Explained: The key economic metrics of Punjab

About 75 percent of Punjab’s population depends directly on agriculture

Farmers have been protesting for a legal minimum support prices (MSP) for their crops. Many of them belong to the state of Punjab. Given that the agrarian state is back in focus, Moneycontrol explains some of the key economic parameters of this agrarian state.

Fiscal Deficit

Punjab's fiscal deficit is estimated to be nearly 5.0 percent of GSDP in 2023-24. While this is lower than the previous fiscal’s 5.2 percent, it is significantly higher than the initial projection of 3.8 percent for FY23. In both these years, the fiscal deficit has been higher than the limit permitted by the central government, which was 4 and 3.5 percent, respectively, for FY23 and FY24.

In contrast, another agrarian state Uttar Pradesh has targeted a fiscal deficit of 3.5 percent of GSDP for FY24. In 2022-23, as per the revised estimates, the deficit is expected to be 4 percent of GSDP, same as the budget estimates for the year. The state has therefore been meeting the limit mandated by the Centre.

Higher fiscal deficits in the long run can hamper economic growth and put pressure on inflation.

Debt Levels

Punjab has one of the highest debt levels among Indian states. At the end of 2023-24, its outstanding liabilities are estimated to be 46.8 percent of GSDP, higher than FY23 wherein the debt level was at 45.81 percent. This is primarily due to repayments of previous dues of over Rs 35,000 crore in the current financial year, according to the states' Budget or FY24.

In comparison, Uttar Pradesh's outstanding liabilities is estimated to be 32.1 percent of GSDP at the end of 2023-24, lower than the revised estimate for 2022-23 (34.2 percent of GSDP).

Outstanding liabilities is the accumulation of total borrowings at the end of a financial year, including any liabilities on public account.

Source: Punjab Budget (FY24)

Subsidies
A significant portion of Punjab's revenue expenditure of Rs 1.23 lakh crore for FY24, an increase of 5 percent over the revised estimate of 2022-23, includes spending on salaries and subsidies.

As per the state Budget estimate for FY24, salaries, pension, interest payments and power subsidies account for a whopping 71 percent of Punjab's total expenditure, while only 8 percent goes for capital spending.

The Comptroller and Auditor General of India (CAG) noted that during 2017-22, power subsidies in Punjab constituted a major portion of the total subsidies, ranging between 68 and 99 percent. During the same period, subsidies have been about 56 to 102 percent of the revenue deficit, an analysis from PRS Legislative Research showed.

Power subsidy at Rs 13,443 crore constitutes a major portion of total subsidies of Rs 14,516 in Punjab during 2021-22.

Agri Spend

About 75 percent of Punjab’s population depends directly on agriculture, with the state majorly growing crops such as wheat and rice. While the state's service sector’s contribution to the state’s gross state domestic product (GSDP) is the highest at 45.91 percent, agriculture takes second place, at 28.94 percent as of FY23.

The farm sector plays a dominant role in the state’s GSDP compared to the all-India contribution of 18.11 percent.

The overall allocation for agriculture and allied sectors was pegged at Rs 13,888 crore (in the state budget) for FY 2023-24, which is 20 percent more than last year. This is 10.2 percent of its overall expenditure towards agriculture, and higher than the average outlay by states (5.8 percent), according to PRS Legislative Research.

Whereas, Uttar Pradesh allocated 2.9 percent of its total expenditure towards agriculture, which is about half the average spending on the sector by states (5.8 percent).

Unemployment
The unemployment rate in Punjab is at 6.4 percent (October-December 2023). This is lower than the rate seen in the same period in 2022, but higher than 3.5 percent seen in a state like Haryana in those months.

Punjab's current unemployment rate is almost on par with the all-India rate of 6.5 percent for October-December 2023.