The study was conducted with a view to confirm any shrinkage in allocation of budgetary resources in Punjab and its possible impact on the agricultural progress. The balance between the central and state schemes for agriculture had also been studied. The study was largely based on secondary data collected from Statistical Abstracts of Punjab, CMIE Reports; Annual Reports of the State Agricultural Department and State Planning Board, etc. In State, the farm household income could grow barely at 1.21% annually during the 1990s after growing tremendously at 8-9% per annum during the 1970s and 1980s. The GSDP had increased significantly at around 4-5 per cent per annum after 1985-86. Such growth was comparatively much less as compared to the national average after the post-reform period. Further, there had been structural shifts in the composition of GSDP over time, with the share of primary sector declining from 45.73 per cent in 1985-86 to 31.24 per cent in 2006-07. A view of the trends in growth of GSDP in agriculture and allied sub-sectors confirms the slow down occurring during the post-reform period. The Punjab agriculture was struggling hard to sustain its high productivity with almost no signs of further improvement by intensifying the input use. Total budgetary expenditure in Punjab increased by more than three times from Rs. 3210.87 crore during 1985-86 to 11088.94 crore during 2006-07. Such increasing trends was largely driven by the trend in budgetary expenditure on revenue account which increased at the compound growth rate of more than 6 percent per annum and reached from Rs. 2604.58 crore during 1985-86 to Rs.9470.05 crore during 2006-07. The expenditure on capital account did not follow a clear trend. Entirely different picture emerged when we looked at the trends in expenditure on agriculture in the state during this period ie almost stagnant real expenditure on agriculture (at 1993-94 prices). Out of 22 years of the study, the expenditure on capital account became negative during eight years. At constant prices, the expenditure could register a compound annual growth of 1.8 per cent only. While there was almost no increase in the real expenditure during the pre-reform period, the post reform period increase was also around 1.5 per cent per annum. The proportional allocation to agriculture in the budgetary allocations had also declined significantly over time. The proportion of expenditure on agriculture in expenditure on economic services fluctuated widely between as high as 29 per cent to as low as 8.77 per cent finally being around 12 per cent during 2006-07. However, its share in budgetary expenditure declined continuously from 9.95 per cent during 1985-86 to mere 2.45 per cent during 2006-07. Further, the share of agriculture in NSDP always remained below one percent (except two years) and declined further with time. While the share was 1.41 per cent in 1985-86, it has further shrunk to just 0.49 per cent. A total of 32 centrally sponsored schemes were operational during the period of study in the state. The amount actually released in these schemes was much below the outlay and ranged between as low as 11 per cent during 2005-06 to as high as 55 per cent during 2006-07. The actual expenditure incurred under these schemes for the development of agriculture in the state was very low (around 10 per cent of the outlay approved) till 2005-06, though it jumped to around 45 per cent and 75 per cent during 2006-07 and 2007-08, respectively. These trends highlight the problem of very small proportions being released and expended for the agricultural development in Punjab. Though some schemes worked well and benefitted a significant proportion of Punjab farmers, there were many schemes which could not garner any allocation in recent times, thereby denying the intended benefits to the farming community and slowing down the pace of growth and reforms in agriculture. The state sponsored schemes appeared to haddone better than the centrally sponsored schemes in Punjab. Increased expenditure on these schemes will give a significant push to the growth of agriculture sector in Punjab, not only benefitting the state farmers but will also help in accelerating national agricultural growth and achieving the food security objective of the country. It comes out clearly that the agriculture expenditure had a strong relationship with the production of major grain crops such as rice and wheat and that of fruits over the period 1985-86 to 2006-07. Further, the agricultural expenditure had also been positively and strongly correlated with the net state domestic product. Such a relationship with the production and NSDP points towards two things; one, state expenditure on agriculture had a strong positive impact on the agricultural development in the state by increased agricultural production and second, keeping in mind the over time decline in such expenditure in absolute as well as proportionate terms (as per cent of NSDP), there is need to expand such expenditure to increase the growth in agriculture sector. In the last about one decade, the crisis in agriculture sector in the state is deepening with the costs rising much faster than the returns in the absence of any considerable jump in crop productivity, thereby adversely impacting the income of the farmers. The relationship between per capita income and the expenditure on agriculture has turned out to be negative during this period. While, the relationship was positive during the pre-reform period, it was weakly negative during the post-reform period. Interpretation of such a relationship just on the basis of correlation coefficient is not easy. Though, the per capita income had increased over time and increased relatively faster during the post- reform period, there was no corresponding increase in the budgetary expenditure on agriculture. This perhaps points towards non-inclusive growth during this period, which had largely been shared by the resource rich, non-agricultural sector and the urban population. In the presence of crisis like situation in Punjab agriculture with almost stagnant productivity levels, rising costs, falling profitability and declining capacity in absorbing the rural labor force, this negative relationship points towards the fact that more efforts need to be done to address the livelihood issues of relative poor population who is still more dependent on agricultural than any other sector of the economy.