Fiscal deficit to jobs: Economic issues new J&K govt has to tackle

The region is expected to clock a growth of 7% in FY25 but it's dependent on Central government grants

Jammu and Kashmir (J&K) will hold assembly elections in three phases from September 18 to October 1, holding such a vote for the first time since its limited autonomy in the Constitution was abrogated in 2019.

Capex Plan: Driving growth and development

With a capital expenditure of Rs 36,904 crore and revenue expenditure of Rs 81,486 crore allocated in the J-K Budget for 2024-25 (FY25), any new government of the union territory (UT) shall have to focus on development. J&K's gross domestic product (GDP) is projected to be at Rs 2,63,399 crore in FY25, growing 7.5 per cent over FY24. The GDP is likely to double in the next five years with emphasis on service sector, industries, agriculture, horticulture and tourism, according to the 'J-K Economic Survey 2022-23'.

Reliance on Centre

J&K is estimated to receive around Rs 67,133 crore from the Centre as grants in FY25 (budget estimates, BE), rising from Rs. 64,319 crore alloted the previous year (BE-FY24). However, it was marked by unutilised funds with revised estimates of Rs 59,666 crore only for FY24. Alongside Jammu and Kashmir, Bihar and the Northeastern states are estimated to raise around than 60 per cent of their revenue from devolution and grants from the Centre. The share of devolution in central transfers is higher for Arunachal Pradesh, Bihar, Mizoram, and Sikkim, while the share of grants is budgeted to be higher for J&K, Assam, Manipur, Nagaland, and Tripura, according to PRS Legislative Research, an independent organisation based in Delhi.

Fiscal deficit, GST revenue

After being under President's rule for more than half a decade now, the new government in J&K will have to tackle the union territory's fiscal deficit. In FY24, the aggregate fiscal deficit of states was budgeted to be 3.1 per cent of GSDP. For FY25 (BE), J-K’s fiscal deficit aims a reduction at 3 per cent (BE) from 5.36 per cent of 2023-24 (RE).

“The UT’S fiscal deficit which was much higher in the previous years has been brought within FRBM limit due to higher level of central transfers”, according to J&K’s Budget at a Glance 2024-25, referring to Fiscal Responsibility and Budget Management Act, 2003.

Unemployment

The estimated unemployment rate (UR) on usual status for persons of age 15 years and above was 3.2 per cent during 2022-23 for India, according to Annual Periodic Labour Force Survey Annual Report. For J&K, this data is at 4.4 per cent for 2022-23 which is higher than the national average.

"Unemployment is a major problem which needs to be resolved in J&K. Creating the right atmosphere and resources for self-employment should be the major goal of the new government," said Javid Tenga, president of Kashmir Chamber of Commerce and Industry.
 

"Handicraft sector which generates employment for 5,00,000-6,00,000 people needs to be revived. Power cuts in Kashmir seem to have no relief in sight. Recent hikes in electricity tariffs, installation of smart meters have been helpful but the systemic failure needs to be addressed. The new government should show increased focus towards it," he said.

“J&K is still fighting for basic amenities. Electricity, water, and road infrastructure are still lacking, despite the tall claims. High density apples are fetching good returns but the irrigation system needs to be revamped,” said an economist and professor who teaches at the Kashmir University and didn't want to be named. “Despite the declining unemployment rate, students remain disillusioned with formal education."

“Earlier, we used to filter the selected 90 applicants for our course from a lot of 2000. This year, we received only 347 applications. The youth is slightly pessimistic. They would rather engage themselves with some business post 12th standard, than enrolling in higher universities, given the dearth of opportunities. The new government will have to be different from the precedent.”