#Elections2017: Punjab’s Populist Policies Lead To Economic Slowdown, Rising Joblessness
The growth of its industries, services and overall economy is 5.9%, which lags the national average of 7.6%, the unemployment rate among its youth is 16.6% while the Indian average is 10.2%, and while literacy is rising, the education system
[ClickPress, Tue Jan 31 2017] The growth of its industries, services and overall economy is 5.9%, which lags the
national average of 7.6%, the unemployment rate among its youth is 16.6% while the
Indian average is 10.2%, and while literacy is rising, the education system is
faltering with the dropout rate increasing from 1.3% in 2014-15 to 3.1% in 2015-16 for
the primary level.
It is against this economic backdrop that 19.74 million (roughly equal to the
population of Romania) voters in India’s 11th-richest state, Punjab, will vote on
February 4, 2017, to choose a new government in a state where the Shiromani Akali
Dal-Bharatiya Janata Party alliance has held sway for a decade, riding on populist
policies that appear to have cut money for education and public investment without
adequately addressing farm distress.
In 2014-15, Punjab had a per capita income of Rs 96,638, 22% less than neighbouring
Haryana’s Rs 124,092.
Punjab’s per capita income nearly tripled, from Rs 33,103 in 2004-05 to Rs 96,638 in
2014-15, while Haryana’s more than tripled, from Rs 37,972 in 2004-05 to Rs 120,492 in
The per capita income for Punjab will likely increase 5% to Rs 101,498 in 2015-16,
according to advance estimates, but this rise does not reflect a host of economic
Farm growth betters national average for first time in five years, but problems abound
Although Punjab is likely to have recorded a higher agricultural growth rate in 2015-
16 than the national agricultural growth rate for the first time since 2010, average
farm sizes are falling–from 3.9 hectares to 3.7 hectares over five years from 2005-06
to 2010-11, according to 2010-11 Agricultural Census data, the latest available–farm
growth has slowed, and many youth are no longer interested in farming, as this 2016
study in the Asia Pacific Journal of Research observed.
The rate of agriculture growth declined over nine years, from 0.95% in 2005-06 to (-)
3.40% in 2014-15, according to Punjab government data.
Lack of research and development and the inability to exploit irrigation facilities
and boost yields are issues that lead to agriculture to grow slower than it could,
according to the Economic Survey 2015-16 of Punjab. Water is an emerging issue: Of 142
groundwater blocks in Punjab, 110 are over-exploited, IndiaSpend reported in March
The declining agricultural growth has had a severe impact on the 6.3 million people of
the working population that are engaged in agriculture, according to the 2011 Census.
This has led to increasing farmer suicides. Punjab reported India’s third-highest
number of farmer suicides at 449 in 2015, according to a written reply given by the
Lok Sabha in 2016.
Services and industry should, normally, absorb those who move out of agriculture, and
while that is happening in Punjab, it doesn’t appear to be happening at the required
Services growing, but not enough jobs–or jobs that youth want
The services sector is growing, but it does not appear to be enough to provide enough
jobs–or jobs that the state’s educated youth, particularly in rural areas, want or are
Employment in the services sector increased from 36.7% in 2012-13 to 39% in 2015-16.
During the same period, employment in the primary sector fell from 37.6% to 34.2%
according to this reply to the Rajya Sabha on December 14, 2016.
Over seven million workers in the state are engaged in the services sector, according
to the Census 2011 data.
“Due to lack of technical skills, the rural youth face hardships to compete with the
urban ones… To fulfill their aspirations they choose the way to settle abroad which is
major trend among Punjabi rural youth,” said the Asia Pacific Journal of Research
study quoted earlier.
Punjab’s economy is expected to have grown 5.9% for the year 2015-16, according to the
Economic Survey of Punjab, 2015-16, compared to India’s growth rate of 7.6%,
apparently inadequate to generate enough jobs. The estimated growth rates for the
secondary (industrial and allied activities) and tertiary (services) sectors are
likely to be lower than the national average for the year 2015-16.
