J&K drowning in debt

Srinagar, Aug 1: Jammu and Kashmir is facing mounting financial pressure as its total liabilities have swelled to a staggering Rs 1,12,797 crore in the fiscal year 2022-23, according to recent budget figures.

The public debt, which forms a significant portion of the total liabilities, stands at Rs 69,617 crore.

This includes Rs 68,786 crore in internal liabilities and Rs 831 crore in loans and advances from the Central government.

The remaining Rs 43,180 crore comprises other liabilities, including insurance and pension funds (Rs 1,331 crore), provident funds (Rs 28,275 crore), and other obligations (Rs 13,574 crore).

Compared to the previous fiscal year 2021-22, when the total debt stock was Rs 1,01,462 crore, the current figures represent a notable increase.

The public debt alone has risen from Rs 62,395 crore to Rs 69,617 crore within a year.

The debt burden has seen a dramatic rise over the past decade.

From Rs 29,972 crore in 2010-11, the liabilities have more than tripled, growing by approximately 3.5 times in just 10 years.

This trend underscores the urgent need for expanding revenue sources and promoting sustainable economic growth in the region.

A key indicator of the debt burden, the debt-to-GDP ratio for J&K, is projected to reach 51 percent for the fiscal year 2024-25, as per budget estimates.

This figure raises concerns about the long-term fiscal sustainability of J&K.

Despite the growing debt, Finance Minister Nirmala Sitharaman, in her recent budget speech, expressed optimism about J&K's economic trajectory.

The Gross State Domestic Product (GSDP) growth for the current financial year (2023-24) is expected to be 7.5 per cent, indicating that the economy remains on a growth path.

The J&K government has been focusing on equitable growth across all sectors of the economy.

To sustain developmental initiatives, authorities have been pursuing both tax and non-tax revenue avenues judiciously.

Notable efforts include the expansion of GST dealer registration from 72,000 in 2018 to 197,000 in 2023, the implementation of focused enforcement and dealer outreach programmes, and capacity building of taxation staff with support from the Institute of Chartered Accountants.

The government has also developed mechanisms to track purchases and stem GST leakages and linked GSTN verification with the bill payment system to improve tax realisation and track GST deduction in capital works.

Financial experts express concern over the rapidly increasing debt levels.

They emphasise the need for a balanced approach that promotes economic growth while maintaining fiscal discipline.

The government’s efforts to expand the tax base and improve tax collection efficiency are seen as steps in the right direction, but more comprehensive reforms may be necessary to address the mounting liabilities.