Punjab’s declining GDP reflect the broader issue of uneven development. Addressing these disparities is essential for promoting holistic growth and preventing social distress across states
The current state of India’s fiscal federalism is significantly detrimental to the states. The system needs to be reoriented to spur a competitive environment across the country, not just within some individual states. The recent union budget was expected to set a comprehensive five-year economic agenda for the country’s wholesome growth.
In Budget 2024-25, unique packages were granted to Bihar of Rs 26,000 crore and Rs 15,000 crore to Andhra Pradesh in exchange for political support, resulting in an even wider fiscal imbalance. It’s essential to ask why a similar approach has yet to be taken to address the economic growth of other financially distressed states. For example, Punjab, as a landlocked border state facing locational disadvantages, requires a fair platform to compete on an equal footing.
Once a prosperous and progressive state, Punjab grapples with a significant problem of unchecked unemployment stemming from distressed farming and an imbalanced industrial base dominated by 99.7% of small and medium-sized enterprises (SMEs).
Punjab accounts for only 5% of industrial units in the country, with a 3.6% Compound Annual Growth Rate (CAGR) in the industrial sector over the last five fiscal years, ranking 12th. In contrast, the neighbouring state of Haryana has demonstrated higher growth rates at 5.9%.Punjab ranked first in GDP in 1981 and fourth in 2004. In the fiscal year 2023-24, with a GDP of Rs 6.98 lakh crore, the state was ranked 16th.