By Satnam Singh Chahal
Punjab’s 2024–25 revised budget estimates reveal a deeply troubling fiscal situation that has pushed the state dangerously close to bankruptcy. According to the official figures, nearly one-third of the total budget has been earmarked solely for the repayment of public debt, which stands at an alarming level of around ₹3.75 lakh crore. On top of this, close to 60% of the state’s finances are absorbed by running the government—covering salaries, pensions, subsidies, and interest payments. This leaves only a tiny fraction for capital expenditure, which is crucial for development and long-term growth. Shockingly, less than 5% of the budget has been allocated for capital works, a figure that underscores the growing fiscal stress.
The biggest casualty of this imbalance is Punjab’s capacity to build resilience against natural disasters such as flooding. Flood management requires large-scale capital investments in infrastructure such as embankments, reservoirs, drainage systems, desiltation programs, and early-warning mechanisms. With capital expenditure reduced to a mere ₹8, 346 crore out of the entire state budget, Punjab simply lacks the financial room to undertake such projects. As a result, each year the state is left scrambling to deal with floods through short-term relief measures rather than long-term preventive strategies.
This structural weakness is compounded by the state’s mounting debt obligations. Debt servicing alone has ballooned to ₹84, 116 crore, which eats up over one-third of the budget. Salaries consume another ₹34, 533 crore, while interest on borrowings is pegged at ₹23, 953 crore. Subsidies, pensions, and miscellaneous general services together account for over ₹39, 000 crore more. With such a heavy dependence on borrowed funds and recurring expenditures, Punjab is locked into a cycle of fiscal stagnation where almost every rupee collected is spent on maintaining the status quo, rather than building for the future.
The implications are severe. Without adequate capital expenditure, Punjab cannot invest in flood mitigation infrastructure, strengthen drainage networks, or modernise water management systems. Even routine maintenance of existing assets, such as embankments and irrigation channels, is compromised. This forces the state into an expensive and unsustainable pattern—spending vast sums on post-disaster relief and compensation while neglecting preventive infrastructure that could have reduced damage in the first place.
In the short term, Punjab must take pragmatic measures to ease the immediate crisis. The government can redirect funds from non-essential operating costs to flood preparedness activities such as desilting priority drainage channels, leasing pumps and modular barriers, and strengthening community-level evacuation and warning systems. Relief allocations should be made more transparent and better targeted to avoid wastage. These steps may not solve the fiscal crisis, but they can help protect citizens during upcoming monsoons.
In the medium term, Punjab needs to rebalance its budget by prioritizing capital expenditure. This can be achieved by rationalizing subsidies, moderating non-essential salary and pension burdens, and creating a ring-fenced “Flood Resilience Fund.” Accessing concessional loans from NABARD, the World Bank, or Asian Development Bank for climate resilience projects could also provide much-needed financial breathing space. Public–private partnerships for urban drainage and Stormwater management could bring in private capital where feasible.
For the long term, structural reforms are unavoidable. Punjab must broaden its tax base, modernize property taxation, and strengthen revenue collection systems to increase its own income. Pension and debt restructuring must be seriously explored to reduce the unsustainable outflow of funds each year. Most importantly, the state must commit to a consistent rise in capital expenditure, from less than 5% today to at least 10% of its annual spending in the coming years. Only then can Punjab afford to build the flood-resilient infrastructure that its people desperately need.
Punjab cannot continue on its current fiscal path without endangering both its economic stability and its citizens’ safety. A state where over 90% of the budget goes to debt servicing and operating expenses, while less than 5% is left for development, is one that risks perpetual crisis. Unless urgent fiscal discipline and re-prioritization of capital expenditure take place, Punjab will not only remain on the brink of bankruptcy but also remain highly vulnerable to the floods and disasters that strike with increasing frequency.