J&K’s Debt to Gross State Domestic Product (GSDP) ratio is fast heading northward. The region tops the states and union territories of India with the highest liabilities to GSDP ratio along with Punjab at 53 percent. The ratio is the highest for J&K in the decade. The erstwhile state’s GSDP at current prices in 2020-21 stood at Rs 1, 76,282 crore while as its liabilities have ballooned to Rs 1 lakh crores.
In the FY 2020-21 the liability stood at Rs 92953 crore. It included internal debt, public debt, loans and advances from central government. To fund its Capex expenditures, Rs 17522 crore were borrowed from the market, the RBI and others. The low revenue outlook has pushed the J&K to indebtedness and the liabilities have now hit a record of Rs one lakh crore.
While the different regimes governing the former state had to operate within a limited budgetary space, they had no option other than trade off, resulting in the accumulation of borrowings. The dire economic straits the J&K has been going through since decades have put it on a slippery precipice. But this situation is unequivocally man made for it is being caught in a show of strength between two eternal enemies of South Asia. The conflict has sapped every sphere of its life but the effect has been more devastating on its economy. It had also a serious psychological cost where generations of Kashmiris have continuously lived in a state of fear resulting in the suppression of their ingenious potential.
The circumstances propped up a mediocre political class (across the spectrum) suffering legitimacy deficit. Self satisfaction and over interest in the pursuits of aristocratic extravagance has been common feature of this political stock. Generation of the processes that could lead to manufacturing, or the provision of services in the state was none of their concerns. They exhausted their capacities in appeasement of their lords and gods. The misery, the bloodshed and loss of everything is what they facilitated in wreaking on the territory they operated on. Was it possible for the economy of Kashmir to generate resources in such upsetting and suffocating circumstances? Political conflict, which is none of its making, rendered its financial system to one surviving on life support.
It has been unable to mobilize its resources and unleash its human potential. The union territory’s tax and non tax revenue including its rightful share from the Center in the FY 2021-22 was only Rs 38600 crore. The funding of the state budget by the government of India in this situation is an obligation on it.
Contrarily over the years a narrative has been invented that Kashmiris contribute less and get more from India. It is simply obfuscation of the facts by certain diseased mindsets. Assam, a BJP ruled state, got resources worth Rs 70, 000 crore from the centre during the current financial year and Jammu Kashmir is estimated to get Rs 68,000 crore (including its rightful share from the central pool of taxes) during the period. The administration is planning to monetize assets worth Rs 3000 crores and borrow Rs 10,600 crores from the market to meet its expenditures.
This fiscal the former state is supposed to pay Rs 7692 crore as interest to its lenders. The burgeoning debt does not remain in line with state’s Fiscal Responsibility Legislation targets. The debt will further slow down its economic growth and squeeze its already restricted economic activity.
The philosophy of cooperative and competitive federalism as propounded by PM Modi does require generous funding to the UT to bring it out of the trap. Given its geo strategic situation, the UT can be converted in to a free trade zone. This will go a long way in changing the destiny of an eternally embattled South Asia. Restoration of Cross LoC Trade can be a baby step in that direction.
