PUNJAB STATE BRIEF
PUNJAB STATE BRIEF 1
AUGUST 2020
SOUTH ASIA
EQUITABLE GROWTH, FINANCE AND INSTITUTIONS (EFI)
1 ThisState Brief was prepared by a team of World Bank experts from the Equitable Growth, Finance and Institutions (EFI) team
comprised by Aurelien Kruse (Senior Country Economist), Pedro Arizti (Senior Public-Sector Specialist), Sutirtha Sinha Roy
(Economist), Saurabh Shome (Economist) and Amit Singhi (Consultant). The team also received valuable inputs from Supriti Dua
(Senior Financial Management Specialist), Mohan Nagarajan (Senior Economist). Rajul Awasthi (Senior Public Sector Specialist),
Chenjerani Simon B. Chirwa (Lead Procurement Specialist), Ishtiak Siddique (Senior Procurement Specialist), Sebastian James
(Senior Economist), Fabian Seiderer (Lead Public Sector Specialist), and Vikram Menon (Senior Public Sector Specialist).
PUNJAB STATE BRIEF
Contents
STATE AT-A-GLANCE .................................................................................................................................. 3
GROWTH AND ITS DRIVERS ........................................................................................................................ 4
FISCAL SITUATION....................................................................................................................................... 5
POVERTY AND INEQUALITY ........................................................................................................................ 7
ANNEX 1: FISCAL AND SOCIAL CHARTS ..................................................................................................... 9
ANNEX 2: GOVERNANCE INDICATORS ..................................................... Error! Bookmark not defined.
PUNJAB STATE BRIEF
STATE AT-A-GLANCE
Chief Minister Captain Amarinder Singh
Political Party/Alliance Indian National Congress (INC)
Finance Minister Manpreet Singh Badal
Next Legislative Assembly Election (Planned) 2022
Population (2019) 30.6 million
Language Punjabi
Key Economic & Social Indicators
Economic variables 2019 2019 2019 2015 2016 2017 2018
Performance Rank@
GSDP (US$ billion)* 74.6 2.8 percent # 15 58.1 59.6 63.6 74.3
GSDP per-capita (US$)* 2,438.6 15 1,997.9 2,023.6 2,133.3 2,457.2
Real GSDP growth (%) 6.0 27 4.2 5.7 6.9 6.4
Share of agriculture in
24.9 6 27.1 26.1 26.1 25.7
GSVA
Share of industry in GSVA 25.2 24 25.0 25.2 25.2 25.1
Revenues (% of GSDP) 11.9 24 11.0 10.6 11.2 11.1
Expenditures (% of GSDP) 15.2 25 14.1 15.2 23.7 13.7
Fiscal deficit (percent of
3.3 17 3.1 4.5 12.4 2.6
GSDP)
SDG Index Score 62 12 .. .. .. 60
Note: indicates worse performance; indicates better performance and indicates similar performance (all vis-a-vis all-states’ average for 2019)
@: indicates a rank from high to low within all states in India. E.g. A rank of 25 represents 25 th highest among all the states in India.
#
: indicates share in total GDP of the entire economy for 2019.
LCU/US$ exchange rate based on average exchange rate for the fiscal year (Apr-Mar).
(US$)*: Both GSDP and GSDP per capita are calculated at current 2011-12 prices.
NITI SDG Index: The Index tracks the progress of all the States and Union Territories (UTs) on a set of 62 National Indicators, measuring their progress on the outcomes of the interventions and
schemes of the Government of India. The SDG India Index is intended to provide a holistic view on the social, economic and environmental status of the country and its States and UTs.
Highlights
• th
Punjab is the 15 most developed state in India in terms of nominal per-capita GDP. Its rank was 6 in the
year 2000.
• Punjab’s average real growth rate has been lower than the national average every decade for the past three
decades.
• Growth has been slower vis-à-vis similarly developed states with comparable shares of agriculture
especially between 2011 and 2019.
• In the past 30 years, services sector has been the primary contributor to growth. The economy’s structural
transformation away from agriculture into services has happened at a slower rate compared to other states.
• Punjab has remained fiscally profligate in the past ten years. Capital expenditures are significantly low
(stood below 1 percent of GSDP for six out of last ten years), but current expenditures are similar to the
national average (13.4 percent of GSDP). Punjab’s fiscal deficit and debt are higher than the national
average and continue to remain elevated. The state ranks among the bottom few on measures like spending
on physical and human capital.
• Punjab is among the states with lowest number of poor in India. While its health and education indicators
are comparatively better, the participation of females and youth in labor force trails vis-à-vis the national
average.
