Sixty Years After Its Formation, Punjab Faces Deep Economic Struggles Despite Cultural Rise

Punjab marks sixty years since its formation as a Punjabi-speaking state on November 1, 1966, following the Akali Dal-led Punjabi Suba movement. While the Punjabi language now thrives globally—noted in British singer Ed Sheeran's 2025 hit song "Sapphire" and the legacy of late singer Sidhu Moosewala—the state faces a severe economic crisis and a growing debt trap.

The Economic Decline

In the early 1980s, the Green Revolution made Punjab India's food bowl, contributing 70% to 73% of wheat and 40% to 45% of rice to the central pool. Its per-capita income remained the highest in India until the mid-1990s. By the 2020s, however, Punjab plunged to the tenth spot on per-capita income and hit the last position among major states on the NITI Aayog's Fiscal Health Index in 2025 and 2026. The Centre's reliance on the state has also dropped, with its wheat share falling to about 30% and rice down to 20% to 25% in recent years.

Pop Welfare and Debt

Successive governments across party lines have implemented populist policies that locked the state into heavy debt. In 1996-97, Congress Chief Minister Rajinder Kaur Bhattal started free power for small farmers, which the succeeding Akali Dal-BJP government led by Parkash Badal extended to all farmers alongside the Shagun marriage cash gift scheme. Later administrations introduced the "atta-dal" scheme, free pilgrimages for the elderly, free bus rides for women, and the Bhagwant Mann-led AAP government's 2022 rollout of 300 units of free monthly electricity and the July Mawan Dhiyaan Satkar scheme for women. The power subsidy alone costs between Rs 15,500 crore and Rs 20,500 crore annually, pushing Punjab's outstanding debt to Rs 3.46 lakh crore in 2023-24, with projections to reach Rs 4.5 lakh crore by 2027. Economist R S Ghuman notes that the state's finances are in intensive care, while his 2025 study shows over 18,700 industrial units have shut down across the state since the mid-2000s.

Context

State-level fiscal health in India is often heavily strained by populist welfare measures like free electricity and cash transfers, which crowd out capital spending on public assets. In Punjab's case, heavy dependence on paddy cultivation has also severely depleted groundwater tables while failing to diversify the agricultural base. Observers suggest that reversing this trajectory requires cutting indiscriminate sops, boosting productive investments, and reviving local industries before the fiscal situation deteriorates further.