Sagging economy stares at Badal

Last Updated: Wed, Mar 07, 2012 06:37 hrs

The revival of a deteriorating state economy and promoting Punjab as an attractive investment destination will be the most important economic challenge ahead for the re-elected Shiromani Akali Dal-Bharatiya Janata Party government in Punjab.

Banking on the issue of development and proving all electoral predictions wrong, SAD created history by returning to power for a consecutive term. The alliance won 68 (SAD-56, BJP-12) of the 117 Assembly seats, while the Congress won 46. Other parties managed to bag only three. The emergence of the People's Party of Punjab, formed by Manpreet Singh Badal (former SAD member and the estranged nephew of chief minister Parkash Singh Badal), and its alliance, failed to create any magic. It couldn't win even one seat, with party founder Manpreet Singh Badal losing from both the seats (Maur and Gidderbaha) he contested.

Party Seats won
2007 2012
BJP 19 (8.28) * 12
SAD 49 (37.09) 56
INC 44 (40.90) 46
Others 5 (6.82) 3
Total 117 117
*Numbers in parenthesis represent vote %

Manpreet said he had left the Akali Dal due to the regime's economic profligacy. If his defeat means another spending push, this is likely to deepen Punjab's economic crisis.

Since the years of the country's economic liberalisation in the early 1990s, Punjab has failed to keep pace with other state economies, which have zoomed ahead as attractive investment destinations. Many industries from Punjab have preferred to expand in other states, increasing the rate of unemployment in those states. The growth in Punjab's gross domestic product (GDP) has also been slow when compared to others. In 2010-11, while Punjab's GDP grew 13.4 per cent, Haryana's grew 19.2 per cent, Himachal Pradesh's 21.1 per cent and Rajasthan's 18.8 per cent.

To reverse the trend, the SAD-BJP government has announced it would give a special package to the traditional small-scale industries located in Amritsar, Jalandhar, Ludhiana, etc. It is also promising to end the 'inspector raj' by providing less bureaucratic resistance to industries. To attract investments, the new government has promised to give "liberal fiscal incentives" to industrial units, with a focus on job generation.

Industry, however, is expecting the new government to do much more. To start with, it wants the government to abolish multiple tax structures, allow free movement of goods and have a strong focus on policy, with a special thrust on fiscal reforms.

It also hopes the new government to live up to its poll promise of ensuring adequate power supply. Power, essential for the industry, is in short supply in Punjab. Against a demand of 10,000 Mw, the state has an installed capacity of only 6,500 Mw. Owing to the populist measure of distributing free power, the Punjab State Electricity Board (SEB) is also in deep losses.

"There is an immediate need for the government to revive both agriculture and industry in the state. The infrastructure needs development and bureaucratic delays need to be minimised to attract foreign direct investment, which has so far eluded the state," said Gurmail Singh, chairperson of the department of economics, Punjab University.

During its previous term, the SAD-BJP coalition was unable to manage the fiscal situation well. This could worsen with the new government bound to deliver on poll promises.

These include free computer laptops with data card for all class 11 and 12 students; a Rs 10,000 scholarship for all "budding sport persons" per district; free gas connections for all below-poverty-line families and free domestic power up to 250 Mw to all dalits and economically weak families.

"Such poll promises have hurt the economy in the past. The new government will have to focus on inviting new industry to overcome the problem of unemployment," said Lakhwinder Singh of Punjabi University.

Overcoming the stagnation in agriculture will be another challenge. Agriculture contributes 30 per cent to the state GDP and been growing only slowly. From 1999-2000, the wheat yield in Punjab saw a decrease of four percent, whereas the all-India average saw an increase of five percent. The percentage increase in rice yield has been lower than in many states. The SAD-BJP has promised to increase public investment in the sector and increase focus on raising productivity by mechanisation.

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