Punjab Faces Financial Challenges in FY25
In the fiscal year 2025, Punjab is expected to face financial difficulties due to having the lowest capital-to-revenue expenditure ratio among all Indian states, at just 6.2%. This means that only a small portion of Punjab’s spending is dedicated to capital expenditure, which is important for long-term infrastructure development.
In contrast, Gujarat leads with a much higher ratio of 36.2%, indicating a stronger focus on capital spending that can drive future growth. The National Stock Exchange (NSE) report highlights that the overall capital expenditure by Indian states is expected to moderate in FY25 after three years of strong growth.
The total capital spending for the fiscal year is estimated to increase by just 6.5% to Rs 6.5 lakh crore, a slowdown compared to the sharp 39.3% rise in FY24. The capital-to-revenue expenditure ratio is set to decline slightly to 20.7% in FY25 from 21.2% in FY24, reflecting a more cautious approach by states.
Revenue expenditure, covering recurring costs like salaries and subsidies, is expected to grow by 8.9% to Rs 44.2 lakh crore, marking the slowest growth in the last four years. Committed expenditure, such as interest payments and pensions, remains high, comprising about 24% of total revenue expenditure and consuming nearly a quarter of revenue receipts.
States like Punjab, Kerala, Himachal Pradesh, and Tamil Nadu have earmarked over 35% of their revenue receipts for these fixed costs in FY25, putting additional pressure on their finances and leaving less room for discretionary spending and investment in development projects.
Doubts Revealed
Punjab -: Punjab is a state in the northern part of India. It is known for its rich culture, history, and agriculture.
Capital-to-Revenue Expenditure Ratio -: This ratio shows how much money a state spends on building things like roads and schools (capital) compared to everyday expenses like salaries (revenue). A low ratio means less money is spent on long-term projects.
FY25 -: FY25 stands for the financial year 2024-2025. In India, a financial year starts on April 1st and ends on March 31st of the next year.
Gujarat -: Gujarat is another state in India, located in the western part of the country. It is known for its economic development and industries.
Capital Expenditure -: Capital expenditure is the money spent by a state or country on building and improving things like roads, schools, and hospitals. It helps in long-term development.
Revenue Expenditure -: Revenue expenditure is the money spent on day-to-day operations like paying salaries, interest, and pensions. It is necessary for running the government smoothly.
Kerala -: Kerala is a state in the southern part of India. It is famous for its beautiful landscapes, backwaters, and high literacy rate.