“Just as it is impossible to know when a swimming fish is drinking water, so it is impossible to find out when a government servant is stealing money” – Kautilya
This scathing observation by Chanakya captures a timeless truth that the habitual exploitation of public funds has long been a fundamental flaw in governance. Today, while analysing the economy of Himachal Pradesh, this adage takes on renewed relevance.
The budget, while promising big, seems to take away with both hands not only what was given earlier but even what was expected from a state reeling under economic distress, thanks to its irrational promises and flimsy foundations. The budget seems to rest on an outdated premise of trickle-down economics where simply announcing new schemes and pouring money into them is expected to generate employment, development and economic growth.
Interestingly, such misplaced budgetary proposals are the consequence of a self-sabotaging divorce from Indian economic thought. Promising more than what is fiscally possible and then backtracking on commitments without any qualms, maintaining strict control over economic resources, appropriating temple funds to finance revenue expenditure and promoting minority appeasement in the garb of a welfare state model are all symptoms of a culturally alien economic framework devoid of dharmic roots of Indian economic wisdom.
Promises, Projections and Reality: An economic critique
I. Nominal and Real Economic Activity
The economic survey 2024-25 of Himachal Pradesh tries wantonly to present a rosy picture of a state once prosperous but now gasping for economic revival.
Outlining the macroeconomic profile of the state, the survey argues that the Gross State Domestic Product (GSDP) at current prices for the Financial Year (FY) 2024-25 is estimated to be Rs 2,32,185 crore, as against Rs 2,10,662 crore in the FY2023-24, exhibiting an ‘impressive’ growth rate of 10.2 per cent for the FY2024-25 as against 9.9 per cent for FY2023-24.
Real GSDP for FY2024-25 is estimated at Rs 1,46,553 crore, as against Rs 1,37,320 crore in FY2023-24, exhibiting a growth rate of 6.7 per cent for the FY2024-25 as against 6.6 per cent for FY2023-24 (FR)
While the survey has clandestinely presented the growth rates as impressive, the reality is starkly different. GSDP at current prices has shown a marginal increment of 0.3 per cent and has decreased from a double-digit growth rate of 12.3 per cent during 2022-23(SR). The data is even more concerning in terms of constant prices which has shown a ‘impressive’ growth rate of 0.1 per cent yoy. This subdued growth has a direct bearing on the growth rate of PCI, which too has shown a miniscule growth rate of 0.1 per cent (9.5 per cent – 9.6 per cent) and has declined compared to 2022-23 levels.
II. Sectoral Imbalances
In terms of sectoral share, the primary sector has suffered the most. In the years under the current regime, growth rate has been volatile, hovering around the 2.5-3 per cent mark, experiencing a negative growth rate of 1.7 per cent in 2023-24. It is noteworthy that such a trend is preceded by an 18.2 per cent growth rate in 2019-20.
While the secondary sector has maintained an upward growth trajectory, it owes most of this growth not to organised manufacturing but to utility services and construction growing at 11.5 per cent and 9.4 per cent respectively. These sectors are characterised by the seasonal and informal nature of employment, intensifying unemployment woes in the hilly state.
The service sector, which remains the backbone of a tourism-oriented state economy, shares a similar fate. Once growing at a rate of 9.6 per cent, the sector’s growth has decelerated to 6 per cent in 2023 and further to 5.9 per cent in 2024. This slowdown in tourism and related services raises serious concerns about the state’s ability to leverage its natural and cultural assets for sustainable economic development.
With regards to merit goods like education and health, spending has declined from 18 per cent to 14 per cent and from 7.4 per cent to 6 per cent, respectively, between 2022-2024.
III. The State of Public Finance: Burden of Committed Expenditure and Huge Debt
With regards to public finance, the state’s plight is now so widely known that no economic manoeuvering and blame gaming can conceal the mismanagement of the public purse.
While the survey mentions a significant increase of 4.22 per cent in the projected revenue receipts for FY2024-25, it doesn’t mention that this decline was from 6.19 per cent during the preceding year. Furthermore, the revenue expenditure of the state continues to grow from 73 per cent to 80 per cent each year since 2022-23. Around 80 per cent of total expenditure is likely to be committed expenditure which includes salary, pension, interest payment and subsidies.
In sharp contrast to recurrent spending, capital expenditure, which is vital for stimulating long-term growth through infrastructure and multiplier effects, has been relegated to a paltry 10 per cent of GSDP. The failure to channel sufficient funds into capital projects ensures that the state’s growth remains short-lived and superficial.
State’s debt has increased to unprecedented levels amounting to a mammoth Rs 1,04,729 crore, far more than the state’s revenue generation potential. Borrowing has become the primary tool for meeting fiscal deficits. This reliance on debt not only suppresses fiscal autonomy but also endangers future economic stability by burdening the state with interest payments and debt servicing obligations.
