The Jammu and Kashmir administration, through its Public Sector Undertakings (PSUs), raised Rs 23,911.53 crore via off-budget borrowings during the 2022-23 fiscal year. These borrowings did not enter the Union Territory’s Consolidated Fund but are still required to be serviced and repaid through the annual budget.
According to details received by The Chenab Times, the revelations come from the Report of the Comptroller and Auditor General of India (CAG) on the J&K Union Territory finances for the year 2022-23. The comprehensive report offers an overview of the UT’s financial health, management of its budget, the quality of its accounts, and its financial reporting practices.
Fiscal Indicators and Public Liability
The CAG report noted that the government of Jammu and Kashmir had not established any specific targets for fiscal indicators within its medium-term fiscal policy statement. Despite this, the UT recorded a revenue surplus of Rs 5,976.61 crore in 2022-23, which represented 2.62 percent of its Gross State Domestic Product (GSDP). The fiscal deficit for the same period stood at 2.13 percent of GSDP, with the ratio of public liability to GSDP at 12.26 percent.
However, when the quantum of off-budget borrowings is factored into the total debt, the overall public liability, encompassing both public debt and public account liabilities, escalated to 22.75 percent of the GSDP. The report further detailed a significant increase in the UT’s public debt, which surged by 120 percent from Rs 10,567.85 crore in the 2020-21 fiscal year to Rs 23,240.11 crore by 2022-23.
The public debt-to-GSDP ratio for Jammu and Kashmir saw a rise from 6.30 percent in 2020-21 to 10.20 percent in 2022-23, a trend the report suggests is not conducive to fiscal stability. Concurrently, the ratio of interest payments on public debt relative to revenue receipts showed an upward trajectory, moving from 8.16 percent in 2020-21 to 9.08 percent in 2022-23, indicating a potential decrease in debt sustainability.
Account Misclassification and Expenditure Trends
Beyond borrowing concerns, the CAG report also highlighted instances of misclassification within the UT’s financial accounts. Specifically, revenue expenditure amounting to Rs 219.13 crore, which included Rs 191.10 crore in grants-in-aid and Rs 28.03 crore in subsidies, was incorrectly booked under capital expenditure.
Information was available with The Chenab Times indicating a continuous incongruity between receipts and expenditure, a mismatch that the report suggested points towards rising fiscal stress. Jammu and Kashmir’s revenue sources include its own tax and non-tax revenues, grants-in-aid from the Union government, and non-debt capital receipts. The expenditure side covers both revenue and capital accounts, the latter focused on asset creation, loans, and investments.
Between 2020-21 and 2022-23, the UT’s revenue receipts experienced a growth of 31.39 percent, increasing from Rs 52,495.48 crore to Rs 68,975.95 crore. Capital receipts, however, showed volatility, rising from Rs 40,635.06 crore in 2020-21 to Rs 50,200.89 crore in 2021-22 before declining to Rs 38,115.80 crore in 2022-23.
The proportion of grants-in-aid within revenue receipts increased from 72.07 percent in 2021-22 to 74.65 percent in 2022-23, underscoring an increased dependence on financial support from the Union Government. During 2022-23, J&K received Rs 6,029.68 crore as the central share for Centrally Sponsored Schemes (CSSs), alongside other transfers and grants totaling Rs 45,463.25 crore from the Government of India.
Expenditure Patterns and Fiscal Deficit
Revenue expenditure, which funds current services and past obligations without adding to infrastructure, grew from Rs 52,633.75 crore (31.39 percent of GSDP) in 2020-21 to Rs 62,999.34 crore (27.64 percent of GSDP) by 2022-23. This expenditure consistently constituted a significant portion, between 83 and 85 percent, of the total expenditure during the period.
The gap between revenue receipts and revenue expenditure resulted in a revenue deficit in the initial years, although a revenue surplus of Rs 5,976.61 crore was recorded in 2022-23, contrasting with deficits of Rs 138.27 crore and Rs 30.83 crore in the preceding two years. The J&K government allocated Rs 10,773.78 crore for capital expenditure in 2022-23, representing 14.59 percent of its total expenditure.
The CAG report highlighted that 87.52 percent of the UT’s current borrowings in 2022-23 were utilized for repaying existing borrowings, diverting funds away from capital creation or development activities. The fiscal deficit, calculated as the gap between total expenditure and total non-debt receipts, saw a decrease to Rs 4,855.37 crore (2.13 percent of GSDP) in 2022-23, down from Rs 10,693.36 crore (6.38 percent of GSDP) in 2020-21 and Rs 11,150.60 crore (5.58 percent of GSDP) in 2021-22.
Committed and Inflexible Expenditure
A substantial portion of the revenue expenditure comprised committed expenditure, which includes interest payments, salaries, and pensions, and holds the first charge on financial resources. Committed expenditure accounted for 75 to 76 percent of the revenue expenditure between 2020-21 and 2022-23. This figure rose from Rs 39,302.27 crore in 2020-21 to Rs 47,475.27 crore in 2022-23, marking a 20.80 percent increase.
Inflexible expenditure, which ranges between 2.94 percent and 4.36 percent of revenue expenditure during the reviewed period, also saw an increase from Rs 1,741.60 crore in 2021-22 to Rs 2,199.44 crore in 2022-23, an increment of 26.29 percent. Collectively, committed and inflexible expenditures amounted to Rs 49,674.71 crore in 2022-23, constituting 79 percent of the total revenue expenditure. The report noted that this upward trend in committed and inflexible expenditure limits the government’s financial flexibility for other priority sectors and capital creation.
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