||Black and White Digital News||

||Tejveer Singh November 05, 2024||

JAMMU/KASHMIR: Jammu and Kashmir’s fiscal health has reached a critical juncture, with the fiscal deficit ballooning to Rs 13,122 crore in 2023-24. This figure, breaching the Fiscal Responsibility and Budget Management (FRBM) Act’s 3% limit, now stands at a worrying 5.36% of the Gross State Domestic Product (GSDP). The mounting public debt, totaling over Rs 1.12 lakh crore, raises concerns over the Union Territory’s fiscal sustainability. While officials remain hopeful for 2024-25 due to expected central support, financial analysts caution about the deepening debt crisis and the need for prudent expenditure management.

Detailed Analysis:

In a sobering revelation, Jammu and Kashmir has reported a fiscal deficit of Rs 13,122 crore for the 2023-24 financial year, breaching the FRBM Act’s prescribed ceiling of 3% and escalating to 5.36% of the GSDP. The FRBM Act, passed in 2003 by the Indian Parliament, was introduced as a regulatory framework to manage public finances more effectively, reduce the fiscal deficit, and promote fiscal discipline. However, J&K’s current fiscal data indicates an alarming drift from these fiscal prudence goals.

While a senior official from the Finance Department expressed optimism regarding the fiscal year 2024-25, they acknowledged that the projected containment of the deficit within the FRBM threshold is primarily contingent on increased central grants. “The fiscal deficit, including Annual Resource Mobilisation (ARM) for 2024-25, is expected to drop to 3% of GSDP, down from 5.36% in the revised estimates of 2023-24,” said the official, hinting at the significant role central transfers will play in maintaining fiscal stability.

Enhanced support from the center has been instrumental in managing the fiscal strain, as highlighted by the finance department. “The deficit, which had been higher in previous years, has been brought closer to the FRBM threshold due to enhanced central support,” reiterated the finance official, emphasizing the critical reliance on external financial assistance.

The Debt Dilemma:

Despite the optimism surrounding the upcoming fiscal year, Jammu and Kashmir’s total liabilities reached Rs 1,12,797 crore in 2022-23, underscoring a staggering rise in public debt. Internal liabilities make up a significant portion, accounting for Rs 68,786 crore, with an additional Rs 831 crore in central loans. Provident, pension, and insurance fund obligations add another Rs 43,180 crore, highlighting the pressing nature of J&K’s long-term financial obligations.

The debt situation has intensified dramatically over the last decade, with the debt burden tripling from Rs 29,972 crore in 2010-11 to a daunting Rs 1,01,462 crore by 2021-22, before hitting the current Rs 1,12,797 crore. The debt-to-GSDP ratio, projected to reach 51% for the fiscal year 2024-25, has triggered concerns about the Union Territory’s long-term fiscal sustainability and debt serviceability.

Financial analysts warn that while borrowing helps fund essential services and infrastructure, excessive debt without a proportionate revenue increase could compromise fiscal flexibility, making it challenging to manage future financial shocks.

Revenue and Expenditure Outlook for 2024-25:

The Gross State Domestic Product (GSDP) for Jammu and Kashmir is forecasted to grow by 7.5% to Rs 2.63 lakh crore for 2024-25, which offers a glimmer of hope for economic recovery. The overall budget size is estimated at Rs 1.18 lakh crore, a substantial increase of Rs 30,889 crore compared to 2023-24. Revenue receipts are projected at Rs 98,719 crore, while capital receipts are estimated to contribute Rs 19,671 crore.

On the expenditure side, revenue spending is anticipated to reach Rs 81,486 crore, reflecting the costs of maintaining administrative, social, and economic services. Capital expenditure dedicated to developmental projects is estimated at Rs 36,904 crore, marking a significant commitment to building long-term infrastructure despite fiscal constraints.

Sectoral Allocations and Taxation Goals:

The breakdown of sectoral allocations, as reported by Lieutenant Governor Manoj Sinha in July, illustrates the priorities set forth for 2024-25. The administrative sector is slated to receive Rs 9,881.68 crore, while the social sector allocation stands at Rs 24,870.50 crore, aiming to bolster healthcare, education, and social welfare programs. Infrastructure, receiving Rs 15,719.40 crore, and the economic sector with Rs 5,555.48 crore are also expected to drive economic growth and productivity.

In addition to these allocations, the administration has placed a stronger emphasis on improving tax revenues. The projected tax-to-GDP ratio of 7.92% marks a notable rise from the previous year’s 5.68%, reflecting the administration’s push to broaden the tax base and improve collection efficiencies. This increase, however, must be carefully balanced to avoid excessive burden on businesses and citizens already grappling with rising living costs.

Future Challenges and the Path Ahead:

As J&K braces for a fiscally challenging future, the stakes are high to achieve a balance between funding essential services and maintaining fiscal responsibility. While the anticipated central support offers temporary respite, sustainable long-term solutions must involve prudent expenditure management, strengthening local revenue bases, and targeted fiscal reforms. The Union Territory must navigate these challenges to mitigate fiscal vulnerabilities and ensure stable economic growth in the years to come.