Shimla: Chief Minister Sukhwinder Singh Sukhu called Himachal Pradesh’s “most difficult financial year”, his Congress -led government is charting a new course. In a budget of 58,514-crores of rupees for 2025-26, it was unveiled on Monday, Sukhu avoided the general populist free, which has stressed the state’s finance. Instead, he focused on strengthening the rural economy while managing rising debt burden and demolition of central grants.
Out of the total budget of this year, 67 percent has been prescribed for salary, pension, interest payment and loan repayment, which is leaving limited funds for development.
The state budget for 2025-26 is Rs 58,514 crore, which marks a slight increase of Rs 70 crore from Rs 58,444 crore for the previous financial year. It also comes as the state assembly, in its current session, approved a supplementary budget of Rs 17,053.87 crore to meet the additional financial needs of 2024–25.
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Sukhu’s blueprint is a reality, with the opposition of the Bharatiya Janata Party (BJP) in its crosshare for the alleged fiscal mismanagement – Himachal’s finances are uncertain, and difficult options lie further.
According to the budget document, the debt of the state has increased to Rs 1,04,729 crore. Out of this, Rs 29,046 crore has been borrowed in 2 years since Sukhu took over. However, he said that 70 percent of these funds were used by the previous BJP government to pay loans and interest.
“We are paying for their mistakes,” CM told the state assembly.
The state’s loan-to-GSDP (GDP) ratio, which was 39.29 percent in 2020-21, has continued to projection upwards, reaching 42.5 percent in 2024–25. Meanwhile, its per capita loan is now Rs 1,17,000.
This fiscal reconsideration comes as a revenue deficit grant (RDG) from the Central Government – an important lifeline for Himachal – to decrease.
Under the fourteenth Finance Commission (2015-20), the state received Rs 40,624 crore, which was an average of Rs 8,000 crore annually. But the fifteenth Finance Commission (2021-26) dropped it to Rs 37,199 crore-when inflation is faced in inflation as part of its overall recommendation to reduce such grants to all states.
The decline has been stable: Rs 10,949 crore in 2021-22 to Rs 9,377 crore in 2022-23, Rs 8,058 crore in 2023-24 and only Rs 6,258 crore this year. For 2025-26, it declines by Rs 3,257 crore in 4 years-70 percent fall in 4 years.
“In my view, the year, 2025–2026, will be the most challenging year for the economy of our state in the last several decades,” Sukhu warned.
Out of every 100 rupees, they go to a salary of Rs 25, Rs 20 for pension, Rs 12 for interest payment, and Rs 10 for loan repayment. This leaves just 24 rupees for everything – including capital work, infrastructure and development. Important capital expenditure for development has eliminated a fraction of revenue expenditure. In 2021-22, it was Rs 5,200 crore against the revenue expenditure of Rs 34,500 crore-1: 6.6 ratio that makes progress.
Meanwhile, revenue expenditure has increased, 23 percent for salary, 17 percent for pension, and 3 percent for subsidy in 2023-24 alone, and this year reached the top of Rs 40,000 crore. The fiscal deficit at 5.76 percent of GSDP is doubled from the compulsory 3 percent limit by the fiscal responsibility Act.
Sukhu’s approach indicates a change away from the freebi-fuel policies of the past. Gon blanket handouts are-free electricity from hundreds of crores, or Rs 4,500 crore monsoon relief package of Rs 2023, or Rs 1.3 lakh for a fully damaged house. Instead, he announced an increase of a slight rupee in the minimum support price (MSP) for milk, with MSP growing from Rs 45 to Rs 51 per liter for cow’s milk, and Buffalo is growing from Rs 55 to Rs 61 for milk. This is important for rural farmers, who have innovation in polyhouses and micro-deals, contributing to a project 8.8. 2,27,162 crores this year.
Former CM Jeram Thakur told the print, “The easiest thing is to blame others.
“For the first time, budget size has not increased in the state,” he said.
Himachal’s debt realities
Facing the financial obstacles of the state, the Congress government has fulfilled its promise of 1,500 monthly assistance for all women, selecting a phased rollout in the 2025-26 budget. Between January 1, 2025, and 31 March, 2026, it turned 21, as well as working in others’ homes by June 1, 2025 – along with her eligible daughters, will get Rs 1,500 per month under “Indira Gandhi Pyari Behna Sukhana Sukh Saman Nidhana”.
The state’s own revenue streams give some relief. An estimated tax collection of Rs 12,500 crore for 2024-25 has been stable at 5-6 percent of GSDP-weakened to shrink the central fund or make up to compensate for curbing the growing loan. Meanwhile, borrows are being used for survival rather than development.
In 2021-22, 72 percent of Rs 8,650 crore was used for revenue expenses in the loan for revenue expenses, while the loan servicing consumed 25 percent of the total receipts, of which interest payment was for 13 percent alone.
The state-run enterprises reduced the problem, with a shortage of Rs 1,800 crore to the Electricity Board and Rs 1,700 crore as well as the resources that could have funded roads or power plants.
Sukhu convicted the BJP, alleging that the state was accused of imposing burden on loans that now disrupt their administration. However, the crisis moves darker than partisan politics, stems from a decade out of a decade.
Himachal’s natural property – Hydropower of more than 10,000 MW, attracts millions of tourism Shimla and Manali, 68 percent of their land’s spreading forests – can be a fiscal gold mine. Nevertheless, royalty remains short-lived from hydropower, tourism taxes are trivial, and forest revenue from wood, resin and eco-tourism is barely registered.
A senior finance officer said on the condition of anonymity, “We have trusted the grant instead of creating our strength.” “Now, the well is running dry.”
CM Sukhu bare the state’s debt realities, emphasizing the need for transparency in a cash-faced state. He said that fiscal rules reduce the decrease of 3.5 percent of GSDP in 2024-25 and 3 percent in 2025-26, with the central government borrowing up to Rs 6,551 crore this year under constitutional boundaries. More than this roof more than next year’s allowance, and no loan can be taken without the node of New Delhi. Sukhu inherited a loan of Rs 76,185 crore from BJP by March 2023, which was spent at Rs 12,266 crore on interest and was Rs 8,087 crore on repayment – whose development was only Rs 8,693 crore worth Rs 29,046 crore under his watch. “Seventy percent of our debt is just the old dues,” he said.
The Chief Minister vowed to pledge to rally to suppress the central government for justice to the people, employees, and the assembly for justice. “My government is committed to facing this challenge simultaneously,” he announced that whatever he sees as an inappropriate deduction in RDG indicates a united stance against it. But with the fall of up to Rs 3,257 crore next year, obstacles are challenging. Analysts have warned of a loan trap: when 25 percent of revenue repeats old loans and 72 percent new people cover the ongoing cost, development stalls. The CAG can soon hit the liabilities of the prediction to kill Rs 1 lakh crore, a tipping point for a small, nature-individual economy.
“Revenue expenses should be reduced-free power for poor, freeze hiring, and improvement bleeding state enterprises. Rs 18,000 crore.
(Edited by Zininia Ru Chaudhary)
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