How to create a new Punjab and restore its economic condition?

The factors underlying this dramatic change are manifold and complex. Nevertheless, it is clear that there was widespread disenchantment with the mainstream political parties among the people in Punjab. The current governments were voted on from time to time. Yet, as much as things changed, they remained the same. Corruption on a large scale persisted. Drug mafia flourished. The mess in the state’s finances worsened. Employment opportunities, which were scarce for decades, almost disappeared. For young people who had the initiative, migration was in the hope of a better life abroad, but for many who had no family income or wealth, drugs provided a deceptively soft alternative that only ruined lives. Successive governments have failed to meet the economic aspirations and political expectations of the people.

An economic slowdown during the 1990s, which gained momentum around 2000, caused the relative economic decline of Punjab in comparison to other states. The accompanying chart compares trends in Punjab’s per capita income with those of Haryana, Himachal Pradesh and Chandigarh, which were part of undivided Punjab until 1966, and India’s from 1970–71 to 2019-20. Till 2000-01, the per capita income was almost the same in Punjab and Haryana, while it was initially low in Himachal, but increased by 2000-01. Over the next two decades, per capita income in Haryana grew more rapidly, widening the gap with Punjab, while Himachal also surpassed Punjab. So much so that in 2019-20, Himachal had 20% higher per capita income, Haryana 50% higher and Chandigarh almost 100% higher than Punjab.

In 1965–66, undivided Punjab ranked fourth in per capita income among the states of India. At that time, among its three constituent regions, Punjab had a higher per capita income than Haryana and much higher than Himachal, so a divided Punjab would have ranked third in India, if not higher. The table shows that the picture did not change much till 2000-01. In fact, the divided Punjab was third in 1990-91 and fifth in 2000-01, while Haryana was slightly below and Himachal very low. Over the next two decades, Haryana and Chandigarh retained their ranks in the top five, but among the 33 states, Punjab rapidly dropped to 15th in 2010-11 and 17th in 2019-20.

It is a story of slippery missed opportunities. By 1990, Punjab had completed its agricultural revolution and exhausted its rural surplus labour, so that industrialization was the obvious next step in the classical path of development. It had experience in manufacturing—sporting goods in Jalandhar, cotton hosiery and woolen garments in Ludhiana, or metal manufacturing in Batala—and practiced skilled labor in jugaad to do so. Alas, it did nothing to promote industrialization unlike its neighbors. Haryana nurtured the automobile sector and Himachal attracted pharmaceuticals. Punjab was backward. As of 2019-20, the per capita net state domestic product formation in Punjab was only 45% in Haryana and only 32% in Himachal. Sadly, the service revolution in India, driven by information technology that led to economic growth in many states—telecommunications, trade, finance or e-commerce—also largely bypassed Punjab.

Agriculture made Punjab India’s bread basket, increased income and brought prosperity. But this was no reason to sit comfortably. This was necessary to diversify the state’s economy into manufacturing and services. This would create jobs and raise the standard of living. Instead, Punjab lost three decades.

Still, it’s never too late to take action and make amends. A fresh start is needed in agriculture, where irrigation tube wells have depleted groundwater levels, high-yielding varieties have depleted soil nutrients, and chemical fertilizers have had environmental consequences. Subsidized water or electricity is not the answer for farmers. The time has come to think about environmentally sustainable agriculture. Using scarce water resources, rice cultivation should be progressively replaced by pulses and oilseeds which will be more profitable for the farmers. There is a clear potential in processing and labor intensive manufacturing of agricultural products. In fact, there is no reason why Punjab cannot leapfrog into skilled-labour-intensive or technology-intensive manufacturing and services. But this will require a proactive industrial policy for infrastructure, land, industrial finance and skill-development.

The challenges before the new AAP government in Punjab are dire. The work is not just about ending corruption and ending the drug mafia, or improving education and healthcare, all of which are clearly necessary but will not be enough. Punjab needs a transformational change in its economy. It is about thinking big (beyond corruption) and thinking long (beyond the next election), to formulate and implement a development strategy that revitalizes agriculture and promotes industrialization for sustainable development.

Deepak Nayar is Emeritus Professor of Economics at Jawaharlal Nehru University, New Delhi