Dear Leaders, Thanks, But Punjab Can Do Without Freebies
The people of Punjab are quite capable of managing the economy of their state without freebies. Here’s the proof.
The freebie bug has bitten political parties in Punjab this election season. The three major parties/alliances – the Congress, Aam Admi Party and the Bharatiya Janata Party (BJP) – Shiromani Akali Dal (SAD) combine have promised things from free laptops to waiving off loans. But are these freebies the right things to be promised in a state that has one of the highest incomes in India?
Data from District Metrics shows that Punjab is well ahead of most states in terms of household incomes and growth rate of organised economic activity.
Map 1 shows the districts with per-household purchasing power over Rs 350,000 per year. As can be seen, most districts of Punjab enjoy a household purchasing power over Rs 350,000. District Metrics defines purchasing power as an estimate of the district’s disposable income.
Map 2 provides the growth rate of Per Household Purchasing power in the years 2010-11 to 2015-16. Again, it can be seen that most districts of Punjab rank among the fastest growing districts in India.
In terms of income distribution, there is a broader and more equitable distribution, as Punjab has a higher share of its households in higher income groups, compared to rest of India, both for urban and rural households (Charts 1 and 2). It may be noted that at an all-India level, urban areas have better income distribution than the rural areas.
In another analysis, with the district level purchasing power estimates, we ranked the districts of India with the lowest percentage of households in the purchasing power group “less than Rs 75,000 per year”. A district with lower percent of its household in the poor income category would be ranked high in this. The results indicated that all the 22 districts of Punjab had ranked within top 100 among India’s 650 districts. Similarly, we ranked the districts of India on the basis of highest percentage of the households in the highest income group – “Above Rs 650,000”. In this too, all the 22 districts of Punjab have featured in the top 100 districts of India and it had the highest percent of the households in the higher income group.
What about economic activity? The Reserve Bank of India (RBI) periodically releases data on district level credit disbursement based on economic activities. Based on RBI data on organised economic activity, we note that 14 of the 22 districts of Punjab have at least one economic activity where the district rank in credit off-take is within top 100 districts of India. Table 1 gives the list of economic activities listed by RBI and the number of districts in Punjab which have a rank within top 100 of India’s 650 districts.
It is not that Punjab does not face challenges to its economy. The principal challenge is that of the slowdown of business in the state, compared to rest of India. A comparative analysis of Punjab’s growth in organised economy as reflected in RBI statistics with India average performance reveals the glaring problem facing the state (Chart 3 and Table 2). Table 2 presents the compounded annual growth rate (CAGR) of organised credit between 2010-11 and 2014-15 for Punjab and India. In many sectors, Punjab has lagged behind, and has even registered negative growth. This reflects in the reduced share of Punjab in India’s total credit offtake between the two time periods.
What could be a probable cause for this slowdown is the lower participation of the Punjabi youth in the economy, which can be directly attributed to the drug menace that is taking a toll on Punjab’s economy. Data from the Narcotics Bureau of India reveals that Punjab is the biggest market for drug use in India, and not just an entry point for drugs from the “Golden Crescent” region comprising Pakistan and Afghanistan. For instance, the total seizure of heroin in Punjab during the year 2015 was a whopping 600 kg, with Maharashtra being a distant second at 235 kg.
Showering freebies to the state of Punjab would be counterproductive to Punjab’s economy. Apart from being an insult to the state, which is currently at the forefront of economic empowerment built largely on an agrarian base, such freebies have the risk of moving a significant section of the youth towards idle living and into more drugs. The current situation in Punjab urgently needs a solution to the drug menace.
Apart from social vulnerability due to the drug menace, the other challenge that Punjab faces is environmental sustainability. Political parties need to focus their energies on building sustainability – particularly related to soil health and water security. The people of Punjab are quite capable of managing the economy of their state without freebies of the type assured by the latest poll promises.