Punjab's Fiscal Crisis Intensifies as Expenditure Outpaces Revenue
Chandigarh: The financial stability of Punjab is facing severe challenges, with a persistent gap between income and spending coupled with escalating liabilities, according to the latest Comptroller and Auditor General (CAG) report for the fiscal year 2023–24. Tabled in the state assembly, the document underscores growing concerns over the sustainability of public finances amid rising deficits and debt burdens.
Revenue Growth Overshadowed by Soaring Expenditure
Punjab's revenue receipts showed a compound annual growth rate (CAGR) of 9.71%, increasing from Rs 61,575 crore in 2019–20 to Rs 89,192 crore in 2023–24. Capital receipts also rose from Rs 43,891 crore to Rs 46,902 crore during this period. However, the share of grants-in-aid from the central government declined significantly from 23.68% to 16.03% of revenue receipts, indicating reduced reliance on federal assistance. In 2023–24, the state received Rs 3,184.97 crore as its share for centrally sponsored schemes.
In contrast, revenue expenditure surged at a CAGR of 11.54%, climbing from Rs 75,860 crore (14.13% of Gross State Domestic Product or GSDP) in 2019–20 to Rs 1,17,407 crore (15.76% of GSDP) in 2023–24. This expenditure consistently accounted for 80% to 96% of total spending, leading to a widened revenue deficit of Rs 28,215 crore (3.79% of GSDP) in 2023–24, up from Rs 14,285 crore (2.66% of GSDP) in 2019–20.
Capital Expenditure Neglected Amid Borrowing Woes
The report revealed that capital expenditure was severely limited, with only Rs 4,743 crore spent in 2023–24, representing just 3.88% of total expenditure. Capital spending accounted for a mere 4.4% of total borrowings, suggesting that borrowed funds were primarily used for current consumption and debt repayment rather than asset creation or developmental projects.
Punjab's fiscal deficit expanded to Rs 33,115 crore (4.45% of GSDP) in 2023–24 from Rs 16,826 crore (3.13% of GSDP) in 2019–20. A substantial portion of revenue expenditure was tied to committed liabilities, such as interest payments, salaries, and pensions, which amounted to Rs 76,388 crore (65% of revenue expenditure) in 2023–24, compared to Rs 52,544 crore in 2019–20. When combined with other inflexible expenses, these components totaled Rs 88,808 crore, consuming 75.64% of revenue expenditure and leaving minimal fiscal space for development initiatives.
Subsidies and Off-Budget Borrowings Add to Strain
Subsidies exhibited an upward trend, rising from Rs 10,161 crore in 2019–20 to Rs 18,770 crore in 2023–24, with power subsidies dominating 92% to 99% of the total. Additionally, the state incurred Rs 501.24 crore in implicit subsidies.
Off-budget borrowings of Rs 4,092.78 crore were raised through public sector undertakings and parastatals as of March 31, 2024. These borrowings, while not flowing through the consolidated fund, still require servicing via the state budget, further straining financial resources.
Contingent Liabilities and Debt Sustainability Concerns
In 2023–24, the state government provided guarantees worth Rs 5,594 crore against borrowings and paid Rs 1.17 crore to discharge an invoked guarantee related to the Punjab State Industrial Development Corporation Limited. The report highlighted that the reversion to the Old Pension Scheme (OPS) in November 2022 could increase financial burdens and impact debt sustainability.
Overall liabilities, including public debt and public account liabilities, reached 44.27% of GSDP when off-budget borrowings are included. The debt-to-GSDP ratio increased from 42.71% in 2019–20 to 43.72% in 2023–24, indicating difficulties in stabilizing debt in the near future. A large proportion of debt receipts was used to repay existing borrowings, with repayments ranging from 87.94% to 117.01% of total debt receipts between 2019–20 and 2023–24.
Fiscal Responsibility Targets and Budget Management Issues
In terms of fiscal responsibility, Punjab recorded a revenue deficit of 3.79% of GSDP against a target of 3.52%, while the fiscal deficit stood at 4.45% of GSDP against a target of 4.6%. Debt remained within the prescribed limit at 43.72% of GSDP, below the ceiling of 46.81%.
The report also identified irregularities in budget management. Supplementary provisions of Rs 1,147.64 crore in 20 cases during 2023–24 proved unnecessary as actual expenditure fell short of original allocations. Budgetary allocations were based on unrealistic proposals, with savings exceeding Rs 100 crore in 12 out of 42 grants. Excess expenditure of Rs 5,242.75 crore for 2023–24 and Rs 1,475.11 crore for 2022–23 requires regularization by the state legislature.
The CAG report paints a concerning picture of Punjab's fiscal health, urging immediate corrective measures to address the widening deficits and rising debt to ensure long-term financial stability.
