What would the native people of Punjab, Kerala and West Bengal do if?
A very interesting question indeed. I like to visualize India as a union of various small nation state economies like the European Union with a common currency partly influenced by the insights of Ruchir Sharma the author of Breakout Nations. Regarding the question, the easiest way to reduce the deficit would be the standard economic practices used by other developing economies. Majorly, increasing the revenue or receipts to pay off the debt and decreasing and cutting fiscal spending to reduce the deficit. Taking into account the various unique traits inherent in the economies of the states based on their resources I can think of the following ways to do transform themselves into enriching economies in the longer run. Punjab The geography of Punjab provides it a very unique position. being called the Land of Five Rivers it has a very fertile and agriculture rich economy with a tremendous potential in agricultural surplus in dairy products, pulses and cereals. One can easily increase the productivity and turn the state into a major Agriculture exporting economy. In order to achieve it there is a need for increasing the required infrastructure in agriculture sector with a focus on improvement in backend infrastructure. Being, investment in improving the modernization of agricultural practices, seeds, fertilizers and infrastructure like cold storage, better connectivity, among other things. This would boost agriculture production and bring surplus revenues. Also, one can adopt the model of cooperative dairy model similar to the one in Gujarat to become a milk exporting nation state. At the same time, more energy can be produced with an investment in constructing damns and reaping Hydroelectric energy. The same energy can be exported to energy deficient nations like Pakistan and stimulating the revenues. However, all this can be done only in the longer run. For a quick immediate fix the alternatives remain a usage of Fiscal policy by increasing taxes and cutting expenditure. However, there can be a innovative approach used in laying these taxes down taking into account the diaspora of the economy of punjab. One can lay a tax such which do not affect the economy much (which is rather hard to achieve) like taxing more of the rich rural farmers by stimulating financial inclusion and integrating them to the financial system inorder to record their huge surpluses. Kerala The state of Kerala derives its power from being a potential knowledge economy because of its high literacy rates. It could turn its economy into a major service oriented economy raising big chunk of revenue to fund its deficits through reaping benefits of outsourcing like Philippines. Not to forget the potential income of foreign exchange by boosting revenues from tourism. There is a wide potential of increasing revenue from Health Tourism wherein a large population can be attracted towards treatment using herbal wisdom and turn it into a health rejuvenation hot-spot. Again these are long run solutions. West Bengal We all love the state for its deep roots in Art, Literature and vibrant culture. It is a state which has been ruled by Marxists for a very long time and its huge deficit comes as no surprise (Views are personal, no offence intended) because of the lack of discipline in spending and less focus towards revenue generation. Bengal also holds the key to turning itself into a knowledge economy. However, there are just immense amount of opportunities for making it a hub of industrial development. It has a unique feature of being a port state. The state can link itself with a wider international waterways and make a sizable amount of revenue through changing into a international level port city like Shanghai and establishing relation with other inland states to make use of the ports for exporting and importing their produce. Most importantly north eastern states will turnout to be a major trading partner in terms of logistical requirement for the export of Tea and Coffee among other products. More importantly there is a lot of potential for industrial development in the state. P.S: This has been an enriching exercise. Thanks for asking the question.