Where a limited fiscal deficit in an economy is desirable, uncontrolled growth in liability is perilous. That J&K has an aggregate liability of Rs 26,000 crore is obviously not a healthy sign for this moribund economy. The State Finance Commission has revealed in its report that J&K’s liability during the past 20 years has unstoppably been on an upward progression. It has gone from a Rs 3,300 crore to Rs 26,000 crore during this period, showing a staggering 20 per cent annual increase, which according to the report is the highest in the entire northern region. The liabilities, the report says, have grown from Rs 3,358 crore with a percentage increase of 17 in 1991-92 to Rs 24,800 crore at a percentage increase of 19.17 in 2009-10. Of the total liabilities the market borrowings stood at Rs 10,213 crore at the end of March 2010. The internal debt proportion is more than 60 per cent of the total liability and is much higher compared to neighbouring states of Punjab and Himachal Pradesh.
The dismal fiscal picture gets only accentuated by the limited sources of income available to J&K. It is no secret that apart from the plan funds and financial devolutions J&K gets from the Centre, there is very little resource base for it within the State. The tax and non-tax revenues in J&K over the years have not shown much growth in comparison to the steep increase in expenditures. Where as the Centre government, to bring down its fiscal deficit, can utilize its monetization option— albeit there are problems attached to it— there is no such option available to the states in India. States, particularly those which are backwatered in India have limited options to bring down their fiscal deficits or repay their liabilities. The increasing fiscal deficit pushes these states to more borrowings, which in turn enhances their interest burdens. Same holds true about J&K. The State over the years has seen tremendous increase in its liabilities while it has been not in a position to contain its fiscal deficit. The Comptroller and Auditor General of India in its latest report pointed that the J&K’s fiscal liabilities increased by 18 per cent to Rs 28,735 crore in 2009-10. According to the report the overall fiscal liabilities of J&K State increased from Rs 23,287 crore in 2008-09 to Rs 28,735 crore in 2009-10. The CAG report, which was tabled in the Jammu and Kashmir Legislative Assembly previously, said the fiscal liabilities of the State have increased by 18.31 per cent during 2009-10 over the previous year.
To bridge the gap between its incomes and expenditures, the State falls back upon different sources to raise finances. No wonder then a considerable portion of our budget goes into meeting the interest liabilities. The state government would do good to devise a policy to bring down its fiscal deficit, though admittedly there can be no shortcuts to deal with this problem. However, that should be no reason for us to be complacent with the situation. One must understand that if the things move ahead unchanged in the coming years, it would be extremely difficult for the State to come out of this debt trap. The need of the hour is that the State devise a policy which would see at place a no nonsense mechanism to deal with the challenge of public debt management. The State could set up a Public Debt Management Office where the public debt issues could be dealt with. This office could explore new avenues to get debt to the State at low cost which ultimately would help it to bring down its interest payments. Similarly, there is no alternative to the government except to contain its non-productive expenditures in the administration. The government can also think about imposing certain taxes on the high-end tourists, nationalized banks operating in the state, telecommunication companies getting huge revenues from J&K.
Lastupdate on : Tue, 5 Jul 2011 21:30:00 Makkah time
Lastupdate on : Tue, 5 Jul 2011 18:30:00 GMT
Lastupdate on : Wed, 6 Jul 2011 00:00:00 IST
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