When the Aam Aadmi Party (AAP) took office in Punjab in March 2022 under Chief Minister Bhagwant Mann, the state was already grappling with a massive debt burden inherited from previous governments. The government’s own White Paper acknowledged that Punjab was trapped in a “debt spiral” with outstanding liabilities amounting to ₹2.63 lakh crore, roughly 45.88% of the state’s Gross State Domestic Product (GSDP). Unfortunately, rather than stabilizing the fiscal health, the debt has only worsened during the current administration’s tenure.
By the financial year 2024-25, Punjab’s debt is projected to soar to ₹3.74 lakh crore, increasing to nearly 48% of GSDP. This figure makes Punjab the most indebted state in India, according to a Reserve Bank of India (RBI) report. To put this in perspective, with a population of approximately 3 crore people, this amounts to a loan burden of about ₹1.25 lakh per capita—meaning every resident of Punjab, irrespective of age, theoretically owes this amount. This level of indebtedness is alarming and significantly restricts the state government’s ability to allocate resources to critical sectors such as health, education, and infrastructure.
The government’s budgetary plans have factored in fresh borrowings of ₹50,000 crore in the 2023-24 fiscal year alone, exacerbating the already precarious situation. A significant portion of government expenditure is directed towards debt servicing; for 2024-25, debt repayment alone is expected to consume ₹36,766 crore, leaving limited fiscal space for development. Compounding this is the heavy subsidy burden, particularly on electricity, where ₹18,714 crore was spent on providing free power to farmers and households in 2022-23, and an additional ₹7,780 crore allocated in the following budget.
Economically, Punjab faces multiple challenges beyond its debt. Industrial growth has been sluggish, agricultural profitability is under pressure due to rising input costs and declining yields, and unemployment remains high, especially among youth. The state’s Gross State Product growth has lagged behind the national average, further constraining revenue generation. These economic headwinds, combined with the growing debt load, paint a grim picture for Punjab’s fiscal sustainability.
Criticism has also emerged regarding the political management of Punjab’s finances. Allegations suggest that Delhi-based AAP leadership, led by Arvind Kejriwal, has used Punjab’s resources for election campaigning in other states, including misuse of government aircraft and funds for political advertisements. Several Delhi AAP leaders have been appointed to senior and highly paid positions in Punjab, with critics questioning the cost-effectiveness and accountability of such appointments.
Since AAP’s electoral defeat in Delhi in 2024, many of its top leaders and strategists have shifted their focus to Punjab, living a life of luxury at the expense of Punjab’s taxpayers. This situation has added to public concern about governance priorities and fiscal discipline in the state.
Looking ahead, the pressing question remains: Who will bear the brunt of this massive debt when the political tides change post-2027? With a staggering 86% of new loans being used just to service old debts, Punjab’s financial flexibility is severely limited. Without immediate reforms to curb political misuse of funds, rationalize subsidies, and promote economic growth, the state risks falling deeper into a fiscal quagmire that will impact generations to come.
Punjab’s fiscal situation is notably more severe than that of most other Indian states, as reflected by its alarmingly high debt-to-GDP ratio. For the fiscal year 2024-25, Punjab’s debt stands at approximately 48% of its Gross State Domestic Product (GSDP), according to the latest Reserve Bank of India report. This figure not only places Punjab as the most indebted state in the country but also highlights a critical challenge to its economic stability.
To put this in perspective, Maharashtra, India’s largest economy, has a debt-to-GDP ratio of about 25%, nearly half of Punjab’s. Tamil Nadu, another economically significant state, carries a debt ratio of 30%, while states like Karnataka and Gujarat maintain lower ratios around 20-22%. Even Haryana, a neighboring state with similar economic challenges, has a lower debt ratio at approximately 35%. These comparisons reveal how Punjab’s debt burden is disproportionately heavy relative to its economic output.
On a per capita basis, the situation is equally stark. With a population of roughly 3 crore, Punjab’s debt per resident comes to an estimated ₹1.25 lakh, which is substantially higher than in other states. For example, Tamil Nadu’s per capita debt is around ₹1.03 lakh, Maharashtra’s about ₹84,000, and West Bengal’s close to ₹50,000. This means that each citizen of Punjab, from children to elderly, theoretically carries a debt burden far exceeding that of citizens in most other Indian states.
This overwhelming debt constrains Punjab’s ability to invest in essential services and development. Debt servicing alone consumes a huge portion of the state’s budget, limiting funds available for healthcare, education, and infrastructure growth. Moreover, Punjab’s economy faces multiple headwinds: industrial growth has slowed, agriculture is under stress due to rising input costs, and unemployment remains a persistent issue.
The steep rise in Punjab’s debt, despite a shrinking economy, underlines the urgent need for fiscal discipline and strategic reforms. Without decisive action to curb new borrowings, rationalize subsidies, and improve economic growth, Punjab risks falling deeper into a debt trap. This will further limit the government’s capacity to improve living standards and may saddle future generations with unsustainable liabilities.