Navigating fiscal constraints to drive sustainable growth

Himachal Pradesh's annual budget, presented on Monday by chief minister Sukhvinder Singh Sukhu, reflects a balancing act between fiscal prudence and ambitious plans for tourism, green energy, and rural development.

- KS Tomar

It also underlines the financial challenges that the hill state faces amid dwindling central grants and mounting debt burden.

To mitigate this crisis, economists recommend a three-pronged strategy. First, revenue generation needs a major boost through enhanced tax compliance, rationalisation of subsidies, and monetisation of state assets. Second, Himachal Pradesh will do well to leverage its vast natural resources by aggressively advocating for financial recognition of its ecological contributions, estimated at ₹90,000 crore annually. Additionally, expanding tourism, particularly eco-tourism and religious tourism, can bring in sustainable revenue, while promoting green energy projects to attract private investment. Lastly, the government needs to facilitate private sector participation in infrastructure projects through public-private partnerships (PPP), reducing the reliance on state funds.

Rationalising expenditure On the expenditure side, a rationalisation of government spending is essential. Pension reforms, restructuring of public sector undertakings (PSUs), and prioritising high-impact capital investments over revenue expenditures can help improve fiscal stability. In addition, the state should seek renegotiation of central grants and explore special financial packages to bridge the fiscal gap. With a strategic mix of revenue-enhancing and expenditure-reducing measures, Himachal Pradesh can navigate its financial challenges and create a sustainable economic model.