If you visit some of the villages in the districts of Hamirpur, Kangra and Una in Himachal Pradesh, you will find a large section of women participating in local panchayat sabhas. Many of them are widows. Their husbands sacrificed their lives for safeguarding the interests of the country while serving the armed forces in different parts of the country. This defines the valiance of the Himachalis, a state which stands at a crossroads today. The Revenue Deficit Grant (RDG) which provided for a fiscal stimulus to a border state has been abolished. The state of Himachal Pradesh has been in a state of uneasy calm since the Union budget and the 16th Finance Commission report was placed in the parliament on February 1, 2026. The commission recommended the abolition of the RDG, which the state has received since independence in one form or the other. Himachal Pradesh, along with 13 other states, could be robbed of its legitimate right with this move. Political parties, except the Bharatiya Janata Party (BJP), protested and even substantiated the logic for continuing the RDG as the political and administrative identity of the state will be affected due to this fiscal contraction. For Himachal Pradesh, RDG comprised nearly 25% of the revenue receipts. Thus, a quarter of the fiscal space shall be lost. An abrupt loss of such an amount will hit the state severely. It is estimated that for the period 2026-30, a total of nearly Rs 50,000 crore would have been allocated to the state as RDG.The Congress-led state government passed a resolution demanding the continuation of RDG in a special session of the Vidhan Sabha. The resolution was opposed by the BJP, which also walked out from an all-party meeting on the matter.Meanwhile, the BJP leadership separately met the Union finance minister where it did not mention the RDG.RDG is a constitutional rightThe finance commission recognised early that some states, despite prudent governance, would struggle to meet routine expenditure because of structural disadvantages. RDGs were therefore designed to fill the gap between what a state earns and what it must spend to run essential public services – salaries of teachers and nurses, pensions, healthcare, education, and maintenance of basic infrastructure.This mechanism acknowledged that equality of citizenship cannot exist without some degree of equality in state capacity.For Himalayan states, RDG became particularly significant. Mountain geography raises the cost of every public service. Building a school in a remote valley, maintaining roads vulnerable to landslides, staffing health centres in snow-bound regions, and ensuring administrative outreach to scattered settlements – all require expenditure far beyond what limited local revenue sources can sustain.Thus, RDG was never a charity. It was a constitutional recognition that geography should not decide the dignity of public life.Himachal’s trade offsWith the nationalisation of forests in the 1980s and most of the state’s ability to generate fiscal strength in both the secondary and tertiary sectors of the economy in private hands, there were limited areas in which the Himalayan state could carve out its independent path of revenue generation. Protecting the ecology and providing ecological services not just to the people of the state but also to neighbouring states meant that the RDG was a trade-off, helping to provide some buffer space. Likewise, refraining from cutting trees in forests – not only for commercial purposes but even for the state’s own needs – was a loss that had to be compensated by the Centre.Impact of RDG’s abolitionThe economic impact is easy to estimate: withdrawal of subsidies on water, education, health etc will lead to vacant posts in different departments that will not be filled owing to the resource crunch, thus impacting their quality. However, the social impact will be more profound. With gradual erosion of governance, the state may as well face a situation similar to neighbouring Uttarakhand which is defined by out migration and ghost villages.There is a call that the union government has to take. Whether they want to treat Himalayas from an extractive peripheral appendage or want the mountains and their ecology to blossom.Tikender Singh Panwar is the former deputy mayor of Shimla, and currently a member of the Kerala Urban Commission.Raja Awasthi is a senior journalist. Disclaimer: He is also currently the media adviser to the Himachal Pradesh chief minister in Delhi.