PUNJAB once enjoyed the glory of being the most forward-looking state of India. This image prevailed for three decades till the early 1980s when the state got deeply embroiled in violent civil strife. Fortunately, Punjab came out of this crisis by the early 1990s and once again began to be counted as one of the most peaceful areas in the country. Although the state gained political normalcy with a strong secular outlook, neither its economic progress nor its vibrant nature could be sustained. Consequently, in per capita income, Maharashtra overtook Punjab in 1992-93 as did Haryana in 2004-05. The growth rate of the state has remained much below the national average and the World Bank Report (2004) states that, ‘If the current growth trend persists for another decade, at least four Indian states, viz. Gujarat, Karnataka, Maharashtra and Tamil Nadu, are likely to have per capita income higher than that of Punjab.’ There have been other such reports and research articles detailing the crisis in Punjab, transforming its image from a socially and economically vibrant entity to a crisis-ridden state.

This dominant view in the current writings on Punjab is often based on the assumption that Punjab continues to be an agrarian economy and that its agriculture is in deep crisis. The states which are showing better performance have diversified into industry and services which tend to grow faster than agriculture in the long run (World Bank 2004, Johl Committee I and II). The efforts initiated in the state to diversify its agriculture and economy, have not yielded positive outcomes (Gill 2004; Dhaliwal et al. 2004). The reports of farmers suicides bring out the grim reality of rural Punjab (Gill 2005; Aiyer and Manick 2000; Gill and Singh 2006). Is it possible then for the state to come out of this scenario in the coming decades and regain its lost glory? This article attempts to examine this issue and foregrounds the potential for future development.

 

Historically, most regions witness phases of fast developing prosperity followed by a crisis leading to disruptions in the development process or slowdown in economic activity. One such phase was experienced by Punjab in the aftermath of partition which accompanied India’s independence in 1947. The partition uprooted a large number of people involving an exchange of populations, forcing them to leave their homes and hearth and enter as refugees. Fortunately in the Indian Punjab, they were quickly resettled. Though cuts were applied on land and other properties they claimed to have left behind, yet Punjab grappled with this problem in record time and was ready for initiating measures to embark on a fast growth path.

After settling the refugee problem in a period of four years, Punjab began the consolidation of land holdings in 1951 and by 1963-64 the work was almost completed. At the same time, it established a network of canals for irrigation with the completion of the Bhakra Dam by the end of the 1950s. With the establishment of Punjab Agricultural University at Ludhiana in 1962, the foundation was laid for a successful launch of the green revolution in 1965-66. Today, although the potential of green revolution technology appears exhausted, yet possibilities of development remain. It is this potential which needs to be recognized and leveraged for future development.

Modern growth theory (Lukas 1988; Romer 1990) indicates that growth can be boundless and show increasing returns if based on human capital formation. Punjab is next only to Kerala in human development ranking. By the end of the 20th century, officially 94% of Punjab’s population was above the poverty line, 70% were literate, 94% of all six year old children were enrolled in primary schools, 63% of births were attended by skilled health staff, 72% of children under twelve months were immunized, 52% households had access to improved sanitation and 99% of households had access to safe drinking water. The average life expectancy in 2001 was 68 years.

Despite weak spots like a declining female sex-ratio caused by widespread female foeticide, Punjab’s achievements in human capital formation are formidable. By removing these weaknesses and strengthening health and education, a new direction can be given to the social and economic development. This will not only be a major driver of socio-economic development but also contribute to diversification of the economy towards industry and service sectors.

 

Similarly, the international migration flows from Punjab can positively impact the development process. It is estimated that among the 20 million Indian diaspora, 10-15% are persons of Punjab origin. These emigrants not only provide necessary links for further international emigration but also contribute a new outlook to local Punjabis as also serve as a source of technological upgradation and enterprise within the state. It is generally believed that in many countries Punjabi migrants have higher income levels than the average Indian migrant, who in turn have a higher income level than the national average of host countries. The Punjabi migrants maintain their own cultural and linguistic heritage and preserve their links with the families in Punjab. Many wealthy Punjabi migrants have set up trusts and charities to enhance the health, education and social infrastructure in Punjab. Besides, remittances (estimated at US $ 2 to 3 billion per year) are contributing to an enrichment of the state (World Bank, 2004).