Increasing subsidies–and hence a shortage of money for government investment–have been
cited as a key reason for Punjab’s declining growth rate, according to this 2012
commentary by the CATO Institute, an American think tank based in Washington DC.
Populist policies, such as free electricity to farmers and cash handouts to lower-
caste married women, could also be responsible for slowdowns, the Wall Street Journal
reported in May 2011.
Inflated land prices due to restrictive laws, neglect of higher education due to
emphasis on agriculture, investment rates below the national average since the 1990s
and corruption are other reasons for slow industrial growth in Punjab, according to
this 2012 paper by the CATO Institute.
Punjab’s industrial sector also suffered due to tax breaks given by New Delhi to
establish factories in the hilly states of Uttarakhand and Himachal Pradesh, leading
to a flight of industrial capital, the paper said.
Even if this capital stayed in Punjab, it does not appear that the state’s education
system can supply the human resources it needs.
The neglect of primary education, and Punjab’s drop-out problem
Punjab’s education data hide more than they reveal: Literacy and the general education
budget rose, but spending on primary education and incentives to retain students in
school were cut, leading to the primary school dropout rate doubling in one year.
Female literacy rate increased 11 percentage points from 70.7% in 2011 to 81.4% in
2015-16, according to data from the National Family Health Survey-4. The male literacy
rate saw a slower growth of 7 percentage points, from 80.44% in 2011 to 87.5% in 2015
But the average annual dropout rate at the primary level increased, from 1.3% in 2014
-15 to 3.1% in 2015-16, according to District Information for System Education data,
explaining why the rising literacy rate may not be enough to prepare young Punjabis
for industrial and service-sector jobs.
The funding cut to incentives could be a reason why students drop out: Over 50,000
students in 32 government-aided schools were not being served mid-day meals, NDTV
reported in September 2016. Funding for the mid-day meal programme, often cited as an
incentive to keep students in schools, was cut from Rs 277 crore in 2015-16 to Rs 250
crore in 2016-17.
Lack of classrooms, over-congestion of present ones and unavailability of basic
electricity or drinking water are some reasons as to why students dropped out or cut
classes, the Indian Express reported in May 2016.
While the budget for general education (excluding technical education) increased
15.6%, from Rs 1,820.8 crore in 2015-16 to Rs 2,106.5 crore in 2016-17, funding for
the the Sarva Shiksha Abhiyan, a central government programme for universal education,
was cut by nearly 15%, from Rs 890 crore in 2015-16 to Rs 750 crore in 2016-17.
The government is trying to address the dropout issue by introducing “smart
classrooms”– classrooms that foster teaching through computers, assistive listening
devices and audio-visual devices with specialised software that will enable the
children to study in an internet-free environment–Hindustan Times reported in December
2016. The aim of these classrooms is to encourage children who love to watch
television to enrol in schools and learn from a similar medium.
Punjab’s education crisis appears to partly manifest itself in rural unemployment.
There may not be as many jobs as young Punjabis need, but many youth, as we said, may
not be adequately trained for the available jobs.
Rural youth unemployment rate seven percentage points higher than national average
Punjab has India’s eighth-highest rural youth unemployment rate, which is higher than
the national average for both rural and urban areas. The youth employment rate refers
to the proportion of youth (ages 18-29) labour force that is unemployed.
Increasing mechanisation of agriculture and the lack of required skills to work in
information technology firms have left Punjab’s rural educated youth in a limbo,
according to this 2014 paper by the Economic and Political Weekly.
The state’s failure to provide employment opportunities and its focus on agriculture
has also contributed to the growing unemployment situation, Mint reported in June
(Salve is an analyst with IndiaSpend. Nair, a graduate in economics and statistics
from Mumbai University, is an intern with IndiaSpend.)