To wash or not to wash ... it depends on the materials you want to combine.
If you want to stitch a cotton yarn onto a cotton fabric, both react very similar to being washed: they shrink by roughly 5% in length (in extreme cases up to 10%). If you want to stitch a different yarn (maybe silk, acrylic or wool) they might react very different to the same treament. You should factor these changes into the planning of your embroidery project.
In embroidery, each individual stitch is relatively short. It shouldn't be much of a difference if the fabric shrinks by 5% but the yarn doesn't. It will be a little loose and incorporated objects like beads might pull strands looser than others. But overall the finished piece should still look alright.
If, on the other hand, the yarn shrinks more than the fabric, the result will be very unshapely. A stitched border might curl or pull in areas. Big motifs in the center of the fabric will pull areas together and deform the whole fabric. The more stitching there is on the fabric, the stronger this deformation gets.
As a rule of thumb, I suggest using a yarn that does not shrink. If you're not sure how much your yarn and fabric shrink, cut a small piece of fabric off, embroider a small motif on it, then measure it's size before and after washing and see if it deforms.
You should see the efford for the preparations in relation to the effort for the actual execution. If embroidering takes several weeks, maybe months, saving a single day for testing the shrinkage of your fabric and yarn can have catastrophal consequences after all these weeks. For something as work-intense as a phulkari, I would go out of my way and pre-wash the fabric and (if possible) the yarn as well.