Himachal’s total debt of ₹95,000 crore is highest among the hill states, but it is not the only state with a worrying spike in state debt in recent times. Poll promises and freebies are exerting pressure on finances of at least five other states ruled by different parties, leaving little room for other development works.
They include Madhya Pradesh, Karnataka, Telangana and Punjab.
Madhya Pradesh
Ladli Behna scheme proved to be a gamechanger for BJP in the last year’s elections, but the state government is facing severe financial burden due to this and a few other poll promises.
In August alone, the state government borrowed ₹10,000 crore loans in four equal installments. In the last fiscal year, Madhya Pradesh borrowed ₹76,230 crore as per revised budget estimate, taking the total debt of the state to ₹4,18,056 crore. The BJP government is planning to borrow ₹94,431 crore this fiscal year.
The state has allocated ₹18,984 crore for the Ladli Behna scheme this year. In addition, it offers ₹4,775 crore on agriculture pump subsidy, ₹3,500 crore for offering 100 units of electricity at ₹100, ₹6,290 crore on electricity subsidy to farmers and ₹1,231 crore for the Ladli Laxmi scheme for girls. The above subsidies and direct cash transfer amount to a total of ₹34,780 crore. This year, it made a provision of ₹1,17, 945 crore for salaries, pension and interest payment on loans. The state government has estimated a fiscal deficit of 4.1% of the state GDP or GSDP, which is higher than 3.5% recommended by the central government. In his budget speech, deputy chief minister Jagdish Devda had said the state will try to bring the fiscal deficit back to the prescribed limits.
Karnataka
The Congress government in March hired consultancy firm Boston Consulting to suggest measures to generate additional ₹55,000-60,000 crore to fulfil the five guarantees it promised to the people during elections in 2023. In June, the government increased sales tax on diesel and petrol saying the state needs funds to fulfil its guarantees.
In FY24, the state spent ₹36,000 crore for the guarantees. This year, it has earmarked ₹53,674 crore for five guarantees. More than half of it (₹28,608 crore) has been allocated to the Gruha Lakshmi Scheme, which provides women head of each BPL family ₹2,000 per month. The other schemes include free power for agriculture, free bus rides for women and free units of electricity to households among others. Karnataka plans to borrow ₹1,05, 246 crore in the current budget. The state’s borrowings have significantly increased over the past two years.
Punjab
The AAP government is spending ₹17,110 crore for free electricity to farmers and households. The state fiscal deficit is at 3.8% of the SGDP, higher than the recommended 3.5%. The outstanding liability on the state stands at ₹3,51,130 crore as of March 2024, according to RBI data.
Telangana
The Congress government has earmarked ₹20,378 crore for fulfilling the poll promises. The amount includes ₹15,470 crore for debt relief to farmers, ₹3,083 crore for Mahalakshmi free bus ride to women and ₹1,825 crore for free 200 units of electricity to households. The government is yet to provide the promised financial assistance to women under the Mahalakshmi scheme. In the budget, it announced a support of ₹12,000 annually to agriculture labourers and housing assistance of ₹5-6 lakh to SC/ST to help build 450,000 houses.
Finance minister Mallu Bhatti Vikramarka in his budget speech said the state needs ₹31,000 crore for fulfilling farmers’ loan waiver promise and it is working on ways to generate this money. The government is currently reviewing all the ongoing schemes to rationalise them and continue only those found to be useful for the state. This was mentioned in the budget document of 2024-25.