J&K Budget 2021-22: High fiscal deficit, no public consultations raise eyebrows

31 January 2021

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Srinagar, Jan 31: Even as Jammu & Kashmir’s State Budget for 2021-22 is said to be almost finalized and all set to be tabled in the Parliament in the second week of February; key stakeholders of Jammu & Kashmir’s manufacturing, services and agriculture sectors are clueless about the contours of this important budget.

In the absence of an elected Legislative Assembly and government, J&K’s Budget, as per the J&K Re-organization Act, 2019, is supposed to be presented by the Union Finance Ministry and passed by the Parliament.

Traditionally, Jammu & Kashmir government would undertake a detailed process of consultations with technocrats, business chambers and other key stakeholders in both Kashmir and Jammu regions before finalizing the budget. This year, the departure from the standard practice is being seen in high deviance.

“We have been looking forward to consultations with J&K’s industry. Considering this budget is going to come at a difficult time, it was very important to seek ideas from business and industry on how to make the upcoming budget a positive difference. But there have been no consultations at all”, FCIK President, Shahid Kamili told Ziraat Times.

The same views were expressed by the Kashmir Chamber of Commerce and Industry as well.

“There have been no consultations with Kashmir Chamber or any other trade bodies regarding the budget”, Sheikh Ashiq, President of Kashmir Chamber of Commerce and Industry (KCCI) told Ziraat Times.

One of Jammu region’s leading businessmen and former President of Jammu Chamber of Commerce and Industry (JCCI) and FOIJ, Annil Suri said ‘to his knowledge, there have been no consultations in Jammu either.’

“We are groping in the dark. There have been no pre-budget consultations with any business chamber or trade association of Kashmir and Jammu. It is like walking into a blind budget”, another leading Jammu businessman told Ziraat Times.

It is not only the question of consultations that is raising eyebrows; Jammu & Kashmir’s rising debt liabilities and the fiscal deficit – compounded by the post-August 5, 2019 and the pandemic situations – experts believe, require intense discussions and consultations at multiple levels.

“J&K’s tax revenues, unsustainable fiscal deficit, liabilities of Rs 82,332 crore, and a future economic outlook that doesn’t sound promising at all. The Reserve Bank of India (RBI)’s State Finances: A Study of Budgets of 2019-20 report says that J&K today is the only state/UT in the country whose fiscal deficit is over 7 per cent of its GSDP. If RBI data is anything to go by, J&K’s total outstanding liabilities stand at Rs 82,332 crore as on March 2020, which is 48 per cent of its GSDP”, Arjimand Hussain Talib, Founder and CEO of Ziraat Times wrote in The Print recently.

“J&K’s Gross Fiscal Deficit (GFD) is 6.5 per cent of its GSDP, which is second only to Manipur (6.6 per cent). This ratio for most of the other states is between 0.3 and 3.5 per cent. J&K faces a significant budget deficit this year, the actual quantum of which is yet to be known. In 2020-21, J&K’s revenue and capital receipts were estimated as Rs 91,100 crore and Rs 10,329 crore, respectively, with an estimated fiscal deficit of Rs 10,200 crore”, Mr Arjimand wrote.

Observing that the National Institute of Public Finance and Policy (NIPFP) in a recent report has already given a heads up that if J&K’s reliance on borrowings maintained the current trajectory, its fiscal deficit will rise to 12 per cent of its GSDP by 2024-25, Mr Arjimand said, “The Reserve Bank of India (RBI)’s State Finances: A Study of Budgets of 2019-20 report says that J&K today is the only state/UT in the country whose fiscal deficit is over 7 per cent of its GSDP. If RBI data is anything to go by, J&K’s total outstanding liabilities stand at Rs 82,332 crore as on March 2020, which is 48 per cent of its GSDP.”

Commenting on this situation, a former Finance Minister of Jammu & Kashmir on the request of not to be named said “Consultations are a must. In the past we would make sure to take suggestions and inputs from manufacturing, services and agricuture sectors. Every sector and institution was important to us.”

“Last year it was bragged that the budget had passed Rs 1 crore. It is a normal thing to happen when the scale of economy grows. But the point is does this administration have any idea how to ensure a decent tax revenue buoyancy while maintaining a conducive environment for economic activities? I am afraid, it does not”, he added.

Finance Minister Nirmala Sitharaman will present the Union Budget 2021 on February 1. Ms Sitharaman will start her budget speech at around 11 am.