Subnational finances and fiscal prudence in Punjab and Haryana—A comparative analysis

Fiscal policy is one of the critical components of economic stability; as high deficit has constrained the economy from achieving the objectives of economic growth and development. The present study aims to assess the fiscal performance of Punjab and Haryana states by examining the major fiscal policy indicators in the pre and post reform period. A comparative analysis on the fiscal front has been done between these two neighboring Non Special category states. The study has concluded that on most of the fiscal parameters including revenue deficit, fiscal deficit, tax mobilization and debt, Haryana's fiscal situation is better than that of Punjab. Haryana has shown commitment towards following fiscal prudence path. Revenue deficit is found to be the major factor affecting the fiscal situation of both the states. The present research suggests that in order to deal with the problem of fiscal instability at state level, the strategy needs to be ensured that resources are used for productive investment.