Himachal Pradesh debt debate shifts to borrowing pace

The chief minister’s counterattack comes as Shimla loses the Revenue Deficit Grant, which he said had left a fiscal gap of Rs 8,000 crore to Rs 10,000 crore. That revenue shock has forced the state to reduce its 2026-27 budget size to Rs 54,928 crore from Rs 58,514 crore in 2025-26, underscoring how dependent smaller, hill states can be on central transfers. In practical terms, lower grants mean less fiscal flexibility, more pressure to borrow or cut spending, and a greater risk that development outlays get squeezed by interest costs and salaries.

Sukhu is also framing his administration as one that is trying to widen the revenue base rather than merely borrow more. He said reforms and anti-corruption measures have generated about Rs 4,000 crore in own-resource revenue, while legal wins involving Wild Flower Hall, Chharabra, JSW’s hydroelectric project and Kishau Dam are intended to bolster state income and reduce leakages. If those gains prove durable, they could help stabilize debt dynamics over time; if they prove one-off or contested, the state will remain vulnerable to grant cuts and cyclical pressure.

For the BJP, the political risk is that the debt debate becomes less about a total stock of liabilities and more about the trajectory of borrowing under a weakened transfer regime. For Sukhu, the upside is that a lower-borrowing narrative can resonate with voters if it is paired with visible service improvements, including healthcare staffing and diagnostics that he says are already reducing the outflow of patients spending around Rs 1,000 crore outside the state on treatment. But the fiscal challenge remains substantial: with grants down, expenditure needs rising and revenue gains still limited, Himachal’s ability to avoid a sharper squeeze will depend on whether its new revenue measures outpace the loss of federal support.