J&K’s fiscal deficit crosses Rs 13,000 Cr in 2023-24

Srinagar, Nov 1: Jammu and Kashmir reported a fiscal deficit of Rs 13,122 crore for the financial year 2023-24, breaching the limits set by the Fiscal Responsibility and Budget Management (FRBM) Act.

FRBM Act, 2003, was enacted by the Parliament of India to improve the management of public funds, reduce the fiscal deficit, and strengthen fiscal prudence.

Official data reveals that the fiscal deficit now stands at 5.36 percent of the Gross State Domestic Product (GSDP), far above the 3 percent ceiling mandated by the FRBM.

Despite the alarming figures, officials remain optimistic about curbing the deficit in the coming year.

A senior official from the Finance Department said that with increased central grants in the current fiscal year, the deficit for 2024-25 is projected to be contained within the 3 percent FRBM limit.

“The fiscal deficit, including Annual Resource Mobilisation (ARM) for 2024-25, is expected to drop to 3 percent of GSDP, down from 5.36 percent in the revised estimates of 2023-24,” the official said.

The primary factor contributing to the anticipated improvement is a boost in central transfers to J&K.

“The deficit, which had been higher in previous years, has been brought closer to the FRBM threshold due to enhanced central support,” the finance official said.

Financial experts underscore that fiscal deficit is a critical measure of economic health, indicating the gap between government expenditure and revenue, excluding borrowings.

As expenditure exceeds revenue, governments often rely on borrowing, which can increase public debt.

J&K’s financial pressures are mounting, with total liabilities reaching Rs 1,12,797 crore in 2022-23.

Public debt constitutes a significant portion of this, standing at Rs 69,617 crore, including internal liabilities of Rs 68,786 crore and Rs 831 crore in central loans.

The remaining liabilities include Rs 43,180 crore for provident, pension, and insurance funds.

The rising debt burden has tripled over the past decade, growing from Rs 29,972 crore in 2010-11 to Rs 1,01,462 crore in 2021-22, before reaching the current Rs 1,12,797 crore.

This sharp increase highlights the need for sustainable economic growth and expanded revenue sources.

Looking ahead, the debt-to-GDP ratio is projected to reach 51 percent for the fiscal year 2024-25, raising concerns about long-term fiscal sustainability.

In contrast, the GSDP for 2024-25 is expected to grow by 7.5 percent to Rs 2.63 lakh crore, while the overall budget size for the year is projected at Rs 1.18 lakh crore, up by Rs 30,889 crore compared to 2023-24.

Revenue receipts are estimated at Rs 98,719 crore, with capital receipts at Rs 19,671 crore.

Revenue expenditure is expected to reach Rs 81,486 crore.

Highlighting sectoral allocations, Lieutenant Governor Manoj Sinha in July reported that the administrative sector is set to receive Rs 9881.68 crore, the social sector Rs 24,870.50 crore, infrastructure Rs 15,719.40 crore, and the economic sector Rs 5555.48 crore. Capital expenditure for development is estimated at Rs 36,904 crore, with the tax-to-GDP ratio projected at 7.92 percent, a notable increase from last year's 5.68 percent.