Despite being under a debt of nearly Rs 1 lakh crore, Himachal Pradesh can still turn the tables and boost its revenue if it amends its financial policies and strategies.
Nestled in the Himalayan region and facing significant geographical and financial challenges, the state’s economy is largely driven by agriculture, hydropower, tourism and pharmaceuticals.
Strategic reforms in recent years have further boosted its economic performance. With an ambitious goal to become self-reliant by 2027 and India’s most prosperous state by 2032, Himachal Pradesh is leveraging its unique geography and resources to make a substantial contribution to the national GDP.
Following are the main economic factors concerning Himachal:
- Agriculture and horticulture: Agriculture employs 57% of the state’s workforce, significantly higher than the national average of 45%. The state is a leader in horticulture, particularly apple production, earning the title “Apple Capital of India”.
- Tourism: It accounts for 7.78% of the state’s GSDP, driven by the state’s scenic Himalayan landscapes, cultural heritage and some prime hill stations of the country. Domestic tourist arrivals surged to 18.124 million in 2024, a count that is increasing day by day.
- Hydropower: Himachal Pradesh’s rivers and mountainous terrain make it a hydropower hub, with a total installed power generation capacity of 4,561.63 MW as of August 2024.
- Pharmaceuticals and other industry: The state is a major pharmaceutical hub, meeting 35% of Asia’s pharmaceutical demand. Solan district has emerged as the pharmaceutical hub of India.
- Economic growth and contribution: Himachal Pradesh’s GSDP for 2024-25 is estimated at Rs 2.32 trillion.
While Himachal Pradesh’s economy is relatively small as compared to larger states, its specialised sectors such as horticulture, tourism and pharmaceuticals punch above its weight.
Himachal Pradesh can increase its revenue contribution to India’s GDP by leveraging its unique strengths and addressing challenges through strategic initiatives. Its focus on sustainable development, ranking second nationally in SDG progress, ensures long-term contributions to India’s GDP.
Here are the key strategies, grounded in its economic profile and potential:
- Improve tourism infrastructure and boost promotion:
- Focus on eco-tourism and adventure tourism: Invest in sustainable tourism models like eco-friendly resorts and adventure sports. Promote lesser-known destinations like Tirthan Valley, Spiti and Chamba to decongest popular sites like Shimla and Manali.
- Improve connectivity: Accelerate the pace of building projects such as the Rs 1,546.4-crore Shimla Urban Transport Ropeway and the proposed Mandi Greenfield Airport to boost tourist footfall throughout the year.
- Digital marketing and cultural events: Promote Himachal’s cultural festivals and heritage sites globally through digital campaigns on various social media platforms. Working of dedicated tourism app like Himatithi and many more for seamless travel planning and extension of the tourist season beyond summer and winter peaks could increase annual revenue.
2.Expand horticulture and agro-processing sectors:
- Value-added products: Invest in processing units for apples, kiwis and off-season vegetables to produce juices, jams and dried fruits.
- Cold storage and supply chains mechanisms: Expand cold storage facilities and improve logistics to reduce post-harvest losses.
- Organic farming: Promote organic certification for crops like ginger and potatoes as agro-processing and exports could add higher values to the national GDP.
3.Level up hydropower and renewable energy:
- Hydropower expansion: With fast-track pending projects like the 1,800 MW Koldam expansion to attract private investment can generate both revenue and local employment. Full utilisation of the state’s 25,000 MW hydropower potential could contribute ₹10,000 crore annually to national revenues.
- Solar and wind energy: Leverage hilly terrains for small-scale wind farms and expand solar projects, offer incentives for rooftop solar in rural areas.
- Green energy exports: Supply surplus power to neighbouring states like Punjab and Haryana, generating revenue through inter-state tariffs.
4.Strengthen pharmaceutical and industrial sectors:
- Pharma hub expansion: Baddi can attract more global firms with tax incentives and faster land approvals.
- Special economic zones: Develop new SEZs for electronics and green manufacturing through subsidies for tech upgrades and multinational companies.
- Skill development: Partner with industries to train youth in pharma, IT and manufacturing, reducing unemployment and boosting productivity.
5.Promote IT and startup ecosystem:
- IT hubs in smaller cities: Develop IT parks in towns like Shahpur, capitalising on low operational costs and high quality of life. IT sector alone has the capacity to generate Rs 1,000-1,500 crore in five-six years with targeted investments.
- Remote work infrastructure: Market Himachal as a remote work destination with co-working spaces and high-speed internet, attracting digital community.
- Startup incubators: Support startups in agri-tech, tourism and clean energy through venture capital funds.
6.Enhance education and skill-based revenue:
- Educational tourism programmes: Promote Himachal’s universities, colleges and boarding schools to attract students from other states and abroad as other countries with similar landscape do. Educational services could contribute Rs 500-1,000 crore annually with focused development.
- Vocational training: Expand skill centres for tourism, horticulture and renewable energy, aligning with the state’s economic needs.
7.Address challenges to maximise revenue generation:
- Geographical constraints: Invest in all-weather roads and tunnels to improve access for the tourists and investors to reach every corner of the state.
- Climate resilience: Implement climate-smart agriculture and disaster-resistant infrastructure in districts like Shimla, Kullu, Kangra and Kinnaur to mitigate risks from landslides and floods.
- Policy support: Streamline land acquisition for industries and simplify licensing to attract FDI.
With these strategies and the support from central government through various schemes, Himachal Pradesh’s GSDP (₹2.32 trillion in 2024-25) could grow at 10-12% annually, outpacing the national average. And surprisingly by 2030, the state would not only become financially independent but also contribute an additional Rs 20,000 crore to Rs 30,000 crore to India’s GDP through tourism, industry, and energy, while creating 5-7 lakh jobs. But all that’s needed in meticulous planning and financial discipline.
Shrey Awasthi
