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J&K’s Budget 2022-23: Facts, Hopes, Apprehensions

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As the budget preparation for the year 2022-23 is going on in Jammu and Kashmir, the stakeholders expect the upcoming budget to pave a way for some initiatives that eventually could help to stabilize the economy of the Union Territory (UT) which has been grappling with a constant growth in the unemployment rate and peaking inflation for quite some time.

J&K’s budget would be passed by the parliament in February, along with the Union Budget for 2022-23. This would be the third budget passed by the parliament, since the state of Jammu and Kashmir was downgraded to a UT on August 5, 2019.

During the process of preparation of the budget, the UT authorities had pre-budget consultations with the stakeholders — representative of trade, travel, and industry — recently. As many as 12 delegations of Trade, Commerce and Industries sectors from Jammu and the same number of delegations from the Valley had online discussions with Atal Dulloo, Additional Chief Secretary and Financial Commissioner (Finance Department) last month.

What are the wishes and expectations of the stakeholders from the budget for 2022-23 and what are the hopes and apprehensions of the economic analysts about the upcoming budget? To know this, KASHMIR IMAGES spoke with some of them. Here are the excerpts:

 

Haseeb Drabu
Economist, former finance minister of Jammu and Kashmir

First and foremost, one must understand that J&K, in present circumstances, does not have the kind of budget that it earlier used to have.

Earlier, the government would prepare the budget after having consultation meetings with all the stakeholders while keeping its economic policies under consideration. Then the budget used to be presented in the legislative assembly where the stakeholders would discuss it before approving it.

The budget essentially is a political document which reflects the priorities of the government. For instance, when I would present the budget (as a finance minister in erstwhile J&K state), the vital idea used to be a developmental strategy. First, we would assess the availability of our resources; and the prospect of raising these resources further; and what we could get from the outside. After all the assessment, we would present a comprehensive and full fiscal account with a definitive policy of the government.

However, in the given circumstance the current government would present the budget that basically would be an annual account, as the demand for grants from the Home Ministry. It is no longer an independent budget in the sense of a policy document. There is not going to be any policy formulation in this budget. It is only an AFS (Annual Finance Statement) that will be presented. Given the fact that it is no longer a budget but a demand for grants from the Union Home Ministry, it will not have the same incisive approach that a real budget would have. You cannot expect the government to have a focused approach to J&K only.

 

Mir Shahid Kamali
President, Federation Chamber of Industries, Kashmir (FCIK)

As far as our expectations from UT’s upcoming budget are concerned, we wish the new budget provides sufficient scope for the strengthening, revamping, and reviewing of the existing industry.

This is a known fact that the industrialists in the Valley are under high debt, and even most of the units face an existential threat. Our industry is facing this situation due to reasons which were beyond our control. For instance, we met huge losses due to the 2014 floods, followed by the civil unrest in 2016. Then, we saw continuous lockdown post August 5 in 2019. And, now are grappling with the losses caused by the pandemic.

Keeping the pathetic condition of our industry in mind, the FCIK has given a number of suggestions to the government in the pre-budget meeting. For example, we have requested ‘marketing support’ from the government.  Everyone knows that all incentives to the industry have been withdrawn, over the years, making the industry non-competitive. Thus, we have asked the government to come up with a robust local purchase policy for local industry in UT. Also, we have demanded 100% SGST reimbursement to the industries so as to make them competitive with the outside market.

Further, the FCIK has asked for a 100% waiver on demand charges on PDD bills for those units who are under stress, sick, and are not able to restart their units. These units should be made to pay only actual energy consumed charges. Also, we have requested a robust package of insurance in collaboration with insurance companies to provide insurance against the losses.

Furthermore, we have requested that all the incentives provided in Rs 28400 Crore new Central Industrial Scheme be made applicable to the existing MSMEs through the separate allocation of budgetary allocation.

In the pre-budget meeting, we have tried to take up all the issues with the government. I hope our concerns are addressed and the problems solved. And I hope signs of some robust initiatives in favour of industry in Kashmir would reflect in the upcoming budget.

 

Bashir Kongposh
General Secretary Kashmir Traders & Manufacturers Federation (KTMF); Kashmir Economic Alliance (KEA)

A group of KTMF & KEA leaders had an online meeting regarding pre-budget consultations on November 25. During the discussions, we ensured all the issues and problems that traders in Kashmir have been facing for the past few years are brought to the notice of the authorities. Also, we grabbed the opportunity to put forward our requests and demands to the government. For instance, we demanded a general amnesty to the traders for pending VAT (Value-Added Tax) liabilities; a single-window clearance system for granting permissions to the new prospect entrepreneurs; some relief for the transporters; development of new tourist places, which are already put on the tourist map; and developing new parking facilities in Srinagar’s downtown and at district headquarters across the Valley.

In the meeting, we tried to explain all the issues and problems that traders in Valley are facing. We were assured that our suggestions would be taken into consideration while preparing the budget for the next financial year.

 

 

 

 

 

Sheikh Ashiq Ahmad
President, Kashmir Chamber of Commerce and Industry (KCCI)

Last month, the KCCI put forward some suggestions for the consideration of the government in view of the preparation of budget for the year 2022-23. These detailed and sector-wise suggestions can help the revival and development of the overall economy of the UT, if implemented properly. It is sad to say that a lot has been said and written about the revival of economy but least has been done practically. Government has been weak in terms of implementing the suggestions made by the stake holders, and even its own promises. That is why we have suggested that as a first step, the threads should be picked up from the previous budget, and announcements made therein regarding trade, commerce, and industry be acted upon urgently.

