Punjab School of Economics, Guru Nanak Dev University, Amritsar.
The present paper aims at making an analysis of growth, structural transformations and the extent of divergence between the adjoining states of Punjab and Haryana with respect to various components of real capital formation. The study, an empirical one, has made use of various analytical estimations from secondary time series data compiled on aggregated/disaggregated Gross Capital Formation in respect of the two states. As per the main findings, growth performance in capital formation has been rather dismal in Punjab vis-a-vis that in the Haryana, especially during the post-liberalization regime. Major divergences (in respect of the rate of capital formation) between the two states occurred due primarily to five components: Real Estate and Ownership of Dwellings (76.4 percent); Construction (13.9 percent); Trade, Hotels and Restaurants (4.5 percent); Electricity, Gas and Water Supply (3.4 percent); and Transport, Storage and Communication (1.8 percent). In order to improve its rapidly depleting financial health, the state of Punjab needs to give a serious reconsideration in making allocation of its limited resources towards productive purposes (especially in agriculture and manufacturing sectors) rather than providing freebies under various populist measures.