PUNJAB STATE BRIEF
PUNJAB: GROWTH AND ITS DRIVERS
1. Punjab ranks among the top half of Indian states and union territories in terms of
development. With a GDP per-capita of US$ 2,438.6 in 2019, Punjab is the 15th most developed state in
the country. Punjab’s average real growth rate has lagged the national average every decade for the past
three decades. This contrasts with the high growth rates achieved, especially in the current decade (2011-
2019), by states such as Madhya Pradesh, Rajasthan and Andhra Pradesh with a share of agriculture in the
economy similar or higher than that of Punjab as well as those at similar levels of development (viz.
Himachal Pradesh, Tamil Nadu, Mizoram and Telangana).
2. Over the past three decades, Punjab’s real growth has averaged 5.5 percent (being as low as
1.1 percent in 1991 and inching up to 10.2 percent in 2007). Moreover, starting 2000, the services sector
has maintained a stable pace of growth in contrast to both agriculture and industry. Punjab’s structural
transformation away from agriculture towards services has happened at a rate that is slower than that
witnessed in the national economy in general, but higher than other comparable states with similar share of
agriculture in their respective economies such as Rajasthan, Madhya Pradesh, Uttar Pradesh and Rajasthan.
While the nation’s shares of agriculture, industry and services in total GSVA in 2019 stood at 17 percent,
29 percent and 54 percent, respectively; for Punjab:
a. the share of agriculture has reduced from 52 percent in 1991 to less than 25 percent in 2019;
b. that of industry has increased marginally from 17 percent to 25 percent; and
c. of services rose from 31 percent to 50 percent in the same time period.
Fig 1. Punjab is the 15th most developed Indian state Fig 2. Real growth averaged 6% over past decade
Source: MoSPI
3. The services sector has been the mainstay of growth. Over the 29-year period (1991-2019), the
services sector has, on average, contributed 54% to annual GSVA growth. The increase in the contribution
of services from 46 percent in 1990’s to 82 percent in the 2010’s, has been accompanied by a decline in the
average contribution of agriculture – from 22.3 percent in 1990’s to less than 1 percent in 2010’s. Services
sector growth has predominantly been due to an increase in modern services activities, such as financial,
real estate and public services. Industrial activity has been volatile overall albeit with significantly lower
contribution than services.
PUNJAB STATE BRIEF
Fig 3. Punjab’s structural transformation Fig 4. Services mostly contributed to GSVA growth
Source: MoSPI, WB staff calculations
PUNJAB: FISCAL POSITION
4. Punjab’s fiscal deficit and debt continue to remain high. Over the past 5 years (2015-2019), the
fiscal deficit of the state averaged 5.1 percent of GSDP and debt 38.1 percent of GSDP. Excluding 2017,
which was an outlier during which the fiscal deficit had shot up to 12.3 percent of GSDP primarily on
account of significantly high capital expenditures2, the fiscal deficit as percent of GSDP in the past five
years not only remained above the ‘all-states’ average every year but also breached the mandated FRBM
threshold of 3 percent of GSDP.3 Similarly, over the same period, outstanding liabilities remained
significantly higher at 38.1 percent of GSDP than the national (all-states) average (24.0 percent).
Fig 5. Punjab’s deficit and debt are one of the highest Fig 6. Deficit has remained above FRBM threshold
Source: CEIC, MoSPI, RBI, WB staff calculations
5. Punjab’s own source revenues (tax and non-tax) have gradually fallen since the start of the
past decade but they remain higher than the national average as a share of GSDP. Excluding the last
two years (2018 and 2019) Punjab’s own-tax revenue collections have stood higher every year in the past
2
The government in 2017 had had raised a long-term loan to settle cash credit limit accounts of food agencies.
Consequently, loans and advances granted by the state government had shot up to 9.7 percent of GSDP in 2017 even
as they had remained under 0.3 percent of GSDP almost every year in the past decade.
3
The Punjab Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted to institutionalize
financial discipline, reduce fiscal deficit, improve macroeconomic management and strengthen fiscal prudence .
PUNJAB STATE BRIEF
decade vis-à-vis the national collections. The average own-tax revenue collection in Punjab during the last
ten years was 7.9 percent of GSDP whereas that for all the states was 7.5 percent of GSDP. Non-tax
revenues, however, have averaged only 2.7 percent, almost a percentage point lower than the national
average in the last ten years. While non-tax revenues have printed lower than the national average, their
share over time in the reference period has gone up from 3.3 percent in 2011 to 5.2 percent in 2020,
primarily on account of rising grants from the Centre.
