Contingency plan

Asian Development Bank (ADB) on Tuesday has trimmed India's 2016 growth estimate to 7 per cent from the previous 7.4 per cent on account of demonetisation, weak investment and agricultural slowdown. There are various expert voices that suggest that this kind of reduction is a modest estimation, and that the actual economic slowdown and dip in economic growth would be higher than the 0.4 percentage estimated by the ADB. This kind of a forecast has implications for the economic growth prospects for Jammu & Kashmir state as well, which could also manifest in lower tax revenue generation for the state. What complicates the situation is the economic loss that Kashmir has endured because of the long spell of shutdowns, protests and curfews since July, 2016. There are already very clear indications that the overall economic loss that Kashmir has suffered during the last five and a half months now is over Rs 10,000 crore. Such a big loss is very likely to translate into a major reduction in government's tax revenues. In case of Jammu & Kashmir while the visible impact of demonetisation on everyday lives of the people has been minimal it will be a mistake to discount its impact on several economic activities, particularly those happening in the informal sector. Even as certain economic activities in the informal sector do not have directly quantifiable impact on the key elements of the Gross State Domestic Product (GSDP) of Jammu & Kashmir state, there is evidence to suggest that there is a knock-on effect that will ultimately have a cumulative impact both on the GSDP and also on the tax revenue of the government. In this situation the government must do some sort of contingency planning, that must factor in this situation and figure out how it will be able to fund the next fiscal's budget. While Kashmir province has suffered immensely on account of the ongoing unrest, including truncated expenditure on several planned projects, the government must take special measures to off-set that loss in the next fiscal and also ensure that Kashmir province does not end up in a situation where its key public projects would have no funding.     

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