We have requested the government to finalize the financial package that was promised by the government after the 2016 unrest.  At that time state (erstwhile) government, for giving a suitable financial package to the Kashmir’s trade and industry, had taken up the matter with the Central Government and the Reserve Bank of India. We had been told that package will be granted soon. However, more than five years down the line, nothing has moved.

Meanwhile, we have requested the government to provide soft loans to all business sectors for the revival and rehabilitation of businesses. Also, we have suggested a number of things for the revival and promotion of the tourism industry in Kashmir.

For the handicraft sector, we have demanded the government to implement its own promise about setting up Carpet Villages in Kashmir.

In October this year, the Union Minister for the Textiles, Industries & Commerce, during his visit to Srinagar had announced setting up of Carpet Village as a demonstration centre of the local craft to visiting tourists and also to promote the local Carpet Industry globally. We want an implementation of this announcement as soon as possible. Also, we have suggested declaring Sumbal, Sonawari as a Model Carpet Village because there are more than twenty thousand artisans living in this place.

Furthermore, we have requested the government to exempt all handmade items such as Pashmina Shawls, Carpets, Papier Machie, Crewel, Chain Stitch, and Wood Carving from the GST. Also, we have requested market assistance for the piled up stocks and budgetary support for trade fairs and promotion of products manufactured or processed in Jammu & Kashmir across major cities of the world.

We have also put forward some suggestions for the agriculture, horticulture, floriculture, poultry sectors and as well as the general trade. Let us hope that the upcoming budget would help to pave the way for the implementation of these suggestions.

 

Ejaz Ayoub
(Economic Analyst)

Since the authority to decide on taxes stands surrendered by the states to the GST council in 2017, state/UT budgets are mostly limited to deciding on the spending and borrowing program.

The downgrading of J&K from a state to a UT and an absence of a legislative assembly has added another politically disadvantageous layer to it. As a result, the annual budget for J&K, which is now drafted by politically disconnected bureaucrats and approved remotely in New Delhi, has lost its political-economic significance regionally. Even under this limited scope, the annual budget does play an important role in our economy where government spending is still the biggest precursor to the economic output.

The last few financial years have witnessed a substantial deviation from the budgeted estimates and the actual figures, reflecting the turbulent macro-economic environment in the region and the inability of the policymakers to forecast accurately. The ongoing budget (2020 – 21) also might end up with less developmental spending because of the UT’s all-time high debt servicing costs, lower-than-expected GST collections, and choked grants from the Union Govt. The UT government has already indicated its claustrophobic financial elbowroom by announcing austerity measures recently.

The government seems to have fallen woefully short in the capital expenditures to ensure developmental growth in J&K, which it had promised in the previous budgets. Promising people the stars and the moon in every budget has become a norm here. Every time the government calls its budget a ‘historic’ one. But the facts on the ground tell us a different story. For instance, we still have the same tertiary care hospitals that existed thirty years ago. Nothing has changed. And, there is no visible infrastructure development in the sectors like health, mobility, and education. Sadly, the government has stopped publishing economic survey reports, which would help us gauge the economic trends here. The practice has been stopped since 2017. However, the realities on the ground speak louder than any survey report.

When we talk about our annual budget, we must understand that J&K has been grappling with some chronic drawbacks and structural flaws, hindering the expected growth. For instance, a large share of our budget goes to paying the salaries and pensions of our government employees. J&K has the highest government employees-to-population ratio in all states of India. In the 1.09 lakh crore budget of 2020 – 21, Rs 39000 crore went to paying salaries and pensions. As if it was not enough, J&K has to spend a large share i.e around 12% of the budget for the law and order compared to only 6% of all India average (for the last 5 years). Our proportionate average expenditure on law and order is second highest after Nagaland.

These extraordinary expenditures leave us with a little amount for the purpose of development (capital expenditure). Then, to fill the gap, the government borrows the money! And, then a large chunk of money goes for the repayments and debt servicing. For example, in the financial year of 2020 – 21, our outstanding liabilities crossed Rs. 83,000 crore. The piled-up outstanding debt, again, is higher than any other state of India, if we proportionate it with our GDP and the budget size. On an average, more than 42% of the revenue receipts in GoJK’s annual budget are consumed in debt servicing and repayments. All India average for all the states combined for previous 5 Financial Years is only 23%. This is how costly J&K’s debt is getting and how this leads to shrinking elbow room for the already starved developmental expenditure.

That said, I would say that the government should keep growing inflation and unemployment under consideration while presenting the new budget. Since J&K has recorded the highest inflation in India consistently, the government must revisit its tax policy on cooking gas and fuel so that inflation doesn’t make living unaffordable for the economically vulnerable sections of society. This is an opportunity for the government to reduce the Value Added Tax (VAT) & CESS on fuel so that logistic expenditures would go down and eventually it would give some relief to the common people here.

Unfortunately, our unemployment ratio is also one of the highest in India. The rise in unemployment has pushed people to poverty. And, the growing demand for food packets, drug abuse, and suicides are its key indicators. Therefore, the upcoming budget should focus on social welfare, particularly for women and old-aged people.

Last but not least, our future budgets must pave the way for the localization of manufacturing. We import goods worth Rs. 60 thousand crores annually. That simply means most of the benefit of this sizeable consumption goes outside the J&K. We should focus on localization so that consumption money not only gets directed towards local investment and helps in creating employment opportunities but also helps in containing the supply side inflation in a sustainable manner.

These initiatives cannot be done through a single budget. It requires reforms and relevant long-term policies. Budgets can then be aligned with their spending programs in line with the long-term economic strategy of the region.

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