At first glance, Jammu and Kashmir (J-K) appears to be India’s favourite union territory (UT). In its budget for the financial year beginning March 2020, the central government has allotted it 30,757 crore rupees, far ahead of what has been earmarked for other UTs.
This big ticket amount, however, includes the funds that the erstwhile undivided state of J-K would have been entitled to receive had the parliament not voted last August to split it into two federally-administered UTs — J-K and Ladakh.
The Central government is required to share with states the funds from a pool of centrally-collected taxes. The finance commission, a constitutionally-empowered group of bureaucrats, which convenes once every five years to devise a sharing formula, has given the central government an extra one per cent from this pool to spend on the newly-created UTs of J-K and Ladakh. This is because the region is no longer entitled to its own share, as the commission does not directly assign funds to UTs.
Speaking to The Kashmir Walla, former finance minister of J-K and a noted economist, Haseeb Drabu said, “What was the right of the state has now become a provision to be decided by the union.”
For the new financial year, this one per cent comes out to about 20,802 crore rupees. The finance commission has not decided inter-union territory division between J-K and Ladakh, leaving it up to the central government to divide this fund.
The central government has given J-K 30,757 crore rupees — bigger than the share under the finance commission. However, J-K is no longer eligible for separate grants, which the central government has to transfer to states as funding for Panchayats and Urban Local Bodies, according to a statement from PRS Legislative Research, a non-profit organisation based in New Delhi. These grants are allotted by the finance commission, and since it is now a UT, J-K is not under the commission’s purview anymore.
In the current financial year, which will end in the upcoming March, the former state of J-K had been allotted 200.47 crore rupees in such grants.
The region’s economy has also suffered due to the government’s decision to block phone and internet services after the surprise move on 5 August to strip the former state’s special freedoms, which was followed by heightened tensions in the conflict-affected region.
“The economy of J-K has been hit very badly because of the developments since 5 August. Be it industry and trade, agriculture and horticulture, tourism and transport — nothing has even been said in the current budget,” said Dr. GM Bhat, the Head of the Department of Economics at the Central University of Kashmir, Srinagar. Kashmir Valley lost about 17,888 crore rupees and 1.44 lakh jobs since August 2019, according to a report released in December by the Kashmir Chamber of Commerce and Industry (KCCI), a regional commerce body.
J-K’s first budget as union territory
The annual budget for the UT is currently being printed, and will be announced soon, according to officials at the J-K finance department. It will decide the administrative spending in the UT for the new financial year based on the combined funds from central grants as well as J-K’s own revenue and borrowings.
Normally, this budget would be presented by the local government in the UT’s legislative assembly. But due to a delay in elections, the assembly is yet to be formed after it was dissolved in 2018 when the Bharatiya Janata Party (BJP) pulled support from its governing coalition with the People’s Democratic Party (PDP). In what will be a first, the J-K budget this time will be presented by union finance minister Nirmala Sitharaman in parliament in New Delhi.
This is also the second year in a row that the J-K budget has been created in the absence of a legislative assembly, which Mr. Drabu says has limited public discussion on the region’s spending objectives. “The budget of a state is made according to the requirements and compulsions of the state, discussed in the state assembly,” said Mr. Drabu. For the new budget, “the bureaucracy will submit their own proposal, but allocations in the end will be driven by what the centre thinks appropriate. Technically speaking, it is a home ministry budget.”
One of the planks on which the union government justified its decision of bifurcating the state into UTs was faster development of the region. This year’s J-K budget is expected to announce an annual spending of over 1,00,000 crore rupees. “We have been hovering around 1,00,000 crore for some time now,” said Mr. Drabu. “It’s a natural transition, not so much of a stretch.”
Kuwar Singh is a Reporting Fellow at The Kashmir Walla.
The story appeared in our 10-16 February 2020 print edition.