Amidst such concerning fiscal challenges, the Chief Minister’s budget speech introduces a flurry of flagship schemes- ranging from the Indira Gandhi Sukh Suraksha Yojana and the CM Tourism Start-Up Scheme to Rajiv Gandhi Day boarding schools.
While the rhetoric behind these schemes is beautified through poetic couplets the schemes themselves are devoid of concrete funding strategies and actionable implementation plans. The promise of “new ideas” and “innovative reforms” is disproved by the absence of a detailed roadmap to address the critical issues of resource mobilisation and sustained economic development.
The budget’s reliance on outdated principles of trickle-down economics is visible in the overemphasis on creating new schemes and pouring money into them without addressing the fundamental structural flaws in revenue generation. In the backdrop of subdued economic growth, such an approach ignores the complexities of a demand-constrained economy and focuses only on supply-side measures to stimulate holistic growth.
Furthermore, like a broken record, the budget speech incessantly mentions diminishing financial contributions from the centre in the form of GST compensation amount, revenue deficit grants and overall grants-in-aid. The numbers presented to justify such claims are nothing but mere optical illusions.
Overall, the grants-in-aid to the state government is only marginally lower vis-à-vis 2023-24 declining by a paltry 1 per cent. Moreover, the majority of the state’s revenue comes from VAT, excise duty, mining royalties, stamp duty and cess, which remain unaffected by GST.
Now addressing the elephant in the room, while revenue deficit grants have decreased from Rs 40,624 crores to Rs 37,199 crores between the 14th and the 15th finance commission, this reduction is commensurate given a shrinking tax base and the need for equitable resource distribution among states to uphold the spirit of competitive federalism.
More importantly, the Finance Commission’s recommendation doesn’t require equal annual RDG disbursements, as long as the allocated amount is met. Adding the yearly amounts of RDG from 2021-25, anyone with elementary summation skills will acknowledge that the state has in fact received what was promised!
Such casual manipulations and misplaced priorities bring us to a bigger issue at hand: economic policymaking devoid of traditional Indian economic thought which rests primarily on dharma or moral righteousness.
Varta – The Indian Concept of Economics: A tool for prosperity of all
Bharat has had a tradition of economic planning since Vedic times. The Smriti texts, Arthashastra, Tirukkural, Sukranitisara, and Vedas are torchbearers of the depth of ancient Indian knowledge of economics.
Modern economic theory suffers from its unidimensional focus on self-interest and reduces everything to numbers and statistics. In contrast, the concept of dharma is central to Indian economic thought. It focuses on righteousness, truthfulness and charity, which are more associated with the satisfaction of the soul. Our conception of prosperity is of shubh-labh’ i.e. material gain which is ethical and beneficial for everyone. Today, this wisdom has been given commensurate respect under the Bharatiya model of development by NITI Aayog.
The ancient statesmen recognised that the state gained its legitimacy only from the collective trust of its subjects. In the ‘Aitreya Brahman, ’ Narada questions kings about whether they have built wells, provided loans at concessional rates, taken care of the destitute, and protected the citizens and industries from external threats.
In contrast, one common theme that runs through the recent budget and the overall economic management of the state is the dearth of dharma.
The budget introduces new schemes without updating progress on earlier initiatives, and some allocations—like for the Sukh Ashray Yojana—are laughably insufficient. In addition to this, several questions remain unanswered: if resource generation was suboptimal, why weren’t expenditures rationalised? Why does the state borrow solely to repay past loans and interest, sidelining capital investment? Why promise OPS when it would only worsen fiscal strain? And why make impractical manifesto promises? Ultimately, these issues point to a lack of moral righteousness (dharma).
Furthermore, the speech argues that being a special category status state the centre should give more grants-in-aid to the state. However, it conveniently hides the fact that the status also means that the centre contributes more under the centrally sponsored schemes. Such schemes, such as the PM Gram Sadak Yojana and PM Awas Yojana, have been frontrunners in elevating the socio-economic development of the state.
Our concept of Welfare, a key element of dharma-sangata aarthik niti, is envisioned as a familial relationship prioritising the needs of the vulnerable, as reflected in the Sarvodaya and Antyodaya ideals of Pt. Deen Dayal Upadhayay. The Bhagwat Gita describes three forms of charity: selfless (satwik), grudging (rajas), and misguided (tamas).
The so-called liberal regimes tend toward the latter two. In states such as Karnataka, Bengal, Telangana, and Himachal Pradesh, religiously driven benefits, reliance on freebies at the expense of merit goods, sudden subsidy cuts, broken promises like cash transfers to women, delayed wages, and poor employment conditions all point to a tamasic welfare model.
