All Is Not Well With J&K’s Financial Health

All Is Not Well With J&K’s Financial Health

5 March 2013
Rising Kashmir
Asem Mohiuddin

Jammu: With an ever increasing non-plan expenditures and power purchases, Jammu and Kashmir is reeling under continuous debt trap following the surge in financial deficit upto Rs 21,730 crores during 2011-12 fiscal year. The state’s own deficit during the current year has registered an increase of 8 per cent from previous years of Rs 20025 crores. While most of the economic sectors are showing dismal financial progress, the economic survey tabled by Finance Minister, Abdur Rahim Rather in Lower House attributes it to an ever-increasing state expenditure, including power expenses, worsening Credit Deposit ratio in banks, an increase in expenditures including salaries, pensions etc. The report claims that the total expenditures of the state have increased from Rs 13114 crore in 2006-07 to Rs 28645 crores in 2011-12 (118 per cent). Interestingly, the survey report has revealed that J&K is the poorest state in north India in per capita income and figures at 7th number among 8 northern states with an average per capita income of Rs 44533 little more than Jharkhand with Rs 31982 per capita. “The state’s own deficit during 2011-12 is recorded at Rs 21730 crore posting an increase of 8.51 per cent over previous year’s figure of Rs 20025 crores,” reads the report, adding that J&K is even not placed at desired level in terms of economic growth measured on net state domestic product at current prices for the year 2009-10. J&K figures at 22nd position in terms of economic growth among Indian states. Worse, the fiscal deficit has seen considerable increase since last financial year and reached an alarming level of Rs 3700 crores around 19 per cent and 4 per cent of GSDP in current prices, thereby hampering the state economy. “The fiscal deficit of Rs 2833 crore recorded during current fiscal year has seen considerable increase from previous year’s 2367 crore. After including Rs 110.61 crore as interest on loan availed for liquidating Over Draft with J&K Bank and Rs 749.88 crore as Cash Balance Investment account, the gross fiscal deficit stands at 3700 crores,” the report discloses. What is more disturbing is that despite this huge debt trap the state government is lacking organized developmental initiative in the state with only one per cent increase in planned financial expenditures against the sharp rise in non-plan expenditures by 22 per cent. The state has spent around Rs 21923 crores during the current financial year against 17964 crores in last year under non-plan expenditure. However, in planned budget only Rs 6722 crore were spend during this year against Rs 6639 crores during last year. The deficit in the state has increased even after receiving grants upto Rs 14540 crores from Government of India besides substantial increase in receipts of tax and non-tax revenue. Although the Bank credit has picked up during the current year and enhanced by 16.59 per cent in the state due to imbalance in growth structure of deposits and credit, the credit-deposit ratio (CDR) is showing a diminishing trend since March 2008. “The gap between receipts from power consumers and expenditure on power purchases has continuously been rising. From the deficit of Rs 275 crore in 2002-03, it has grown to Rs 1993 crore during 2012-13,” the report reads. Predicting further deterioration in financial health of the state, the report said the committed liability of estimated Rs 3368 crores on account of four installments of 6th pay commission arrears as on March 31, 2012 is to be paid in four yearly installments and can affect the financial health of the state further. The horticulture sector which serves as the backbone of state economy is also witnessing fluctuating trend in last several years, according to the report, with export of only 7.21 lakh metric tonnes of fruits during this year against 10.30 metric lakh tonnes in 2011. The industrial sector has also seen a downfall from 7 to 3 per cent besides the closure of 29 per cent units in the small-scale industrial sector.