Punjab, a state in India known for its rich agricultural heritage and industrial competence, has undertaken various fiscal policy initiatives aimed at addressing economic challenges, promoting growth, generate employment opportunities, and improve the overall well-being of its citizens. These initiatives focus on fiscal reforms, support for small enterprises, and improvements in public expenditure management. These initiatives have focused on key areas such as agriculture, industry, education, and social welfare.
Agriculture Sector
Punjab’s agricultural sector is the backbone of its economy, and the state government has taken several steps to support farmers and promote sustainable agricultural practices. Punjab has allocated 10.2% of its expenditure towards agriculture. This is higher than the average allocation towards agriculture by states (5.8%). Some of the key initiatives include:
Subsidies and Support Schemes: The government provides subsidies on fertilizers, seeds, and irrigation equipment to support farmers and promote sustainable agricultural practices. The Punjab government allocated Rs. 14,516 as subsidy out of which Rs. 13,443 was power subsidy in 2021-22 and Rs 7,465 crore for power subsidies to farmers in the 2023-24 budget. The government also provides subsidies on fertilizers to ensure that farmers have access to them at affordable prices. The government also monitors the maximum retail price (MRP) of fertilizers set by fertilizer companies.
Subsidised Loans: Government also provides subsidized loans to farmers for purchasing agricultural machinery. This helps farmers to modernize their farming practices and reduce their input costs. Rs 855 crore has been allocated for capital outlay on medium irrigation in 2023-24.
Crop Insurance: The state government has implemented crop insurance policy to protect farmers from losses due to natural calamities like floods, droughts, and hailstorms. This provides a safety net for farmers and encourages them to adopt riskier but high-yielding crops.
Market Infrastructure Development: The government has invested in developing market infrastructure, such as mandis and cold storage facilities, to help farmers get better prices for their produce. This reduces the exploitation of farmers by middlemen and ensures that they receive fair compensation for their hard work.
Promotion of Organic Farming: The state government has been promoting organic farming practices to reduce the use of chemical fertilizers and pesticides. This helps to protect the environment and produce healthier food for consumers. A new Agriculture Policy will be launched to conserve natural resources. Five horticulture estates will be set up in the districts of Ludhiana, Gurdaspur, Patiala, Bathinda, and Faridkot.
Manufacturing Sector
Punjab boasts a strong industrial foundation, with manufacturing playing a key role. The state government actively encourages investment through attractive fiscal incentives. In the 2022-23 fiscal year, agriculture, manufacturing, and services contributed significantly to the economy, accounting for 29%, 25%, and 46% respectively (at current prices).
Looking at growth at constant prices, the manufacturing sector demonstrated the most robust performance, expanding by 4.3% in 2022-23 compared to the previous year. This was followed by services at 6.8%, while agriculture grew at a more modest 3.7%. These figures highlight the diverse and dynamic nature of the Punjab economy.
Education Sector
Education is a key driver of economic growth and social development. The Punjab government has implemented various initiatives to improve the quality of education and increase access to education for all. Two new schemes- Professional Coaching for Employment, and Soft Skill and Communication Training was launched.
The government provides free education up to the secondary level to ensure that all children have access to quality education. In 2023-24 budget provisions, Rs 8,645 crore has been allocated to government secondary schools. This is 12% change from RE 2022-23 to BE 2023-24. Scholarship programs are implemented to support the education of meritorious students from economically weaker sections of society. Punjab has allocated 13.1% of its total expenditure towards education, which is lower than the average allocation for education by states (14.8%).
Healthcare Sector
The Punjab government has undertaken several initiatives to improve healthcare access and quality. These include strengthening primary healthcare centres, expanding access to essential medicines, implementing health insurance schemes, and focusing on preventive healthcare programs like immunization drives and maternal and child health services. The government also emphasizes medical education and training to enhance the healthcare workforce.
A Special Project will be launched to strengthen community health centres, sub-divisional hospitals and district hospitals. The government provides subsidized healthcare services through public hospitals and primary health centres.
Urban health services- allopathy has been allocated Rs 3,123 crore in 2023-24 Budget provisions. This is 7 % change from RE 2022-23 to BE 2023-24. Punjab has allocated 4.2% of its expenditure on health in 2023-24. This is lower than the average allocation for education by states in 2022-23 (6.3%).
Social Welfare
Punjab government is committed to improving the social welfare of its citizens. Various initiatives have been implemented to provide social security, healthcare, and other social services to the vulnerable sections of society. There is 7% change from BE to Actuals in 2023-24.
The government implements various social security schemes, such as old-age pensions, widow pensions, and disability pensions, to provide financial support to vulnerable sections of society. Welfare programs are designed to address the needs of marginalized communities, including women, children, and the elderly. Affordable housing schemes are implemented to provide housing for low-income and economically weaker sections of society.
The government operates a public distribution system to provide subsidized food grains to the poor and vulnerable sections of society.
Challenges and Future Directions
While Punjab has made significant strides in implementing fiscal policy initiatives, several challenges remain. These include fiscal deficits, debt burden, and revenue mobilization. To address these challenges and ensure sustainable development, the government needs to focus on the following:
Revenue Mobilization: Strengthening tax administration and expanding the tax base to increase revenue generation. Receipts (excluding borrowings) for 2023-24 are estimated to be Rs 1,00,052 crore, an increase of 6.3% as compared to the revised estimates of 2022-23. In 2022-23, receipts (excluding borrowings) are estimated to be 2% lower than the budget estimates.
