Haryana has outpaced Punjab in terms of economic growth, per capita income, and share of India’s GDP, according to a paper released by the Economic Advisory Council to the Prime Minister (EAC-PM).
Once considered behind Punjab, Haryana now shows a more robust economic performance, surpassing its neighbouring state. The paper titled “Relative Economic Performance of Indian States: 1960-61 to 2023-24,” authored by Sanjeev Sanyal and Aakanksha Arora, highlights this shift, noting Haryana’s strong growth trajectory, particularly after economic liberalisation.
In 2023-24, Haryana's per capita income reached 176.8% of the national average, while Punjab’s stands at 106.7%. This significant gap marks a clear divergence in the economic paths of the two states, which were once a part of the same entity before being bifurcated in 1966.
Both states benefited from the Green Revolution in the 1960s, which initially boosted their economies, particularly through agriculture. However, over time, Punjab's progress slowed, while Haryana began to excel in terms of industrialization and overall economic development.
The paper points out that Punjab’s per capita income peaked in 1970-71, reaching 169% of the national average, but has since seen a steady decline. By 2023-24, its relative income dropped to 106.7%.
In contrast, Haryana's per capita income started rising significantly after the economic reforms in the 1990s. By 2023-24, Haryana had the fourth-highest per capita income among major Indian states, trailing only Delhi, Telangana, and Karnataka.
Haryana’s success has been attributed in part to the rapid development of cities like Gurugram, which has become a major hub for industries and multinational corporations.
The state's proximity to the National Capital Region (NCR) has also played a vital role in its economic expansion, particularly in sectors like real estate, finance, and services.
Punjab, on the other hand, struggled with the aftermath of militancy in the 1980s and 1990s, which stunted its economic growth. Additionally, the state’s focus on agriculture, without diversification into other sectors, has been a limiting factor.
The paper raises an interesting economic question: Did Punjab’s emphasis on agriculture contribute to what economists call "Dutch disease"? This term refers to a phenomenon where an overreliance on one sector, such as agriculture, hampers the growth of other sectors like industry and services.
Punjab’s slow transition from an agrarian economy to a more diversified industrial and service-based economy may have hindered its overall economic growth. In contrast, Haryana capitalised on industrialization, particularly in urban areas, which helped it emerge as an economic powerhouse.
The GDP share of both states also reflects this changing dynamic. In 1960-61, Punjab accounted for 3.2% of India’s GDP, while Haryana stood at 1.9%. By 1970-71, Punjab’s share rose to 4.4%, while Haryana’s was at 2.7%.
However, over the next few decades, Punjab’s share began to decline, falling to 2.4% in 2023-24. Meanwhile, Haryana’s share grew to 3.6%, a clear indication of its upward economic trajectory.
Experts have weighed in on the factors behind this divergence. According to officials from Punjab, Haryana's better financial performance can be attributed to its proximity to the NCR and the boom in real estate, which attracted significant investments.
Punjab, on the other hand, has struggled with a heavy debt burden, partly due to the economic impact of militancy and the focus on security spending over economic diversification.
Professor Kesar Singh Bhangoo, an economist from Punjabi University, argues that Punjab is paying the price for its continued reliance on agriculture. He emphasised that the state has not made efforts to diversify its economy, nor has it introduced policies to attract industrial investments.
Prof. Bhangoo advocates for a bailout package of Rs 20,000 crore annually for the next 10 years to revive Punjab’s economy. He believes that the state's focus on providing freebies, rather than implementing long-term economic reforms, has drained its financial resources.
Prof. Bhangoo also criticised successive governments for prioritising short-term political gains over sustainable economic policies. He pointed out that while governments focus on security and recruit police personnel, they have neglected essential sectors like education and healthcare, further hindering the state’s overall development.
The economic divergence between Haryana and Punjab is a striking example of how policy decisions and strategic focus can shape the long-term growth of states. While Haryana embraced industrialization and capitalised on its geographic advantage, Punjab’s continued focus on agriculture without diversification has left it trailing behind.
The contrasting fortunes of these two neighbouring states highlight the importance of adapting to changing economic conditions and ensuring balanced development across sectors.
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