Punjab, long celebrated as India’s “Granary,” has experienced economic challenges in recent decades, trailing behind its northern neighbors Haryana and Delhi. While Delhi increased its GDP share from 1.4% in 1991 to 3.6% in 2023-24, and Haryana surpassed Punjab on key economic metrics, Punjab’s economy has stagnated and even declined. Research by the National Council of Economic Research (NCAER) and the Economic Advisory Council to the Prime Minister (EAC-PM) highlights the multifaceted nature of Punjab’s economic challenges, from structural inefficiencies to environmental degradation.

The Rise and Decline of Punjab’s Economy

Punjab’s growth peaked during the Green Revolution of the 1960s and 70s, with its GDP share rising to 4.4% by 1970-71. However, its share plateaued in the subsequent decades and began to decline from the 1990s. By 2023-24, Punjab’s GDP share had fallen to 2.4%, a trend mirrored in its relative per capita income, which declined from a peak of 169% of the national average in 1970-71 to just 106.7% in 2023-24.

The NCAER identifies Punjab’s over-reliance on agriculture, supported by central procurement policies, as a key contributor to this stagnation. Despite its historic agricultural strength, Punjab’s economy has been constrained by environmental degradation, such as groundwater depletion, soil contamination, and air pollution from stubble burning.

While Punjab stagnated, Haryana leveraged policy reforms and industrial growth to emerge as a northern powerhouse. Haryana’s GDP share, which stood at 1.9% in 1960-61, rose steadily to 3.6% in 2023-24. Gurugram, or Gurgaon, a major hub for information technology (IT) and communication services, has been a significant driver of this growth. Haryana’s relative per capita income, at 176.8% of the national average in 2023-24, far outstrips Punjab’s, reflecting its robust economic trajectory.

Sectoral Imbalances in Punjab

According to the EAC-PM, Punjab’s agriculture sector accounts for 26.68% of its Gross State Value Added (GSVA) but faces diminishing returns due to monoculture cropping. Meanwhile, the industry sector contributes 27.4% to GSVA but suffers from low productivity and underinvestment. The state’s manufacturing sector, dominated by small and medium enterprises, lags behind competitors due to inadequate infrastructure, limited innovation, and low access to credit.

Despite some success in textiles and light manufacturing, Punjab’s industries have struggled to modernize and expand. The collapse of the Soviet Union, one of Punjab’s major export markets, and the challenges posed by liberalization in 1991 further weakened the state’s industrial base. The services sector, though growing faster than agriculture and industry, remains underdeveloped in high-value areas such as IT and financial services.

Batala and Ludhiana, historically significant industrial hubs in Punjab, exemplify both the potential and challenges faced by the state’s industrial sector. Ludhiana, often referred to as the “Manchester of India,” has a strong presence in textiles, hosiery, and bicycle manufacturing. However, it struggles with modernizing its production processes and improving global competitiveness. Batala, once known as the “iron bird of Asia” for its record export from its machinery and foundry industries, has faced a decline due to outdated technology and lack of investment. Both cities highlight the urgent need for industrial revitalization and policy support.

Social and Environmental Consequences

The NCAER and EAC-PM highlight that Punjab’s economic slowdown has exacerbated social issues such as unemployment, agrarian distress, and drug abuse. Youth unemployment in the state was alarmingly high, with female youth unemployment nearing 30% between 2017 and 2022. Environmental degradation remains a critical issue, with groundwater extraction exceeding replenishment rates and stubble burning causing severe air pollution.

Policy Implications and the Way Forward

To address these challenges, the NCAER report highlights key reforms that Punjab must undertake for an economic boom:

Agricultural Diversification: Transitioning to less water-intensive crops, as highlighted in the EAC-PM paper, can reduce environmental strain and boost farm incomes.

Industrial Modernization: Improving infrastructure, fostering innovation, and attracting investment in high-value manufacturing are essential for revitalizing Punjab’s industrial sector.

Services Sector Expansion: Leveraging its cultural heritage and diaspora connections, Punjab can develop tourism and hospitality while expanding into IT and financial services.

Governance and Human Capital Development: Strengthening institutions, improving education, and enhancing healthcare outcomes are critical to creating a more dynamic economy.

Collaboration for Sustainable Growth

The NCAER emphasizes the need for collaboration between state and national governments. Fiscal support, targeted policy interventions, and infrastructure investments are essential to overcome Punjab’s systemic challenges. By addressing structural issues and diversifying its economy, Punjab can reclaim its position as a leading state in India’s growth story.

The research underscores that while Punjab continues to excel in measures like physical infrastructure and human development indices, its economic stagnation poses a long-term risk. A recalibrated development strategy focusing on sustainability, innovation, and inclusivity can pave the way for Punjab’s economic resurgence.

Manbilas Singh

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Manbilas Singh is a talented writer and journalist who focuses on the finer details in every story and values integrity above everything. A self-proclaimed sleuth, he strives to expose the fine print behind seemingly mundane activities and aims to uncover the truth that is hidden from the general public. In his time away from work, he is a music aficionado and a nerd who revels in video & board games, books and Formula 1.

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