Punjab’s estimated total revenue receipts for 2023-24 are Rs 98,852 crore, a 6% increase from the previous year. This revenue is expected to be sourced from both state and central contributions.
Punjab State’s Share will generate Rs 56,659 crore (60%) of its revenue through its own resources. Own Tax Revenue includes Rs 51,835 crore, an impressive 17% growth from the previous year. It’s projected to contribute 7.4% to the state’s Gross State Domestic Product (GSDP). Own Non-Tax Revenue is expected to rise by 29%, primarily driven by increased map sales. The remaining Rs 39,193 crore (40%) will come from the central government. State’s Share in Central Taxes is estimated at Rs 18,458 crore, an 8% increase. Grants is projected at Rs 20,735 crore, a significant 21% decrease. The discontinuation of GST compensation grants after June 2022 is a major factor in this decline, despite the state anticipating Rs 5,402 crore from this source.
In 2023-24, State GST is estimated to be the largest source of own tax revenue (44% share). State GST revenue is estimated to increase by 21% over the revised estimates of 2022-23. However, in 2022-23, the receipt on this account is expected to be 8% lower than budgeted. In 2023-24, revenue from state excise is estimated to increase by 10% over the revised estimates of 2022-23. However, in 2022-23, revenue from state excise is estimated to be 8% lower than the budget estimates.
Overall, Punjab’s revenue picture for 2023-24 indicates a positive outlook, with strong growth in own tax revenue. However, the decline in central grants presents a challenge that needs to be carefully addressed.
Expenditure Rationalization: Prioritizing expenditure and reducing wasteful expenditure to improve fiscal efficiency. Total expenditure (excluding debt repayment) in 2023-24 is targeted at Rs 1,34,836 crore. This is an increase of 5.9% over the revised estimate of 2022-23. This expenditure is proposed to be met through receipts (excluding borrowings) of Rs 1,00,052 crore and net borrowings of Rs 32,784 crore. Total receipts for 2023-24 (other than borrowings) are expected to register an increase of 6.3% over the revised estimate of 2022-23.
Revenue expenditure for 2023-24 is proposed to be Rs 1,23,441 crore, an increase of 5% over the revised estimate of 2022-23. This includes expenditure on salaries, pensions, interest, grants, and subsidies. Capital outlay for 2023-24 is proposed to be Rs 10,355 crore, an increase of 22% over the revised estimate of 2022-23. Capital outlay is the expenditure towards creation of assets. In 2022-23, capital outlay is expected to be 22% lower than the budget estimate. It is observed that during 2017-22, power subsidy in Punjab constituted a major portion of the total subsidies ranging between 68% and 99%. During the same period, subsidies have contributed to about 56% to 102% to the revenue deficit.
Committed expenditure of a state typically includes expenditure on payment of salaries, pension, and interest. A larger proportion of budget allocated for committed expenditure items limits the state’s flexibility to decide on other expenditure priorities. In 2023-24, Punjab is estimated to spend Rs 74,620 crore on committed expenditure, which is 75% of its estimated revenue receipts. This comprises spending on salaries (35% of revenue receipts), interest payments (22%), and pension (18%). In 2023-24, committed expenditure is expected to increase by 6% over the revised estimate of 2022-23.
Others
Public-Private Partnerships: Leveraging public-private partnerships to finance infrastructure projects and attract private investment.
Good Governance: Promoting transparency, accountability, and good governance to enhance public trust and improve service delivery.
Sustainable Development: Integrating environmental and social considerations into fiscal policies to ensure sustainable development.
By addressing these challenges and implementing effective fiscal policies, Punjab can continue to progress towards a prosperous and inclusive future.
The Punjab government initiated a Fiscal Reform Programme in 1999 to address severe fiscal imbalances, which included the enactment of the Fiscal Responsibility and Budget Management Act in 2003. Despite recognizing the need for fiscal discipline, the government has struggled with political pressures that hinder decisive action for long-term fiscal stability.
While these initiatives reflect a commitment to fiscal reform and economic revitalization, the ongoing challenges of political influence and the need for comprehensive policy frameworks remain significant hurdles for the Punjab government.
Punjab has implemented a range of fiscal policy initiatives to address various economic and social challenges. These initiatives have helped to stimulate economic growth, create employment opportunities, and improve the overall well-being of the people of Punjab. However, there is still a need for further reforms and investments to address the challenges faced by the state, such as unemployment, poverty, and environmental degradation. By continuing to implement effective fiscal policies and promoting sustainable development, Punjab can achieve its goal of becoming a prosperous and equitable state.
References
https://prsindia.org/budgets/states/punjab-budget-analysis-2023-24
https://finance.punjab.gov.in/uploads/10Mar2023/Budget_At_A_Glance.pdf
https://economictimes.indiatimes.com/news/india/punjab-fm-presents-rs-1-96-lakh-crore-budget-for-2023-24-agriculture-education-health-key-focus-areas/articleshow/98537222.cms
https://finance.punjab.gov.in/uploads/10Mar2023/Budget_Speech_English.pdf
https://www.treasury.gov.za/documents/National%20Budget/2023/review/Chapter%203.pdf
https://www.indiabudget.gov.in/budget2023-24/index.php