Punjab leaders unite to demand special economic package from Centre
In a rare show of unity, leaders of all major political parties in Punjab came together on Saturday at an all-party meeting convened by Governor Gulab Chand Kataria to press for a Special Economic Package from the Centre. The demand was reiterated the following day by BJP state president Sunil Jakhar, who emphasised that Punjab’s economy urgently needs a central stimulus.
The meeting saw participation from the ruling Aam Aadmi Party led by Chief Minister Bhagwant Mann, BJP’s Sunil Jakhar, Congress leaders Amrinder Singh Raja Warring and Brahm Mohindra, and Shiromani Akali Dal leaders Balwinder Singh Bhunder and Dr Daljit Singh Cheema. The leaders called for the establishment of a Special Economic Zone in the state to boost investment.
They highlighted that Punjab, being at the forefront of conflicts with Pakistan and constantly fighting the nation’s war against cross-border smuggling of drugs and arms, has also suffered from cross-border sponsored terrorism for decades.
When neighbouring hill states were granted special incentives in the early 2000s, much of Punjab’s already limited industry migrated to the newly established tax havens in Himachal Pradesh, Jammu, and Uttarakhand. This shift significantly impacted the state’s growth, resulting in near stagnation in both its industrial and services sectors. Additionally, long-standing political leaders, whose parties held power for extended periods, failed to seize the opportunity for industrialisation due to their focus on vote bank politics, which primarily catered to the agricultural sector.
As Punjab struggles to keep pace with other developed states, the state’s political leadership appears to be gradually awakening to the need for change. The demand for central assistance is gaining momentum.
Governor Kataria has already endorsed the idea that all party leaders should seek an audience with Prime Minister Narendra Modi to highlight the need for economic incentives for the state. However, the question remains: why has the Centre repeatedly declined to provide such support, despite several requests from successive governments, including during pre-Budget meetings?
Once the most progressive state in the country, Punjab is now considered one of the laggard states. In the recently concluded fiscal year, the state’s public debt surged dramatically to Rs 3.89 lakh crore, with Rs 36,971.37 crore raised in 2024-25 alone. The state achieved only 89.7% of its targeted revenue receipts and spent 96.69% of the budgeted revenue expenditure. As a result, Punjab surpassed its revenue deficit target, which stood at Rs 29,688.10 crore for 2024-25.
Eminent economist Ranjit Singh Ghuman argues that Punjab is a deserving candidate for special incentives. “With a 554 km-long border with a hostile neighbour, Punjab is always the first to bear the brunt of any hostility between India and Pakistan. As a result, six border districts have seen little to no growth. Per capita income in these districts is significantly lower than the rest of the state, and education and healthcare are far below the standard in other regions. Punjab’s debt has escalated, with the state now having the highest debt-to-GSDP ratio. Given that the state lacks the capacity to offer incentives and private investment has been scarce, the Centre should extend its support to Punjab,” he said.
It’s not that the Centre is treating Punjab unfairly. The last Finance Commission did grant the state special revenue deficit grants. In fact, given that Punjab is a border state sharing a 553 km border with Pakistan, and being a state where a religious minority (Sikhs) are the majority population, the BJP government and its strategists are unlikely to alienate the state and its people. However, the Centre insists on accountability from the state in using these resources, requiring strict adherence to their guidelines.
The Centre also insists that the Punjab Government, regardless of which party is in power, route all funds through the state’s consolidated fund to ensure regular audits and proper accountability. Over the past decade, the Central Government has made it clear to successive Punjab governments that central grants would be provided if they stopped offering freebies—something that vote-sensitive political parties in power have been unwilling to do.
Punjab