CHANDIGARH: The cash-strapped Aam Aadmi Party (AAP)-led Punjab government is expected to borrow Rs 49,900 crore this year alone. By the end of the next fiscal year, the state's public debt is projected to touch an alarming Rs 4.17 lakh crore, making it the second-most indebted state in the country in terms of debt to gross state domestic product (GSDP) ratio.
Sources indicate that the Punjab government plans to raise a loan of Rs 49,900 crore this year, while repaying Rs 18,198.89 crore. Additionally, Rs 24,995.49 crore will be allocated towards servicing the debt.
This means that 86 percent of the state's new borrowing will be used solely for repaying old loans and managing legacy debt. As a result, the state's total debt liability is expected to reach Rs 4,17,136.10 crore by March 31, 2026 an approximate 9 percent increase from the current outstanding debt of Rs 3,82,934.98 crore.
In 2024-25, the state government paid Rs 23,953.72 crore in interest on the outstanding debt, which was 23 per cent of its total revenue receipts as per budget documents. Thus the interest liability has been constantly rising due to its growing debt. The debt liability has gone up by Rs 1 lakh crore in the past three years.
Sources said that in March 2022, when the AAP government came to power in the state the outstanding debt of the state was Rs 2.83 lakh crore. In the last three years, the government raised Rs 1.32 lakh crore loans, and of that Rs 1.05 lakh crore debt was repaid. As of that Rs 46,200 crore has been repaid towards the principal amount and Rs 59,000 crore interest on loans has also been paid.
"The government has been restructuring loans taken by the previous governments as it has been negotiating with financial institutions to reduce the rate of interest on loans from 11-12 per cent to capping it at 7 per cent,” said an officer.
The data shared by Union Minister of State for Finance Pankaj Chaudhary in the parliament reveals that Punjab is the second-most indebted state in the country in terms of debt to gross state domestic product (GSDP) ratio. The debt-GSDP ratio of Punjab is 46.6 per cent is second in the country behind Arunachal Pradesh, which stands at 57 per cent and Himachal Pradesh is at the number three position with a debt-GSDP ratio of 45.2 per cent.
The Punjab Budget proposals presented yesterday claimed it was 44.77 per cent and figures stated that the debt-to-GSDP ratio in the coming year would be 44.50 per cent.
The financial condition of the state is grim as debt is accumulating but the state government denies. Punjab Finance Minister Harpal Singh Cheema said that the increase in debt is in consonance with the increase in the GSDP, which is expected to grow by another one per cent in next fiscal. The fiscal and revenue deficit are expected to be 3.84 per cent and 2.51 per cent, respectively.
The AAP government has been blaming the legacy debt of previous governments for fiscal woes of the state.
Senior Congress Leader and leader of opposition Partap Singh Bajwa said that Punjab has been the second-most debt-ridden state in the country under three years of AAP regime. In the upcoming Financial Year (2025-26) the AAP government will raise a loan of Rs 49,900 crore. Consequently, the state’s outstanding debt will be Rs 3.96 lakh crore by the end of next FY. When the AAP got hold of power in March 2022, the outstanding debt in Punjab was Rs 2.73 lakh crore. Is this what FM Cheema was boasting about?
"The AAP government claims that the revenue deficit trimmed to 2.51 percent. But in reality, deficit reduction was achieved by delaying Rs 3968 crore SC scholarship payments and Rs 18,424 lakh pensions—robbing vulnerable groups," Bajwa stated.