Fiscal Crisis: A Case Study of Government of Punjab

Punjab has remained one of the fastest-growing and richest states of India in the past. It was at the heart of the green revolution which, starting in the mid-1960s, ended Indian starvation and heavy dependence on food aid. However, since the 1980s, the state has lost its economic leadership among states, and steadily slipped behind other states. Present study is an attempt to analyse the economic performance of Punjab This report covers a whole range of issues pertaining to Punjab State finance: the revenue receipts and expenditures, gross fiscal receipts and expenditures, gross fiscal deficit, revenue deficit debt and liquidity position in form of WMA and overdrafts availed. It finds that since 1990s Punjab's GDP growth has been lower than the national average. In terms of per capita income, the growth rate of Punjab, initially one of the top-ranked states in terms of per capita income level, has been below the national average in the last two decades. It is slipping down in rank below other faster-growing states. A major weakness has been a high fiscal deficit. State's liquidity situation became worrisome in 2011–12 and it is now using RBI's advances facility almost every day. Once considered as the richest state of India, it is caught in a chronic liquidity crisis as it is emerging as one of the largest borrowers of the Reserve Bank of India's temporary lending facility.