Mounting debt, limited revenue streams, and the withdrawal of the Revenue Deficit Grant (RDG) have pushed the Himachal Pradesh government into a tight fiscal corner. Chief Minister Sukhvinder Singh Sukhu appears to be responding to the crisis with a mix of austerity and political signalling — one that reflects both compulsion and calculation.
On March 17, a day before the Budget session began, Sukhu withdrew Cabinet rank from most of his political appointees, including advisors, and deferred 20% of their salaries for six months.
Projected as a cost-cutting measure, the move was widely read in bureaucratic and political circles as a precursor to tougher decisions. Four days later, while presenting the Budget, the CM went further, announcing staggered salary deferments across the administrative and political hierarchy: 3% for Class I and II employees, 30% for top bureaucrats, 20% for MLAs, 30% for ministers, and 50% for himself.
Notably, Class III and IV employees, along with pensioners, were kept outside the ambit, a distinction that has not gone unnoticed.
The Budget underscored the fiscal strain. With an outlay of Rs 54,928 crore, down from Rs 58,514 crore in the previous financial year, it marks a rare contraction, possibly the first instance in the state’s fiscal history of a shrinking Budget size. In his speech, Sukhu squarely blamed the Centre for discontinuing the RDG, estimated at nearly Rs 50,000 crore for the 2026-31 period, arguing that its withdrawal has pushed the hill state into an unprecedented financial squeeze.
“The total debt has almost reached Rs 1.04 lakh crore. This year, we will borrow around Rs 10,000 crore and repay approximately Rs 13,500 crore, including interest on previously taken loans,” Sukhu said.
Even as the government tightened its purse strings, it unveiled a series of welfare-oriented measures aimed at rural constituencies. Enhanced minimum support prices (MSPs) for grains, milk and wool, along with targeted schemes for fishermen and shepherds, signal a deliberate pivot towards strengthening the rural economy.
According to government sources, the strategy is layered: austerity projects fiscal responsibility, while the selective shielding of nearly 75% of the workforce, primarily Class III and IV employees, helps insulate the government from widespread backlash.
Local polls on Sukhu’s mind?
The timing of the measures too assumes significance with local body elections, originally due in January 2026, now expected in the coming months. Insiders suggest the rural-focused announcements are aimed at shaping the political narrative ahead of these grassroots polls, often seen as a barometer of public sentiment before larger electoral contests like Assembly polls.
“The move to defer salaries is calculative. Class I and II employees and top bureaucrats account for only about 22-24% of the workforce. Nearly 75% comprises Class III and IV employees in departments such as PWD, Rural Development, Forest, Jal Shakti and Horticulture, who have been kept out. The rural economy push is also linked to the upcoming panchayat elections, which will indicate the political mood.”
Opposition attacks, Congress concerns
The Opposition has launched a sharp attack on the Sukhu government on the issue. Leader of the Opposition Jai Ram Thakur, while supporting the decision to defer legislators’ salaries, termed the withdrawal of perks and deferments an “eyewash”, saying that such measures amount to “knocking on the doors of a financial emergency”. He also questioned the sustainability of the state’s fiscal roadmap, warning that temporary fixes could translate into long-term liabilities.
Senior BJP MLA Randhir Sharma was more measured, acknowledging the fiscal stress but calling the response “honest but directionless”. He cautioned against imposing additional taxes — such as entry tax or fuel cess — to bridge revenue gaps, and instead pointed to sectors like tourism, mining and forestry as potential engines of growth. “The state is in a tight financial situation. I will not say the efforts are not honest, but they are directionless. Unless unnecessary expenditure is curtailed, such steps will be ineffective. Revenue generation is necessary, but it should not come at the cost of burdening the public,” Sharma said.
Within the ruling Congress, there is also guarded concern. A senior party leader noted that the restoration of the Old Pension Scheme (OPS) was central to the party’s 2022 electoral success. “OPS was a key issue that brought Congress to power. With decisions like salary deferment, it remains to be seen how government employees respond in the 2027 Assembly elections,” the leader said.
For now, Sukhu’s approach reflects a tightrope walk — balancing fiscal discipline with electoral pragmatism. Whether this mix of austerity and targeted outreach stabilises the state’s finances without eroding political capital will become clearer as Himachal Pradesh heads into its next round of electoral tests.