Amid the ongoing economic challenges in the hilly state, Himachal Pradesh’s fiscal deficit for 2025-26 is projected to reach 4.74 per cent of the state’s gross state domestic product (GSDP), the Fiscal Responsibility and Budget Management (FRBM) report tabled in the state assembly showed.
A fiscal deficit means the government is spending more than it earns, and the gap must be filled through borrowing. When this gap grows, it signals rising financial pressure, leaving the state with less flexibility to invest in development and more of its future income committed to repaying debt and interest.
The report said the fiscal deficit in the current year is expected to rise to Rs 12,114 crore, compared with the budgeted Rs 10,337.97 crore, driven by higher spending and lower receipts. The widening gap has been linked to the impact of natural disasters, committed expenditures and a reduction in Goods and Services Tax (GST) rates, according to the report.
Experts have recommended raising non-tax revenue and securing a larger share from centrally sponsored schemes and externally aided projects to ease fiscal pressure. Salary and pension outlays are estimated at Rs 13,837.36 crore and Rs 10,820 crore, while spending on subsidies and interest payments is projected to exceed earlier estimates by Rs 1,088 crore and Rs 6,738.35 crore, respectively.
Revenue receipts are expected to fall short by Rs 1,726 crore, with actual collections seen at Rs 14,374 crore against the budgeted Rs 16,101.10 crore, the report added.
A Fragile Himalayan Economy
Himachal’s economy, already struggling under the weight of soaring public debt, is now reeling from the devastating impact of this year’s monsoon. Landslides, flash floods, and incessant rains have paralysed mobility, disrupted trade, and battered critical sectors like tourism, agriculture, and small businesses, the very backbone of the hill state’s economy.
According to economists, the cascading impact on livelihoods, with small traders, transporters, and daily wage workers bearing the brunt. As reconstruction and relief efforts gather pace, questions loom over the long-term economic cost and the need for climate-resilient infrastructure in the hill state.
The hill state's economic turmoil is not a new one, as it has been facing high debt issues for many years. The state’s debt-to-GSDP ratio has ballooned to nearly 40 per cent, well above the recommended ceiling of 20 per cent for hill states. Servicing this debt leaves little room for emergency spending, forcing the government to rely on further borrowing for relief and rebuilding. The economic cost of last year’s monsoon disaster was pegged at Rs 8,000 crore. This year’s damages, though early to estimate, could rival or exceed that figure.
In June this year, the central government sanctioned Rs 2,006.40 crore in financial assistance to Himachal Pradesh for recovery and reconstruction efforts following the devastating floods, landslides, and cloudbursts that battered the state during the 2023 monsoon season. |
