Himachal Pradesh, which appeared somewhat insulated from the effects of the global economic slowdown given the special concessions to industry, has started showing the first signs of trouble.
Similarly, Haryana, which had registered healthy growth in the gross state domestic product (GSDP), is also slowing down. Its growth rate dipped to less than 9% in 2008-09 from previous year?s 15%.
On its part, Punjab has sought from Prime Minister Manmohan Singh provision for additional funds and the relaxation of borrowing ceilings under the fiscal responsibility and budget management (FRBM) rules.
Naresh Gulati, chairman of Oceanic Consultants, told FE that while he was hoping that the slowdown would not hit the education and health sectors, the number of students visiting other countries for higher studies has come down drastically. In other words, the slowdown is beginning to have an effect on all sectors.
Enquiries by FE from the Himachal Pradesh excise and taxation department reveals that the hill state has started feeling the impact of global meltdown with VAT collections and central sales tax down by Rs 76 crore in 2009. The VAT collections registered a growth of 14%, a good 3% lower than the projected figures.
A major cause of worry for Himachal is the sharp decline in central sales tax collections, by 26%. The total VAT collections by March 2009 stood at Rs 1,860 crore. Against a target of Rs 1,976 crore, VAT collections for the current financial year fell short by Rs 100 crore.
According to the excise department sources, while no sector has been left unaffected, the textile sector has been the worst hit, followed by the pharmaceutical industry. As the bulk of the products manufactured in the state are supplied to other states, the huge decline of 26% in central sales tax collections points towards an industry slipping into real crisis.
Neighbouring Haryana has projected its GSDP at current prices at Rs 2,12,910 crore in 2009-10. The state logged only 9.3% growth in real terms this year, compared to 14.2% last year. The growth in the primary sector has come down to 1%, adversely affecting the overall growth of GSDP. State finance minister Birender Singh told FE that the impact of falling growth in the farm sector on GSDP could be substantiated given that about two third of state?s population still depends on agriculture for their livelihood.
?The first thing we need to do to fight recession is to increase public spending to create demand and help the economy to revive,? said Singh. He added that the state, by virtue of its good financial management, would be able to see through the difficult period.