Despite a pessimistic situation in which the Punjab state has been trapped, there is a ray of hope if the Punjab government takes concerted steps to come out of the double trap-slow growth trap and debt trap
Punjab should set up a debt relief fund with an appeal to people to voluntarily deposit money in it which will be used only for reducing the outstanding debt burden, three noted economists have suggested to the state government. They pointed out that Punjab's outstanding debt is expected to reach Rs 3.80 lakh crore by March 2023.
These economists are Lakhwinder Singh, visiting professor, Institute for Human Development (IHD), New Delhi, Sukhwinder Singh, former professor and consultant to Punjab Finance Commission, Chandigarh and Kesar Singh Bhangoo, former professor of economics, Punjabi University, Patiala.
Quoting Reserve Bank of India (RBI) statistics, they said Punjab borrowed from various sources more than Rs 3 lakh crore up to March 2022, which amounts to 53.3 per cent of the Gross State Domestic Product (GSDP). They said compared to other states, Punjab has the highest debt-GSDP ratio and is ranked number one.
"This position has been mainly due to (the fact) that each government, (during) duration of its time in office, has borrowed beyond the means and added to the accumulation of debt,” they said in a statement issued on Sunday. “Despite a pessimistic situation in which the Punjab state has been trapped, there is a ray of hope if the Punjab government takes concerted steps to come out of the double trap-slow growth trap and debt trap, " they added.
Suggesting one of the options to reduce the debt, they said a debt relief fund should be set up. “One option is to set up a debt relief fund and issue an appeal to all the concerned citizens to voluntarily deposit the money in the debt relief fund and this fund will only be utilized for reducing debt burden of Punjab, while making a provision of tax exemption as in other similar cases,” the economists said.
They said Punjabis all around the globe including those living in India are by nature helpful and well known in philanthropy.“This cultural trait of Punjabis will go a long way to deal with the debt,” they said. The economists also suggested that the state government can seek a moratorium on debt which will not only stop the debt payment but also will halt interest payments charged on the accumulated debt.
The other available option can be that the government can float bonds with a view to provide immediate relief from the mounting debt burden, they said. The Punjab government should take into confidence the well-known intellectuals of Punjab and the leadership of other political parties to develop a consensus and take up this matter with the union government for a debt relief package, they further added.
Punjab is a strategic state in terms of providing national security including food security and has a legitimate right to seek compensation to the state for improving the deficiency of investment which has occurred since the militant movement in the mid-eighties, they pointed out.
They said that it is their considered opinion that Punjab state can raise its own revenue and can make the required investment to revive the economic growth momentum of the economy, but accumulated debt will continue to remain a big constraint. They had earlier written to the Centre that there should be a moratorium on Punjab's debt for seven years.