Punjab second-most indebted state in country, reveals data

Punjab is the second-most indebted state in the country in terms of debt to gross state domestic product (GSDP) ratio, according to the data shared by Union minister of state for finance Pankaj Chaudhary on Monday.

Its debt-GSDP ratio of 46.6% is second in the country behind Arunachal Pradesh, which stands at 57%. Himachal is at number three with a debt-GSDP ratio of 45.2%. The minister shared this information on the estimated outstanding liabilities and debt to GSDP ratio of all states as on March 31, 2025, in response to Chandigarh MP Manish Tewari’s unstarred question in the Lok Sabha in this regard.

Tewari had asked about the quantum of debt and other liabilities of various states, their debt-GSDP ratio and assessment, if any, of the impact of off-budget borrowings and contingent liabilities on state borrowings.

In his written reply, Chaudhary said that Punjab’s estimated outstanding liabilities would stand at ₹3.78 lakh crore at the end of current fiscal. He stated that all states have enacted their Fiscal Responsibility and Budget Management (FRBM) Act. He said compliance to the State FRBM Act is monitored by the respective state legislatures.

Department of expenditure, ministry of finance follows uniform yardstick for the fiscal deficit of states while exercising the powers to approve borrowings by states under Article 293 (3) of the Constitution of India. “The normal Net Borrowing Ceiling (NBC) of each state is fixed by the Union government in the beginning of each financial year, accordingly. Adjustments for the over-borrowing by states during previous years, if any, are made in the borrowing limits of subsequent years,” he added.

Chaudhary further stated that instances of off-budget borrowings by certain state public sector companies, special purpose vehicles (SPVs) and other equivalent instruments, where principal and/or interest are to be serviced out of the state budgets, had come to the notice of the ministry of finance. Considering the effect of bypassing the NBC of the states by such borrowings, it was decided and communicated to the states in March 2022 that borrowings by state public sector companies/corporations, SPVs and other equivalent instruments, where principal and/or interest are to be serviced out of the state budgets and/or by assignment of taxes/cess or any other state’s revenue, shall be considered as borrowings made by the state itself for the purpose of issuing the consent under Article 293(3) of the Constitution of India, he added.