In terms of infrastructure development, Punjab continues to enjoy a lead among Indian states. All the villages in Punjab are electrified and 92% households have access to electricity, the highest among all the states in the country. The per capita consumption of electricity in Punjab was 800 kwh per annum compared to the national average of 355 kwh (2000-01). Electricity has been a major contributor to agricultural and industrial development in the state. There are more than one million tube-wells and 90% of them are operated with electricity. The Punjab State Electricity Board (PSEB) is generally considered among the financially better performing public utilities, maintaining a collection efficiency ranging between 96 to 98%. Its financial position has further improved with the establishment of the Punjab State Electricity Regulatory Commission, which has insulated the board from populist measures like providing free electricity. The Punjab government now has to fully compensate the PSEB for supply of free electricity to the farm sector and the weaker sections. Moreover, 96% of the total cultivated area is irrigated. The area irrigated by canals has declined to 27.28% while area irrigated by tubewells has increased to 72.34%. Thus, agriculture is covered by a system of assured irrigation.

 

The road connectivity of the state is undoubtedly the best in the country. Punjab has one of the highest road densities among Indian states. The villages are connected with all-weather metalled roads which are maintained by the Punjab State Marketing Board through a 4% tax levied on value of agricultural produce sold in the regulated markets. Going by the size of the state, it has an extensive network of national highways of 1720 km whose maintenance is funded by the Government of India. The state government maintains about 7000 km of roads which connect rural roads to national highways, link the major towns in the state and also provide inter-state links. It is also well connected to other states by trunk railway lines and has national and international air transport connections. Infrastructure is a great strength of the state’s economy. The weighted average of the electricity network, irrigation and road diversity puts Punjab at number one rank with an index of 238 in 1980-81 (Bardhan 1984). Even now, Punjab continues to occupy top position in these three critical infrastructure elements.

 

In the past, Punjab suffered the great disadvantage of being distant from ports. This, along with being a border state, was often seen as a major factor for its industrial backwardness (Johar and Khanna 1983). Today, however, this very disadvantage can be turned into a major advantage for Punjab. Currently the major share of trade between India and Pakistan is via Mumbai and Karachi or via third country destinations like Dubai. With better relations between India and Pakistan, the trade through the Wagah border has slowly opened up and both rail and road links have been improved. There has been considerable increase in people to people exchange, creating a congenial climate for more trade between the two countries via land routes.

At present the trade between the two countries is far below potential. In 2001 it was estimated that trade between India and Pakistan was only US$ 251 million against a potential of US$ 6570 million (Ghuman and Madan 2004). The formation of a South Asia Free Trade Area (SAFTA) is expected to remove several irritants and help increase trade flows through land routes many fold. The major trade flows to Pakistan and beyond would be via Punjab, placing the state in a position of advantage. This would require development of transport and logistics, giving additional boost to trade and industry in the state.

 

The disadvantage of being a border state and far away from the major ports would thus be converted into an advantage. A number of big export houses would invest in storage at or near the dry ports of Ludhiana and Amritsar. Similarly, many industrial houses are likely to invest in Special Economic Zones (SEZs), especially in industries based on export markets. The industry and business located in Punjab would save considerably on transport and storage costs on commodities for export to Pakistan and other Central Asian countries since the distance between Lahore and other major towns of Pakistan from Indian Punjab locations is far less than any other location in India.

The opening of trade via land routes and a peaceful border with Pakistan also has the potential for improving the investment climate for business and industry and creating a fresh market for surplus agricultural produce of Indian Punjab. The availability of new markets of Pakistan and Central Asian countries would not only attract capital from Delhi and elsewhere but help convert Punjab into a hub of industrial and commercial activities. Some of these changes are already visible and more are expected in the near future.

