Economic Development of Punjab, India: Prospects and Policies

Lakhwinder Singh, Nirvikar Singh and Mahima Yadav
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Lakhwinder Singh: Punjabi University, Patiala
Nirvikar Singh: University of California, Santa Cruz, USA
Mahima Yadav: Plaksha University, Mohali, Punjab

No 169, NCAER Working Papers from National Council of Applied Economic Research

Abstract: This paper assesses the state of Punjab’s economy, reasons for its current situation, prospects for growth, and policies to enable that growth. Punjab’s economy is characterized by slow growth, societal challenges, and environmental degradation. We identify four interrelated issues that act as constraints on the Punjab economy. First, driven largely by dependence on the central government’s food procurement policy, and its specific nature, the state remains heavily agricultural in a narrow manner. Second, Punjab’s fiscal situation is constrained in ways that make fiscal policy dysfunctional: related causal factors include the agricultural structure and the state’s political economy. Both physical and soft infrastructure have been negatively affected by the problems in public finances. Third, a combination of regional and domestic politics during an era of liberalization has disadvantaged the state, with existing manufacturing industries declining, and new industries and services not emerging rapidly enough. Fourth, both individual human capital and institutional or organizational capital have either failed to develop, or have deteriorated in some dimensions over recent decades, making Punjab less innovative and less attractive for new investment. The paper argues that prospects for meaningful economic development in Punjab will depend on collaboration between the state and national governments, including fiscal support from the latter to deal with switching costs and accumulated fiscal issues. We also discuss several specific policy areas, including agricultural diversification, industrial development and innovation, cross-border services, and decentralization to the local level.

Keywords: : Punjab; India; growth; development; agriculture; industrialization; public finances (search for similar items in EconPapers)
JEL-codes: H70 O13 O14 O15 O43 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2024-05-24
New Economics Papers: this item is included in nep-agr, nep-ipr and nep-ure
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