Fig 7. Own source revenues have fallen since 2010 Fig 8. Capex is budgeted at 10.4% of total
expenditures for 2020-21
Source: RBI, MoSPI
6. Current expenditures have consistently fallen from the start of early 2000s to the end of the
past decade. Averaging over 15 percent of GSDP between 2001 and 2010, current expenditures have fallen
to 13.4 percent of GSDP in the past decade which is almost the same as the national average in that period.
On the other hand, except in 2017 when capital expenditures had hit 10 percent of GSDP, the ratio has
remained stable around 1 percent over the last ten years. This ratio in the reference period, however, has
been considerably lower than the national average both as a percentage of GSDP and as a share of total
expenditures.
7. Punjab’s expenditures on human capital (health and education) and physical capital
(infrastructure) as a percent of GSDP, are below the average for all states in India4. Average from the
last five years (2015-2019) indicate that:
• On health, Punjab is one of the lowest spenders, second only to Haryana.
• On education, while the expenditure as percent of GSDP is higher than other richer states such as
Telangana, Gujarat, Karnataka, and Kerala, it’s the lowest among comparator states with similar
levels of per-capita GSDP.
• On physical capital, Punjab is one of the lowest spending states – second only to Kerala.
4
Spending on education includes the government’s expenditure on education, sports, art and culture. Spending on
healthcare comprises of expenditure on medical and public health, family welfare and nutrition. Infrastructure
spending is made up of expenditure on housing, urban development, irrigation and flood control, water supply
and sanitation, energy, transport and communications, power projects .
PUNJAB STATE BRIEF
Fig 9. Punjab is one of the lowest spenders on Fig 10. It spends the second lowest on physical
human capital among comparable states capital in the entire country – second only to Kerala
Source: RBI, MoSPI, WB Staff Calculations
POVERTY AND INEQUALITY
8. Punjab has been significantly exposed to COVID related shocks. 47.5 percent of Punjab’s rural
workforce is employed in services sector, compared to 32.4 percent of rural workers in India. Moreover,
17 percent of Punjab’s rural workforce is engaged in the construction sector compared to 12.3 percent of
India’s overall rural workforce. These sectoral figures highlight Punjab’s greater exposure to COVID
vulnerable industries. Daily data from Google Maps shows that while Punjab’s workplaces, retail and
recreational centers and grocery and pharmacies are reverting to normalcy faster than the rest of India, the
levels have not reached the pre-lockdown period. Furthermore, due to the imposition of the nationwide
lockdown (end-March to end-May 2020), Punjab’s tax collections stood 46 percent below in Q12021 vis-
à-vis the same period in 2020. On the other hand, effort by the state government to restrict the spread of
COVID-19 increased overall expenditures by almost 21 percent in the corresponding period – with a major
chunk of it falling in the revenue spending category. Capital expenditures, on the other hand, witnessed one
of the steepest falls among all the major states in the country as they fell by 57 percent on a y-o-y basis in
Q12021.
Fig 11. Punjab experienced high rates of poverty reduction between 2005 and 2012
70
60
50
40
30
20
10
0
TN
TR
MH
GA
DL
MZ
MN
BH
CG
MP
GJ
MG
KL
KA
UP
HR
HP
AR
UK
JK
JH
AS
AI
AP
PJ
NL
WB
RJ
SK
OD
1994 2005 2012
Note: The graph shows the changes poverty headcount based on consumption expenditure surveys.
Source: Consumption expenditure survey (2011-12), NSO.
PUNJAB STATE BRIEF
9. In 2017-18, only a quarter of Punjab’s workers were engaged in the agricultural sector. The
state has a higher share of regular wage earners in its labor force (11.4 percent) and lower casual and self-
employed workers (6.9 percent and 15.6 percent respectively) as compared to the all-India average (7.92
percent, 8.65 percent and 18.1 percent respectively). Despite other strong development indicators, Punjab
has low female labor force participation rate of 15.5 percent, which is 7.7 percentage points lower than the
all-India average. This is driven primarily by rural trends, where female participation rates lag the
equivalent all-India average by 10.6 percentage points. Moreover, Punjab has lower youth employment
rates compared to the rest of India. Labor force participation rates of rural males in the state, between the
ages of 21 and 35, is about 5 percentage points lower than the all-India average. Finally, the rate of job
creation in Punjab also lags the growth in working age population. Between 2017-18 and 2011-12, Punjab’s
estimated population grew by 6 percent but the number of working individuals in the state fell by 8 percent.
Fig 12. Punjab has a lower female labor force participation than all-India average
100
84 84
79
80 73
84
80 78 78
60 47
40 33 32
18
20
21 18
15 14
0
1993-94 2004-05 2011-12 2017-18
Rural Male Urban Male Rural Female Urban Female
Note: The graph shows the labor force participation rates based on usual status for people above the age of 14.
