Over to the year of austerity

J&K’s annual Plan money this year is down. Inevitably, development spending will be hit. What about administrative overhead costs?

DATELINE SRINAGAR

ARJIMAND HUSSAIN TALIB

It is a difficult situation for J&K state this year. The state did not get the requisitioned Rs 8000 crore from the centre for this financial year, and instead got Rs 7300 crore. It would immediately mean three things: one that the government will have to adjust its budget for this year. Two: the budget adjustment will have to happen for development spending. And three: being mid-July now, with almost a quarter of the financial year gone, it is going to be a spending emergency.
One of the other challenges of the situation is that development spending will be seriously hit in the state’s winter zones, mainly the Kashmir valley and other parts of Jammu region. It is unlikely that spending targets could be achieved with barely four-and-a-half months remaining for the spending season.
This situation was clearly foreseeable. The centre must contain its own fiscal deficit. Its economic growth is lowering. Revenues are not up to the expectations. Because of Rupee’s constant free fall against the US dollar and other major currencies, its Current Account Deficit (CAD) is burgeoning. This situation is going to stay for a foreseeable future.
In the last fiscal the central government was unable to meet its revenue target, resulting in a cut in spending. That spending cut has resulted in cumulative loss of around Rs 60,000 crore to the states.
To stick within the revised fiscal deficit target of 5.2% during 2012-13, the centre has already announced a reduction in plan spending by nearly Rs 92,000 crore. The Finance Minister, P. Chidambaram, was also forced to reduce the projection for tax collections by almost Rs 64,000 crore in the revised estimates for the last fiscal year.
States in India are normally entitled to 32 per cent of the taxes collected by the centre. Owing to lower revenue target in 2012-13, states automatically lost Rs 7,874 crore. Similarly, the expenditure cut will lower state plan assistance by Rs 17,338, while another Rs 3,000 crore would be lost in the form of non-plan grants recommended by the 13th Finance Commission. Another Rs 3,723 crore would not flow to the states in the form of centrally-sponsored schemes. District and autonomous authorities - who get direct transfers from the Centre - would have a shortfall of over Rs 27,000 crore.
For J&K it is a moment of political introspection and administrative re-thinking. Politically, we must find ways and means to enhance our state’s own revenues. At the government administrative level, a new approach to development planning and spending is long overdue. An administrative reform can no longer be put on the shelf. We must ensure that our government systems are able to deliver services with the highest possible value for money. Wasteful spending will have to go altogether. And, most importantly, administrative overhead costs will have to be clipped.
The reason administrative overhead costs need to be reduced is because we are spending disproportionately there in comparison to the money we spend on actual services. There is a big scope for reducing our avoidable spending under hospitality and protocol. The money we spend on government servants’ and politicians’ transportation and housing is colossal. Travel and other benefits need to be checked too.
This is not to sound unnecessarily alarmist, but living in a state of denial will not help either. This is a case for responsibility in an environment which is vivid and wherein J&K state can no longer afford the luxury of spending its money in a manner that doesn’t suit its financial health.
When we look at the state’s annual outlays of 2011-12 and 2012-13, we see the trend of negative outlays already in practice.
Despite an overall 10.6% increase from 2011-12, many important departments in 2012-13 already had reduced outlays.
Although energy sector is supposed to top our priorities, it received Rs 41 crore lesser in 2012-13 than the previous year. Transport and Irrigation and Flood control were the other worst sufferers - receiving Rs 53 crore and Rs 37 crore less respectively.
Agriculture and social services had increased outlays by Rs 88 crore and Rs 204 crore respectively. Yet both these sectors hardly contribute anything to the state’s revenues. In percentage terms, general economic services, a term used for an array of spending, received the maximum hike of 72.4%.
Meanwhile, J&K state’s debt accumulation and its inability to raise resources to undertake its own-designed development activities are emerging as serious handicaps for the state. A vast proportion of our budget continues to go to pay government salaries, power and debt repayment and servicing.
Comptroller and Auditor General (CAG) in its report in 2011 noted that J&K’s debt had increased by 18 per cent to Rs 28,735 crore in 2009-10 since the previous year. J&K’s debt-to-gross state domestic product (GSDP) ratio rose to 75.03 per cent in 2010 - up from 69.78 per cent in 2008-09.
An RBI report also says that among all the states in India, J&K’s debt-to-GSDP ratio was the highest in 2008-09 - except for the four tiny states of Mizoram, Sikkim, Manipur and Arunachal Pradesh. This is what should be our cause for the worry.
Let us also not lose sight of the larger picture. Jammu & Kashmir state had made a case for Rs 68,000 crore for the 12th Plan. What we have got is Rs 44,000 crore.
This situation demands a paradigm shift in the state’s political approach towards its economic management. The current approach is redundant in the face of rapidly changing economic and political realities in India and the world beyond.
The columnist is a technical consultant in international development, and a contributing editor with Greater Kashmir

Lastupdate on : Sat, 13 Jul 2013 21:30:00 Makkah time
Lastupdate on : Sat, 13 Jul 2013 18:30:00 GMT
Lastupdate on : Sun, 14 Jul 2013 00:00:00 IST




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