December , 2021
Dynamics of Revenue and Expenditure in Punjab
21:46 pm

Rajiv Khosla

After independence, our policymakers formulated such policies that could benefit the people of India. Many schemes got rolled out for the welfare of the people and funds were provisioned for them in the respective budgets. However, various studies have highlighted that due to corruption, mismanagement and failure of the central and state governments to implement the schemes properly, their access to real beneficiaries remained limited.

A report by Ministry of Statistics highlighted how 12 pro-poor schemes of the central government failed to achieve their targets during 2016-17. These schemes included Pradhan Mantri Gram Sadak Yojana that failed to meet its target in 14 states, Pradhan Mantri Gramin Awas Yojana that failed to reach its target in 27 states, Skill Development Programme and National Rural Livelihood Mission that meted out success only in Kerala and Tamil Nadu. When the governments were asked about the reasons for this dismal performance, they deny the problem by shifting the blame to previous governments. For this reason, the fiscal performance of the successive Akali and Congress governments in Punjab (since 2010-11) is being analysed in this article.

Revenue Pattern in Punjab

At the outset, it is revealed that the total revenue from tax and non-tax receipts that stood at 76% and 24% in 2010-11 respectively, increased to 83% and 17% in 2016-17 (when the Congress government took over) and by the year 2020-21, it went up to 87% and 13%. It indicates a decline in government revenue from schools, hospitals, roadways, land and vehicle registration etc. It needs no rocket science to understand that instead of raising the living condition of the people and taxing their surplus income, both the Akali and Congress governments remained focused on replenishing the coffers by imposing higher taxes amid inflationary burdens.

Further, an in-depth analysis of the taxes brings out that governments have ostensibly failed to generate revenue even by levying taxes. Whereas in the year 2010-11, 85% of the total revenue came from the taxes levied by the
Punjab government itself (74% in 2016-17), it decreased to 72% in the year 2020-21. This points out the constant reliance of the state government on central government, as now more than a quarter (28%) of the Punjab government’s total tax revenue comes from Punjab’s share in central taxes.
GST that was magnanimously declared as a milestone in the country’s tax history, is in fact proving to be a source of deprivation of tax autonomy for the state government. Since the advent of GST, neither the consumers’ have benefited from any reduction in commodity prices, nor has it made any significant difference in the revenue of the Punjab government. While the share of VAT and sales tax in total tax receipts of the state government in 2010-11 stood at 59% (63% in the year 2016-17), in the post GST period, the share of
VAT and GST to the Punjab government in the year 2020-21 remained 59.5%. It speaks volume about the fact that
GST has only increased the dependence of the Punjab government on the central government.

On the whole, the analysis on the revenue side makes it clear that due to the low public investment made by the Akali government during its rule and the suicidal decision of the central government regarding GST, Punjab has become too dependent on the central government.

Expenditure Pattern in Punjab

To begin with, the mounting debt and the payment of interest by the Punjab government which is increasing day by day attracts the attention on the expenditure side. Whereas in 2010-11 out of every `100 spent, `16.75 were directed towards interest payment (`21 in 2016-17), it remained ` 20.20 in 2020-21. It means that a fifth of revenue generated every year goes for debt servicing. The white paper presented by Congress government in the year 2017 showed that during the Akali government rule, there was a massive scam of ` 29920 crore in the procurement of food grains as procured stocks on behalf of the state government did not match the stock available in FCI storage. The deficit was ingeniously covered up by taking new loans of ` 31000 crore before the 2017 elections and the burden of these loans was shifted on to the state exchequer. To repay this debt, ` 3240 crore (`270 crore per month) is being disbursed from the exchequer and that will continue for the next 20 years thereby totalling ` 64800 crore.

The big question is whether any attention has been paid to solve the problems of the common man. Analysis brings out that Akali government did spend some money in the last year (2016-17) of its rule towards health and agricultural sectors to garner votes, but on a large-scale education, health and family welfare, irrigation, agriculture and pensioners remained in a state of neglect.

During the Congress rule, catastrophic cuts in social and economic expenditure were made to repay the debts that had piled up. Two important observations also surfaced
from the analysis. First, the Congress government continued to borrow during its rule (since 2017) from the State Bank of India and LIC to pay the debts taken from the National Small Savings Fund in previous years. Secondly, since 2017 the Punjab government has shrewdly merged its administrative expenditure with its economic expenditure to avoid
disclosing how much the government is spending on its own machinery. Thus, on the expenditure side, both the Akali and Congress governments have failed to provide any meaningful relief to the common man by way of public expenditure. Only during the election years, some populist schemes are announced to woo voters.

Performance in comparison to other states

In order to assess if the revenue and expenditure pattern or economic performance of Punjab remained at par with other states of the Union, Punjab’s fiscal parameters were compared with similar parameters in other states of India for the time period 2012-13 to 2020-21. However, the results painted a grim picture there as well. On the revenue side, Punjab was ranked 27th out of 30 states in both the years (2012-13 and 2016-17), whereas it reached 22nd position in 2020-21 in terms of revenue as percentage of GSDP. But this betterment in positioning was sheerly due to an increase in the share of payments made to Punjab by the central government in its revenue receipts. It reflects that the financial dependence of Punjab on the centre is rising steadily. 

Similarly, on the expenditure side the results indicate that in 2012-13, Punjab ranked 28th among 30 states in terms of expenditure on developmental works, social sector expenditure and capital outlay as percentage of GSDP. In the year 2016-17, Punjab was at 13th slot in terms of developmental and social sector expenditure but at 27th rank in capital outlay. Although, marks of improvement in the condition of Punjab got visible in the year 2016-17, yet it was a temporary phenomenon that was mainly due to the money spent on developmental and some social sector projects by the Akali Government in the run up to elections. Once again now Punjab is amongst the states that spend very less on the social and developmental sector and capital expenditure.

On the whole, this discussion reveals that over the past one-decade, high levels of irrational and unreasonable taxes, lack of public investment and high government spending on government’s own machinery remained the hallmark of Punjab’s governance strategy. Although the present government is and will be making eye-popping public announcements by borrowing, yet, the catastrophe of such borrowings will get visible shortly. It is anticipated that the next ruling government will sell the public institutions of the state in order to manage its finances.


The time is right to ask the government, where did they use the money collected from the people in the form of taxes. Why the addition to salaries, pensions, dearness allowance instalments, new recruitments in public schools, colleges, universities, hospitals etc. have crippled, while the income of every candidate contesting elections is anticipated to have increased manifold, the testimony of which can be had from the nomination filed for the 2022 elections.

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