Every crisis creates challenges as also opportunities. The challenges are often obvious, but opportunities have to be explored. One opportunity is of altering the existing strategy of development. The slowdown in development process and stagnation of agriculture has thrown up new ideas in the state, suggesting alternative ways of government intervention to give new direction to the development process. One major view is for a strategy of corporatisation of the development process. These measures are, however, opposed by farmers’ organizations and certain political parties and groups, who advocate a strategy more suited to the requirements of a fast changing society and economy. There is a vibrant debate around agriculture, health, education, rural development, environment and sustainability of development process, and new policy initiatives are likely to emerge from the present crisis.

The threat to privatize public sector undertakings has already induced a visible change in the working of PSEB and agencies engaged in procurement and marketing of agricultural produce. There are many other changes on the anvil as well. The enterprising nature of population, international linkages, good infrastructure, high human development rank and present levels of development are the strengths of the state.

 

With regard to structural change Punjab has already gained a lead. Technically speaking, the state is no longer an agrarian economy. In terms of the state domestic product, the share of agriculture and allied activities came down from 59.32% in 1970-71 to 39.74% in 2000-01. The share of workforce engaged in agriculture (cultivators and agricultural labourers) declined from 62.57 in 1971 to 39.36% in 2001. Thus agriculture no longer occupies a prominent position either in generating income or in providing employment. If these trends continue, agriculture will further lose in the coming decades. On the basis of past trends, it is expected that by 2021 the share of agriculture in Punjab’s income and employment will diminish to about 25%. This decline will be matched by a rising share of income and employment in the manufacturing and service sectors of the economy. Industry and service sectors have boundless potentials of growth unconstrained by availability of natural resources like land, mines, forestry, and so on.

The trend towards manufacturing and service sectors has been accompanied by a rapid urbanization of the state. In 1971 the share of rural population in Punjab was 76.3% which declined to 66.05% in 2001. If the same trend continues, a majority of Punjab’s population would be living in urban areas after 2035. The data also reveals that although 66.05% of the total population resides in rural areas, a large number of them are not engaged in agriculture. Up to 1991, more than 75% of the rural population was engaged in agriculture. But the 2001 Census brought out that 46.50% of the rural population is now engaged in non-agriculture activities.

The rising importance of non-agricultural activity in the rural areas should give a further boost to urbanization, transforming big villages into small towns and towns into cities. With the expansion of urban conglomerates, persons engaged in manufacturing and service sectors but living in the rural areas will migrate to cities in search of a better quality of life. Ludhiana district is already urban in nature. Jalandhar and Amritsar districts will soon join Ludhiana with a majority of people living in urban areas.

 

In an otherwise progressive state, governance remains a major concern. In the period immediately after independence, Punjab was known for its development oriented administration. But the decade of 1980s transformed the administration into a law and order oriented one. This administration is not only lethargic but has acquired a rentier character with politicians and bureaucrats indulging in massive corruption, reflected in the poor level of state finances. Despite high per capita income, the state has been plagued with a severe fiscal imbalance for a decade and a half. The revenue and fiscal deficits are much higher than the all state average in India even as capital expenditure remains low. This has crippled the capacity of the government to intervene and rectify the difficulties and imbalances in the economy. Thus, for ensuring a smooth transition, the state requires improvement in finances, which cannot be achieved without improving administrative and political governance.

 

Although the educational achievements of Punjab are better than the all India average, they are still considerably lower than what has been achieved by some other high income states. Punjab is ranked at 16th position in literacy among the Indian states and union territories. The situation of rural education is particularly serious with many positions of teachers remaining vacant for decades. The rural population in 2001 was 66.05% of the total but the proportion of students from rural schools in the university campuses of the state was a mere 4.2% in 2005 (Ghuman et al. 2006). The dropout rates too at all levels of education are high. There has emerged a large gap in enrollment between the children from rich and poor households. The rural-urban differences in literacy rates and mean years of schooling are widening. At the same time, the gap between literacy rates among SC and non-SC population remains high. The quality of education for the poor students is dismal, especially in government schools in the rural areas.

