• Dr. Vikram Chaudhary

The Modi government’s ‘corporate-centric’ economic policies, centralization tendencies, and unfair revenue-sharing approach have left states like Madhya Pradesh financially weak wrapped in debts. Without autonomous fiscal policy and a fair share of resources, states’ development paths have become ‘debt-dependent’, while large capitalist groups remain ‘profit-dependent’ through government policy.

The indebtedness of many states under the Modi regime is not only a political failure but also a weakening of the federal spirit of the Constitution. Part XI (Articles 245 to 263) of the Indian Constitution defines centre-state relations, emphasizing cooperative federalism. The Finance Commission, constituted under Article 280, recommends a fair share of taxes (currently 41 percent) to the states, but the NDA government has been lax in following this. Prime Minister Narendra Modi attempted to significantly cut state funds through ‘backdoor negotiations’ with the Finance Commission, an affront to the constitutional process.

Article 256 of the Constitution empowers the central government to issue directives to states, but it cannot be used as a tool to withhold financial assistance. The NPA and loan waivers are a separate scandal, with corporate houses holding a significant portion of the ₹14 lakh crore of NPAs in public sector banks. The Modi government wrote off a significant portion of these loans in the name of ‘balance sheet correction’.Was any state given such assistance or grants or was a farmer’s loan waiver even considered?

The above analysis reveals how the Modi regime has proven to be an economic emergency for most states. This accusation becomes even more compelling if we assess the economic situation of Madhya Pradesh in this context. The Madhya Pradesh government has borrowed a total of approximately ₹3.1 lakh crore in new debt over the past 10 years (from financial year 2015-16 to 2024-25). This figure is calculated based on the state’s total outstanding liabilities, obtained from the Reserve Bank of India (RBI) and state budget documents. Total outstanding debt has increased from approximately ₹1 lakh crore in 2015 to over ₹4.3 lakh crore by 2025.

The Digvijay Singh government was in power in Madhya Pradesh from 1993 to 2003. During this period, the state’s debt gradually increased, but due to the economic conditions at the time and the central-state financial system, the debt level was much lower than it is today. Based on available data, in 2003, when Digvijay Singh’s government ended, Madhya Pradesh’s total outstanding debt was approximately ₹34,000 crore. More loans are now being borrowed each year than during the Congress governments.

Analyzing the economic situation of Madhya Pradesh, data from the past two decades clearly shows that central government policies directly impact the state’s financial health, debt dependence, and growth. During the United Progressive Alliance (UPA) government (2004-2014) led by Dr. Manmohan Singh, Madhya Pradesh received substantial grants and financial assistance from the center, which kept the state’s debt burden under control. However, under the National Democratic Alliance (NDA) government (2014-present) led by Shri Narendra Modi, the lack of expected support from the center has made the state more debt-dependent.

The table below shows the new borrowings in each financial year.

Financial Year New Borrowing (Rs. Crore) Major Source/Note 2015-16 20,000 Total outstanding reached ₹1,00,000 crore. For development projects. 2016-17 22,500 Focus on infrastructure and subsidies. 2017-18 25,000 Total outstanding ₹1,50,000 crore. 2018-19 28,000 Impact of election schemes. 2019-20 30,000 Pre-COVID-19 figures Total outstanding ₹2,00,000 crore. 2020-21 35,000 Additional borrowing for pandemic relief. 2021-22 38,000 Total outstanding ₹2,50,000 crore, limited to 3 percent of DSDP. 2022-23 40,000 Increase in budget expenditure. 2023-24 44,000 Monthly expenditure on Ladli Behna Yojana ₹19,200 crore. Total outstanding ₹3,31,000 crore to ₹3,75,000 crore. 2024-25 64,000 (Estimated) ₹47,000 crore borrowed so far. • ₹Total outstanding more than ₹4,30,000 crore • ₹Total new borrowing ₹3,46,500 crore (average ₹34,650 crore per year).

UPA Era (2004-2014): Strong Central Support and Controlled Debt Growth: During the Congress-led UPA governments, Madhya Pradesh’s economy benefited from liberal central policies, without any political bias. During this period, central grants and assistance increased significantly, helping the state to implement its development plans without excessive debt. For example:

Level of Central Funding: During the ten years of the UPA regime, financial assistance from the Center to the states increased by an average of 20-25 percent annually, with special attention given to developing states like Madhya Pradesh. Through MGNREGA, the Right to Education, and other welfare schemes, the Center provided substantial funding for rural development and infrastructure. In Madhya Pradesh, these schemes increased rural employment and agricultural productivity, reducing the need for the state government to borrow.

