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HT Special | 50 yrs of reorganisation: Haryana overtakes Punjab in finances

Reality check: Haryana’s performance in agriculture and industry has not been consistent with its service sector growth, making it a revenue-deficit state in a decade. From India’s growth engine to a lagging neighbour, today Punjab faces a fiscal challenge for which it has its culture of freebies to blame

punjab Updated: Oct 29, 2016 09:45 IST
Navneet Sharma and Pawan Sharma
Navneet Sharma and Pawan Sharma
Hindustan Times
reorganisation,reorganisation od states,Punjab

REALITY CHECK Haryana’s performance in agriculture and industry has not been consistent with its service sector growth, making it a revenue-deficit state in a decade.

Don’t miss : HT Special | Punjab vs Haryana: 50 yrs on, who’s the poor cousin now?

From India’s growth engine to a lagging neighbour, today Punjab faces a fiscal challenge for which it has its culture of freebies to blame:

Haryana: Service sector drives state’s growth

INDUSTRIAL CONCERN: The Maruti Suzuki plant in the Industrial Model Township (IMT), Manesar, in Gurgaon district after labour unrest in 2012. Haryana’s manufacturing sector needs a boost to help the state on the growth trajectory. (Parveen Kumar/HT File)

When 1956-batch IAS officer SK Mishra was handed the Haryana cadre after the state was formed in 1966, his colleagues who remained in Punjabjoked that if he doesn’t get his salary, he can count on them.

“There was no optimism. No one was sure Haryana would be a viable state,” says the retired bureaucrat, who was awarded the Padma Bhushan for distinguished civil service.

But Haryana, underdeveloped in agriculture, industry, and infrastructure as compared to Punjab, made good progress.

Rapid growth

Bolstered by improvements in agriculture and manufacturing, the state saw an upturn in the service sector.

While Haryana had a gross state domestic product (GSDP) of Rs 332 crore at constant prices in 1967-68, it rose to Rs 3,96,642 crore in 2015-16.

Haryana grew faster than most

states with a decadal average growth rate higher than the national gross domestic product (GDP) for most of this period. It had an annual average growth rate of GSDP of 4.06% from 1970-71 and 1979-80 as compared to the GDP growth rate of 3.13% during the corresponding period.

In the next decade, its GSDP growth rate was 7.01%, while the GDP growth rate was 5.89%. Barring a dip from 1990-91 and from 1999-2000, the trend continued.

The state saw an average growth of 8.5% between 2005-06 and 2014-15 with only Gujarat, Uttarakhand, Maharashtra, Bihar and Tamil Nadu performing better.

“The demand for a separate state was raised because areas that became Haryana were neglected and most of the development was taking place in Punjab. Visionary leadership and a motivated bureaucracy worked,” says Mishra.

The per capita income (PCI) was higher than the national average in the past 10 years. Revenue collections, particularly value-added tax (VAT), were robust.

Challenges ahead

But there are concerns. The tertiary or service sector is doing well, while the primary (agriculture and allied) and secondary (industry) sectors have not been consistent in growth.

There are regional disparities in income levels and development. Most of the PCI comes from six of the 22 districts.

A revenue-surplus state till a decade ago, Haryana today has a huge revenue deficit.

Additional chief secretary, finance, P Raghavendra Rao, however, says the fundamentals are strong and economy robust. “The contribution of the service sector is growing. Efforts are on to boost agriculture and manufacturing. We are focusing on resource mobilisation and job creation. The state is poised for growth,” he says.

Punjab: Misgovernance, militancy setbacks

Road to recovery: The flyover at Zirakpur town on the Chandigarh-Ambala highway is a sign of growing infrastructure in Punjab. The pace of progress has been slow but the state is hopeful of finding its way out of its fiscal woes. (Keshav Singh/HT file)

Resilience is Punjab’s strength. As celebrations to mark 50 years of being a Punjabi Suba (state) begin, bouncing back to its prime slot as India’s growth engine is the challenge the border state faces. Geographically, the Punjabi Suba is roughly equal to what was once the Jalandhar division of post-Partition Punjab before the reorganisation of 1966.

When the Congress government led by Giani Gurmukh Singh Mussafir took oath on November 1, 1966, Punjab opened its account with a Rs 1.5-crore deficit.

“Opening with a cash balance of Rs 4.39 crore (Rs 6.39 lakh revised figures),” finance minister Baldev Prakash announced on March 28, 1967, while presenting the budget for 1967-68.

Proud past

During the first two decades, Punjab was the highest per-capita income state in the country and clocked the fastest growth rate.

After 1994, the debt rose to 40% of the GSDP and revenue deficit kept rising due to high interest payments. The revenue deficit increased from Rs 244 crore in 1988-89 to Rs 2,336 crore in 2000-01.

This year, Punjab will pay Rs 10,788 crore as interest payments.

With 15,000 small-scale units, Punjab accounted for 15% of the nation’s small-scale industry. Backed by rapid growth in agriculture, the state was revenue surplus until 1985-86.

Lost its mojo

The 1971 war with Pakistan, decade-long militancy in the 1980s and aftermath of Operation Bluestar took a toll on the state’s economy. Once a fast-growing state, it slipped into the category of slow-growing ones. Former chief secretary KR Lakhanpal says, “Punjab’s plight is entirely due to misgovernance in the past 25 years. Punjab has lost its mojo. It will take a heroic leadership and Herculean effort to revive it.”

Such is the misgovernance that Punjab ministers are exempt from paying tax and known for spending lakhs a month on fuel for official vehicles.

Punjab remained under President’s rule for eight years and five months on six occasions. The Congress ruled the state for 19 years and the Shiromani Akali Dal for 22 years.

A former chief secretary (1992-95) Ajit Singh Chatha blames the culture of freebies for the fiscal woes. “Uneducated leaders with limited political vision, who fought for Punjabi Suba, ruined Punjab,” says Chatha, who was deputy commissioner of Lahaul and Spiti when Punjab was trifurcated. “Punjab’s history offers a glimmer of hope…it will find a way out of the current morass,” says Lakhanpal.

Next: Agriculture

First Published: Oct 29, 2016 09:44 IST