The health scenario too reflects an area of serious concern. The state ranks 16th in gender empowerment and the sex ratio of 874 per 1000 male in 1991 declined to 793 per 1000 males in 2001, the second lowest in the country. With the collapse of publicly funded health services in the rural area, a large number of villagers are deprived of access to even primary public health care. The widespread drug menace is a further threat to the health of the people in the state. Another area of concern is the rapidly decline in groundwater resources due to excessive reliance on tubewells for irrigation. Finally, the over-use of land has deteriorated the quality of soil leading to fall in fertility requiring larger quantity of fertilizers to achieve the same yield levels.

 

All these concerns need immediate attention to reduce the pain of transition. True that the transition will take place whether the state intervenes in the situation or not, but is likely to be more painful in the absence of requisite correctives by government. One such indication is the growing incidence of farmer suicides in the wake of crippled viability of marginal and small holdings. This can result in violence by an impoverished peasantry leading to serious civil strife. The concerns of common people need to be addressed to avoid the painful nature of the economic transition. Fortunately, there is a demand from the rural population, especially unemployed youth, for making the necessary correctives. A functioning democracy is likely to put pressure on political leaders and the bureaucracy for effective, transparent and responsive governance. The signs are visible and provide hope for the state. An enterprising people, using multiple channels of mobilisation in a democratic system, will hopefully make our ruling elite responsive to the ground reality.

 

References:

Aiyer, K. Gopal and Mehar Singh Manick (2006), Indebtedness, Impoverishment and Suicides in Rural Punjab. India Publishers and Distributors, New Delhi.

Bardhan, Pranab (1984), Political Economy of Development in India. Oxford University Press, Delhi.

Chief Minister’s Advisory Committee (2002), Agriculture Policy and Restructuring, Agricultural Production Pattern Adjustment Programme in Punjab for Productivity and Growth: A Report. Government of Punjab, Chandigarh (Johl Committee II).

Dhaliwal, H.S. et al. (2004), Evaluation of Contract Farming Scheme in the Punjab State. (Mimeo), Department of Economics, PAU, Ludhiana.

Ghuman, R.S. and D.K. Madan (2004), ‘Indo-Pakistan Trade Cooperation and Two Punjabs.’ A paper presented at World Punjabi Conference, 1-3 December 2004, Punjabi University, Patiala.

Ghuman, R.S., et al. (2006), Rural Students in Universities of Punjab: An Exploratory Study. A project report submitted to Punjabi University, Patiala.

Gill, Anita and Lakhwinder Singh (2006) ‘Farmers’ Suicides and Response of Public Policy’, Economic and Political Weekly 41(26), 30 June.

Gill, Sucha Singh (2004), ‘Contract Farming Hurts Farmers: Area Under Wheat and Paddy Increases’, The Tribune, 27 September.

Gill, Sucha Singh (2005), ‘Economic Distress and Suicides in Rural Punjab’, Journal of Punjab Studies 12(2), Fall.

Government of Punjab (1986), Report of the Expert Committee on Diversification of Punjab Economy, Chandigarh (Johl Committee I).

Johar, R.S. and J.S. Khana (1983), Studies in Punjab Economy. Guru Nanak Dev University, Amritsar.

Lucas, R. E. Jr. (1988), ‘On the Mechanics of Development’, Journal of Monetary Economics 22 (I), July.

Romer, P.M. (1990), ‘Endogenous Technological Change’, Journal of Political Economy 98(5), October.

World Bank (2004), Resuming Punjab’s Prosperity: The Opportunities and Challenges Ahead. Poverty Reduction and Economic Management Sector Unit, South Asia Region.