Debt Growth Rate: The state’s total outstanding debt was approximately ₹34,000 crore in 2003, rising to ₹91,000 crore by 2013—an increase of approximately ₹57,000 crore over ten years (an average of ₹5,700 crore per year). This growth was controlled by central assistance under the UPA. The debt-to-GSDP ratio declined from 39.5 percent in 2005 to approximately 25-28 percent by 2014, as GSDP grew at an average annual rate of 7-8 percent. Economic Impact: This collaboration had a positive impact on job creation in Madhya Pradesh. During the UPA era, 2.9 crore jobs were created nationally, with Madhya Pradesh contributing significantly, especially in agriculture and rural areas. Investment also increased as central government policies continued to attract foreign and domestic investors. Manufacturing units recorded slow but steady growth, especially in small and medium-sized enterprises.

The NDA Era and the Modi Era (2014-2025): Central Neglect and Increasing Debt Dependence

The situation in Madhya Pradesh changed after the NDA government came to power in 2014. Grants and assistance from the center did not increase as expected, forcing the state government to rely more on market borrowing for development projects. This neglect is linked to several factors, including centralized policies and reduced share for states. Decline in Central Grants: States’ share of central financial assistance declined to an average of 15-20 percent during the NDA regime, compared to a higher share under the UPA. States like Madhya Pradesh faced delays or reductions in GST compensation and other grants, impacting state subsidy schemes (such as Ladli Behna). As a result, borrowing rates increased. Debt Growth Rate and GSDP Imbalance: From 2014 to 2025, the state’s debt increased from ₹91,000 crore to approximately ₹4.3 lakh crore—an increase of approximately ₹3.39 lakh crore in eleven years (an average of ₹30,800 crore per year, five times higher than the UPA). The debt-to-GSDP ratio increased from 25 percent in 2014 to 33.7 percent by 2025, indicating an imbalance. GSDP growth averaged 6-7 percent under the NDA, but the rapid debt growth increased the burden on interest payments (₹22,000 crore in 2025).

Year Total outstanding debt (₹ crore) Loan taken (approx.) Key Notes 2003 20,000 37,000 The end of the Digvijay Singh government and the beginning of the Shivraj government. 2013 91,000 57,000 (2003-13 Total) Rapid growth over ten years; focus on infrastructure and agriculture schemes. 2016 1,17,000 26,000 (Average per year) GSDP’s debt ratio reaches 25%; the beginning of the fiscal crisis. 2018 1,72,000 55,000 (2016-18) Election spending increased before the Kamal Nath government. 2020 2,33,000 61,000 (2018-20) COVID-19 relief; Shivraj’s return. 2022 2,73,000 40,000 (2021-22) Impact of schemes like Ladli Behna. 2023 3,85,000 44,000 (2022-23) 2023 an election year; total debt exceeds the budget; burden per citizen is ₹41,000.

Total new debt (2003-2023): Rs 3.51 lakh crore (average Rs. 17,550 crore per year). Key Facts - Debt Growth: From ₹34,000 crore in 2003 to ₹3.85 lakh crore by 2023 (an 11-fold increase). Interest payments cost ₹20,000-22,000 crore per year.

Economic Impact: Lack of central assistance impacted employment generation in Madhya Pradesh. Compared to national employment growth, this benefit was limited due to lower state-specific investment. Recent investment summits attracted proposals worth ₹26 lakh crore, but actual investment (especially FDI) remained lower than during the UPA era, as central policies prioritized larger states. Madhya Pradesh was consistently neglected. Manufacturing unit growth has also been slow—the manufacturing sector is projected to contribute only 8 percent of India’s total by 2025, compared to lower industrial polarization under the UPA. This has led to increased unemployment and deepened economic inequality in the state.

During the era of Dr. Manmohan Singh, the support of the UPA central government gave Madhya Pradesh stable growth, whereas the neglect under the NDA led to a debt cycle, which led to GSDP imbalance, low employment generation, lack of investment, and stagnation in production units.

The Indian Constitution is a living embodiment of the federal structure, where the balance of power, resources, and responsibilities between the center and the states is the foundation not only of political stability but also of economic prosperity. The Finance Commission constituted under Article 280, the limit on state borrowing under Article 293, and the principle of equality under Article 14 all advocate fiscal discipline and governance, free from political bias. However, the central government led by Shri Narendra Modi has trampled these constitutional values under political vendetta, partisan financial distribution, and hollow nationalist rhetoric. Madhya Pradesh is a glaring example of this—where central neglect has pushed the state into a debt quagmire, crippling employment, investment, and industrialization. This policy of the NDA government is politically divisive and constitutionally inconsistent, endangering India’s federal structure. Strict adherence to the Finance Commission’s recommendations, the active involvement of the Inter-State Council, and non-discriminatory budget allocation are essential to ensure transparent and equitable financial assistance to the states. Otherwise, this will not only hinder the economic progress of the states but also affect national integration. The opposition, civil society organizations, and the intelligentsia must unite and continue to strongly criticize this on civic, social, and parliamentary platforms.

(The author is a spokesperson for the Madhya Pradesh Congress Committee.)