Sukhu Planning Himachal Budget 2025 Amidst Dim Financial Prospects
CM Sukhvinder Singh Sukhu
Shimla, March 15: All eyes are at Himachal Pradesh government as it prepares to present consistent annual budget for upcoming financial year on March 17. The Congress government, which came to power in December 2022, will present its third budget in the state assembly to be tabled by finance portfolio holding chief minister Sukhvinder Singh Sukhu. In a critical change, the budget that was originally set for a 2 p.m presentation can now move to 11 a.m.
The budget for this year is projected to be over Rs 60,000 crore, in a tough financial climate, compared to Rs 58,000 crore inherited from the 2024-25 fiscal year and Rs 53,000 crore from 2023-24. Given that the government is under rising financial pressure following a growth in debt and a collapse in sources of revenue, this budget will be key for the state.
Fiscal health continues to be a major challenge for Himachal Pradesh. With the debt of the state becoming so alarming and revenues having been few, balancing the budget and making sure the economy of the state is sound, is no small task. Considering the government that is expected to improve people’s lives through fiscal measures, this budget would be a test of Chief Minister Sukhu’s finance management skills as well as his promise to ensure the people get relief.
Economic Challenges and the Budget Deficit
Himachal’s economy has long depended on three major sources of income — handouts from the central government, tax revenue and different types of fees. But in recent years, the state has been facing a steep cut in central assistance, which has added to its financial misery. The lapse of GST compensation and share of the state in central transfers have posed a huge challenge for the state’s finances, making the coming budget even more crucial.
Himachal Pradesh has already sought to meet its financial obligations of Rs 19,000 crore in the current fiscal year. To continue this heavy borrowing has resulted in an ever-increasing debt burden which has now reached an unsustainable level. Tax revenue, including excise duty, stamp duty, mining, and power generation, stood around Rs 19,000 crore in the last fiscal year, according to government data. However, central assistance has largely been decreasing and the substantial remaining revenue comprised different forms of such assistance.
For example, the central government provided revenue deficit grant assistance of Rs 10,249 crore to Himachal Pradesh in 2020-21. But by the 2024-25 FY, this amount had been reduced to Rs 6,258 crore. This assistance, too, is likely to be reduced further from this to only Rs 3,257 crore in the year 2025-26. The drastic decrease in central assistance puts additional strain on the state’s finances, and calls for prudent actions to enhance the state’s revenue generation ability.
Current efforts to control the fiscal deficit
In light of these financial limitations, the Himachal government is said to be plotting to eliminate waste and avoid overspending. To contain the fiscal deficit, the government could try to improve current schemes instead of announcing new ones. They say that the focus will be on making government spending more efficient in this budget, including proper execution of ongoing programs aimed at infrastructure development, health, education, and social welfare.
Rather than launching new big initiatives, the government is expected to do more to improve existing projects. Instilling such rigor will enable scrutiny about outcomes and efficacy of funds spent, triggering tangible enhancements over diverse sectors.
A Budget Within Reach of Tax-Free
This has been a signature of the fiscal policy of the hilly state in Himachal Pradesh for last three decades as this has been presenting a tax free budget for the past three decades. Like previous years, Chief Minister Sukhu is also likely to announce a tax-free budget this time. But with the state coffers almost empty, Sukhu has already hinted at the possibility of hard decisions given the state’s financial crisis. Some are hopeful that the Chief Minister will announce some economic reforms or fiscal measures to arrest deterioration of the state’s financial outlook over the longer term.
In keeping with the tradition of a tax-free budget, the Chief Minister is expected to focus on innovative ways to boost the state’s revenues, either by broadening the tax base or improving tax collection mechanisms. As overwhelming debt and fiscal pressures continue in Himachal Pradesh, Sukhu’s leadership will be under scrutiny as he seeks to steer the state out of these monetary challenges.
Public Expectations Vs Election Promises
The one key takeaway readers of the upcoming budget will have is how the government proposes to meet the Congress party’s election guarantees to the public made as part of the 2022 election campaign. Addressing these key issues of Himachal Pradesh the government employees, farmers, tourism sector businesses and the jobless Youth promises were made by people in the government. The government claims to have already accomplished six of these promises, while the other guarantees have turned into a point of public demands.
The Chief Minister Sukhu will announce major announcements regarding the remaining election guarantees in the budget session. Government employees, farmers, tourism entrepreneurs and job seekers eagerly await relief measures in the budget. State revenues have long relied on sectors like agriculture, tourism and government services to generate economic growth, and unemployment relief measures aimed at these groups would likely help the local economy directly.
Sectors including tourism, a key industry for the state, are struggling amid both global and local pressures. Many businesses particularly in the area of tourism have been challenged with lack of business as economic conditions remain uncertain and inflation and other external factors linger on. Chief Minister Sukhu could announce funds to improve tourism related infrastructure or give incentives to revive this key sector.
A Balancing Act
For Chief Minister Sukhu, the budget will thus be a test of his government’s mettle to balance economic pragmatism with the political commitments it made during the election. His decisions will define the future of the state’s fiscal policy and will be observed closely by both the public and the opposition parties.
The state now faces twin challenges of debt escalation and dwindling central assistance and would be interesting to watch the experiment that catapults its innovative solution to the problem of its own making. And simply looking ahead, in all the immediate cash the budget will not just support the current results but will also put it in the long run future economic stability.
The bottom line is that the new budget will be financially tight, but it also provides CM Sukhu with an opportunity to prove his ability to lead through the challenges ahead. It will be interesting to see how the government will prioritize its spending, make amends to what was promised and, above all, pursue a path of sustainable growth under the new fiscal regime as the state grapples with its economic challenges.
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