Source: Employment Unemployment Survey (2011-12), NSO and the Perodic Labor Force Survey (2017-18), NSO.
10. Punjab has better health and education indicators than the rest of India . The state’s infant
mortality and literacy rates are 12 percentage points lower and 11.6 percentage points higher than the rest
of India. However, Punjab’s performance in standardized test scores across a range of reading
comprehension and arithmetic assessments is lower than the all-India average.
Fig 13. Punjab has better health and education indicators than the rest of India
100
80
60
40
20
0
LK
DD
GO
DN
TR
MN
DL
TN
TL
MZ
KL
MG
GJ
HP
MH
KA
CH
HR
MP
CG
BH
PD
UK
IND
JH
UP
SK
WB
JK
AN
NG
PJ
AR
AP
AS
OD
RJ
Literacy Rate Infant Mortality Rate
Note: The graph shows literacy rate among persons of age 7 years and above and the infant mortality rates, defined as Infant
Deaths per 1000 live births, across states.
Source: Literacy data: NSO (2017). IMR: Sample Registration System (2015-17), Office of Registrar General of India.
PUNJAB STATE BRIEF
11. Punjab is among the states with lowest number of poor in India. Between 2005 and 2012,
Punjab experienced high rates of poverty reduction, with rural poverty reduction rate exceeding urban
rates by about 4 percentage points. During this period, the state also experienced a fall in consumption
inequality5. However, poverty rates in Punjab are particularly high for traditionally disadvantaged groups
belonging to scheduled castes (SC). In 2011, 15.6 percent of the state’s SC pop ulation were below the
poverty line, compared the state’s overall average poverty rate of 8 percent.
ANNEX 1: FISCAL AND SOCIAL CHARTS
Outstanding Liabilities (% of GSDP) Own-state revenues v/s transfers from Centre
Source: RBI, MoSPI, State Budget Documents
Committed and Non-committed expenditures (% Expenditures by type in 2020 (% of GSDP)
of GSDP)
Source: RBI, MoSPI, State Budget Documents, WB Staff Calculations
5
Consumption inequality is measured using the gini coefficient. Gini coefficient measures the dispersion of
consumption in the region. A gini of zero means everyone has the same average consumption. A gini of 1 means
only one person has all the consumption in the area and others have none.
PUNJAB STATE BRIEF
Changes in gini coefficient
0.40
0.35
0.30
0.25
0.20
0.15
0.10
DL
TN
GJ
TR
KL
KA
GA
MZ
MH
MP
HR
HP
MG
JH
BH
MN
UP
UK
CG
WB
AP
JK
AR
AI
PJ
OD
AS
NL
RJ
SK
1994 2005 2012
Note: The graph shows the changes in gini coefficient based on household consumption expenditure surveys.
Source: Consumption expenditure survey (2011-12), NSO.
Growth in population and number of workers between FYs 2012 and
19% 2018
14%
9% 10% 10% 9% 8% 8%
16% 8% 7% 7% 7%
5%
8% 7% 6% 7% 7% 8% 6% 7% 7% 8% 7%
14% 5% 5% 4% 5%
11% 3%
7% 6%
4% 2%
1% 0%
-2% -3% -3%
-5% -5% -5% -6%
-7% -7% -7% -8%-8% -8%
-8%
-11%-11%-11%-11%
-14%
-25%
est. workers added est. population added
Note: The graph shows the change in projected population and the growth in number of total workers between 2011
and 2017.
Source: Population projections from Office of Registrar General of India. Total workers are calculated by multiplying
the worker population ratio with population projection estimates. Worker population ratios at the state level are
estimated using the Employment Unemployment Survey (2011-12), NSO and the Perodic Labor Force Survey (2017-
18), NSO.
Changes in mobility trends based on Google’s location data
PUNJAB STATE BRIEF
Note: The graph indicates percent change in mobility levels relative to the median mobility value, for the
corresponding day of the week, during the 5-week period Jan 3–Feb 6, 2020. The peaks in residential and workplace
curves occur due to the day of the week being Sunday.
Source: https://www.google.com/covid19/mobility/index.html?hl=en
0.8
Exposure to COVID-19 vulnerable sectors
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
TR
GO
TN
ARP
KE
MN
CHD
BI
ME
MI
TEL
GJ
MP
MH
CHT
PUD
KA
DND
HR
UK
HP
NCT
PJ
JK
DNH
ANIS
AS
JH
UP
SI
OD
WB
NG
RJ
AP
LKS
INDIA
services construction
Note: The graph shows fraction of services and construction sector workers in rural areas across states.
Source: Periodic Labor Force Survey, NSO (2017-18).