The financial crisis plaguing the northern state of Himachal Pradesh has been a growing concern as the state government finds itself in a situation where salaries for employees are being delayed, and plans for benefits and freebies are being reassessed. The state is grappling with a significant financial burden due to high expenditures on salaries, pensions, and subsidies, leading to a mounting debt burden that has been on the rise.
The fiscal challenges facing Himachal Pradesh were highlighted back in February this year when Chief Minister Sukhvinder Singh Sukhu presented the state Budget 2024-25, with concerns raised about the possibility of fiscal ratios being higher than initially estimated. The state had set a target fiscal deficit of 4.7% of GSDP for 2024-25, but the revised estimates for the previous fiscal year showed a fiscal deficit of 5.9% of GSDP, indicating a concerning trend of increasing deficits.
India Ratings and Research had previously warned that the fiscal ratios of Himachal Pradesh might surpass the budgeted figures for FY25, with the state's debt projected to reach 42.5% of GSDP, significantly higher than the indicative estimate provided by the 15th Finance Commission. The state's escalating fiscal challenges are exacerbated by its high committed expenditures, primarily driven by elevated debt levels resulting in substantial interest payments, high salaries, and pension costs due to the generous remuneration structure for government employees.