Punjab: At ₹18,303 crore in first half of year, revenue deficit a concern for government

With revenue receipts falling short of expenditure, the Punjab government’s revenue deficit has soared to ₹18,303 crore in the first six months of the financial year 2024-25.

This deficit in the April-September period is 79% of the ₹23,198-crore gap estimated by the state government for the entire fiscal year. The deficit has raised concerns about the fiscal health of the debt-laden state, especially regarding the availability of funds for capital projects. Revenue deficit occurs when the government’s revenue expenditure exceeds its revenue receipts.

According to the fiscal indicators released on Wednesday, the state’s revenue receipts amounted to ₹41,709 crore, while the revenue expenditure stood at ₹60,011 crore by the end of the first six months. Of this, 78% went into meeting expenditure on committed liabilities, such as salaries, pensions, interest payments and subsidies. In the 2024-25 Budget Estimates (BE), the state government projected revenue receipts of ₹1.03 lakh crore, of which approximately 40.13% was realised during the April-September period, while revenue expenditure was much higher at 47.20% of the estimated spending of ₹1.27 lakh crore for the year. The government has had to borrow to meet its expenses.

Meanwhile, the fiscal deficit stood at ₹21,119 crore at the end of September, and the revenue deficit to fiscal deficit ratio stood at 86.66%, indicating fiscal stress on the state, though it was lower than the previous year.

Upinder Sawhney, economist and former professor at Panjab University, Chandigarh, said the state finances are under severe strain, with the government failing to generate enough revenue to meet its current expenditure, resulting in this huge deficit. “The deficit is being managed through various means, including loans, off-budget borrowings and resources from other government undertakings. The state government needs to address leakages and, more importantly, implement measures for expenditure reduction. Subsidies, in particular, are a drain on state finances and are being funded through borrowing,” she added.

The Comptroller and Auditor General of India (CAG), in its report for financial year 2022-23 tabled in the Punjab assembly last month, stated that the revenue deficit exceeded the target of 1.99% of the gross state domestic product, reaching 3.87% for the year. The report also highlighted that while the state’s revenue receipts grew at an average annual growth of 10.76%, expenditure rose at a faster rate of 13%. Between 2018-19 and 2022-23, revenue receipts grew from ₹62,269 crore to ₹87,616 crore, whereas revenue expenditure rose from ₹75,404 crore to ₹1,13,661 crore, leading to increase in revenue deficit.

However, the state government has, in recent weeks, made decisions, including raising the value-added tax (VAT) on petrol and diesel, increasing bus fares and property registration charges, and partially withdrawing the power subsidy for a section of domestic consumers, in an effort to raise funds and reduce its outgo on power subsidy. “The full impact of these measures, aimed at augmenting revenues and rationalising expenditure, will be seen in our revenues over the next few months,” a financial department official said.