what is desired and what is proposed and implemented. It complicates the matter rather than providing solutions. The decisions taken so far, and the experts engaged, shows the fondness of the government for establishing dominance of the bureaucracy instead of innovative policy experts.

Punjab is facing a huge deficit of developmental institutions. From top to bottom, these institutions are dysfunctional. It is well known that the state planning board could not hold even a single meeting during its tenure and the position is similar at the grassroots level. Directly delivering finance for development by the political leadership to favour some in the recent past has a de-skilling impact on these institutions and promoted rent seeking behaviour.


The evolution of the structure of Punjab economy displays deficiency of inter-linkages across and within sectors. Agriculture sector production is predominantly dominated by wheat-paddy and geared towards food security of the nation. Industrial and services sectors also have very weak linkage as well as with the agriculture sector. This kind of production structure cannot generate economies of scale and scope and the cost of production is turning out to be very high. For reaping full benefits, the agriculture sector needs a shift towards crops that can be processed locally and it further needs integration with marketing. This involves one-time switching cost.

To fulfil people’s aspirations, the Punjab government is expected to mobilise resources through engaging institutions, Union government, corporate sector, diaspora and local. The new opportunity provided by the Indian government to borrow from international agencies can be harnessed. This requires substantial amount of homework, preparation of reports, lobbying and engagement of the diaspora. Above all, public policy formulation, design and implementation and searching for adequate financial backing needs expert advice.

For transparency, an independent evaluative agency also needs to be appointed. The successful rejuvenation of the economy needs releasing fiscal policy from its shackles. All this requires change in the mindset of the government and involvement of the public intellectuals who possess ideas to resurrect the economy of Punjab.


The government should engage economists as an advisory council to the chief minister of Punjab for regular review of the economy, churning out fresh ideas and suggesting the course of action for faster progress of the economy. Each ministry needs professional expert advice and well-trained professional experts available in universities and research institutes can be utilised who can provide innovative solutions and save the ministers from announcing decisions and retreating afterwards. It is suggested that Punjab government should also set up a diplomatic expert group for engaging diaspora for mobilisation of resources and involvement of various governments for bringing in industrial investment.

The Punjab government should learn lessons from engagement of experts in the Kerala State Planning Board and decentralised planning that earned huge success and international recognition. Kerala has long overtaken Punjab on key development indices. It’s high time that the political leadership learns a lesson and address the core deficiencies for rejuvenation of Punjab economy.

(The writer is professor of economics at Punjabi University, Patiala. The views expressed are personal)

First Published: May 09, 2017 11:41 IST