Even our temples have also become victims of these culturally alien economic models. Recently, a notification asking the temple trusts in Devbhoomi to contribute funds towards the government’s flagship schemes has caught the ire of various groups as only Hindu temples have been targeted.
But this reduction of temples to mere cash cows, with the government milking its treasury to bridge their budgetary deficits, is not new; even the early post-independence government under PM Nehru intervened in temple finances in the name of social justice.
The fiscal attack on temple revenues comes from a malicious dirigiste view that dismisses temple revenue as idle and its expenditure as unproductive. However, our glorious history shows temples were not only sacred spaces but also engines of economic growth—funding schools, markets, agriculture, irrigation, and credit in prosperous empires like Vijayanagara and Chola. Furthermore, such use of temples had a direct impact on economic growth as they were used for capital expenditure instead of bridging the fiscal deficit gap like modern regimes do.
III. Structural Reforms: Integrating Development with Dharma
A. Recognising the Importance of Agriculture
Himachal Pradesh is an agriculture-oriented state, yet the recent budget mistakenly highlights secondary and tertiary sectors as economic drivers, relying on Lewisian and Rostow’s models. This approach sidelines agriculture—a sector that has been undervalued since the Nehruvian era.
In contrast, our ancient concept of Varta sees agriculture as a way of life where our land is sacred and crops are seen as boons by our deities, even festivals like Pongal and Sankranti are woven around an agricultural way of life.
Economically, agriculture catalyses growth by supplying resources and labour, boosting demand, and fostering last-mile poverty alleviation. The budget should have, therefore, prioritised agricultural growth through enhanced price support, technical advancement in the horticulture sector and a crop insurance mechanism for protecting against climatic distress.
B. Policy Continuity and Industrial Reforms
The government’s promise of “industrial reforms” and increased support for the manufacturing sector remains opaque. A coherent policy framework that outlines specific measures for enhancing productivity, fostering innovation, and supporting small and medium enterprises (SMEs) is essential. Rather than abrupt changes in taxation and subsidy regimes, the state should focus on long-term institutional support, such as facilitating access to credit, improving infrastructure, and ensuring regulatory stability. Such a holistic approach would not only stimulate the industrial sector but also create a virtuous cycle of growth in the economy.
C. Addressing Environmental Vulnerability
Himachal Pradesh’s unique geography and natural beauty are both its greatest asset and its most significant vulnerability. Unplanned development, environmental degradation, and the increasing frequency of natural disasters endanger the state’s economic future—especially in sectors like horticulture and tourism, which are highly sensitive to climatic shifts. A sustainable economic model must balance environmental conservation with development planning. This entails robust disaster management protocols, investment in green infrastructure, and promoting renewable energy.
D. Enhancing Revenues and Rebalancing Expenditure
A persistent challenge for Himachal Pradesh is the contraction of its tax base. Despite incremental improvements in the state’s share of central taxes—from 13 per cent to 18 per cent—and a commendable increase in its own tax revenue from 17.5 per cent to 27.4 per cent over recent years, the overall tax buoyancy remains inadequate. A coordinated effort is required to augment the tax base through structural reforms that incentivise compliance, promote ease of doing business, and increase formalisation. A sensible revenue generation strategy would simultaneously arrest the increasing debt burden and promote meaningful public investment.
The state’s fiscal crisis is primarily a product of its skewed expenditure pattern. With Rs 76 out of Rs 100 of the budget committed to liabilities such as salaries, pensions, and debt servicing, only a slender margin remains for capital investment which is essential for a multiplier effect on long-term growth. A moral shift of fiscal policy must involve streamlining government functions, rationalising subsidies, and institutionalising performance audits to ensure that each rupee spent yields tangible benefits.
In conclusion the budget can be summarised as confused, immoral and directionless. The budget appears to be an exercise of ‘see money, spend money’ instead of a potent tool for realising the government’s vision. The government must understand that pouring more resources at the top of a funnel doesn’t mean automatically collecting more at the bottom. Essentially, the budget presents old wine in a new bottle where resource generation is avoided, and debt generation is desired, where old promises are ignored, and new dreams are sold in the disguise of an ever-increasing number of schemes to keep the citizens confused and asking for more.
For too long now, the art of economic decision-making has been hijacked by foreign-borrowed economic concepts. We are a culturally mature society with moral ethos affecting not just our daily life but also our economic thought. Economic and other policies, therefore, should reflect this distinct heterogeneous cultural landscape that is Bharat. The recent resurgent and steady national growth despite an uncertain global economic order epitomises that re-shaping economic policies through an indigenous lens can create a truly ‘Hindu rate of growth’ that can outperform even the most advanced economies.
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