Search the Internet          Tips  Sites: Finance, Investment

Punjab, a state in a shambles

Komal Ahuja

Pity poor Captain Amarinder Singh. Punjab's new chief minister has inherited a bankrupt state.

Once one of the fastest growing states in the country with the highest per capita income, Punjab's economy is in a shambles today. Seventy five per cent of its farmers do subsistence farming. Their ostentatious lifestyles have put them in a debt trap. As a result, dozens of them had to committ suicide.

The state is largely dependent on agriculture. Agriculture and allied activities account for 40 per cent of the state's gross domestic product.

The state is plagued by small agricultural holdings. So the mechanisation of agriculture has led to over-capitalisation and underutilisation of machines. According to government officials, only 16 to 40 per cent of the capacity of tractors is utilised. Indeed, tractors have become status symbols, something that helps in ensnaring a better bridegroom for daughters.

Even industry in Punjab is going through a bad phase. Many small businesses have closed down. The state government's finances are in a mess. The statistics tell just how badly off Punjab is.

This year, Punjab has a revenue deficit of Rs 35 billion or 4.5 per cent of the gross domestic product. Its gross fiscal deficit is Rs 55 billion or 7 per cent of GDP. It has a public debt of Rs 330 billion, or 40 per cent of GDP. In 1999, salaries, pensions and interest payments comprised 142 per cent of total tax and non- tax receipts. Pensions in Punjab are the highest, higher than those of the Centre.

Not surprisingly, chief minister Singh is trying to pull Punjab out of the morass it is now in. The government clearly can't afford to continue supplying power free to farmers. No decision on putting a stop to this has, however, yet been taken. He has also been meeting important economists and asking them for advice on setting the state's economy right.

These apart, the chief minister has cracked down on power pilferage and tampering with meters, arrested teachers engaged in private tuition, ordered vigilance raids to check absenteeism among government employees and reimposed octroi in a bid to prop up state revenues.

There's also talk of imposing other tough revenue-generating measures. Singh has also started a crusade against corruption by arresting the chairman of the Punjab Public Service Commission and removing the vice-chancellor of Punjabi University, Patiala.

The government also has a new, less regulatory industrial policy on its drawing boards.

Last but not least, it it considering setting up agro processing zones in various parts of the state, pushing for the establishment of processed wheat product units and re-orienting farmers to produce what the market needs -- poultry, dairy products, fruits and vegetables, basmati, durum, pulses, and oilseeds.

Whether Amarinder Singh succeeds in achieving his goals has to be seen. Clearly, he has a tough, unenviable task ahead of him.

Powered by

ALSO READ:
The Rediff Budget Special
The Rediff-Business Standard Special
Money