The disclosure by the UT Government that Jammu and Kashmir’s total debt has surpassed Rs 1.25 lakh crore raises significant concerns about the financial stability of the Union Territory. According to data presented by Chief Minister and Finance Minister Omar Abdullah, as of March 31, 2024, J&K’s debt stood at Rs 1,25,205 crore, representing 52 percent of its Gross State Domestic Product. While debt is an essential tool for financing development, the rapid accumulation of liabilities over the past decade raises questions about the sustainability of J&K’s financial health and the efficacy of its economic policies.
A substantial portion, Rs 69,894 crore, is accounted for by loans from the Reserve Bank of India and state development initiatives. GPF, the National Small Savings Fund, UDAY power loans, and advances from the Central Government have been taken from almost every viable institution. Even treasury liabilities amounting to Rs 5,429.49 crore are there. Delayed payments mean a delay in project completion.
One of the most alarming trends is the rising proportion of internal debt to total outstanding debt, increasing from 55 percent a decade ago to 66 percent today. While reliance on internal borrowing can be a viable short-term solution, excessive dependence on such mechanisms can lead to higher interest obligations and limit financial flexibility. The decreasing share of the provident fund further underscores the shifting dynamics of J&K’s financial management.
The growing debt burden has significant implications for J&K’s economic prospects. A debt-to-GSDP ratio of 52 percent is a red flag, especially when compared to the recommended limits for fiscal prudence. If this trend continues unchecked, J&K’s financial situation could become unsustainable, leading to severe repercussions such as credit downgrades, reduced investor confidence, and restricted developmental spending.
The public debt of Rs 83,010 crore, constituting 66 percent of the total on-budget debt, underscores the extent of financial stress. At present, the UT faces mounting repayment obligations. The presence of UDAY power loans indicates the persistent financial distress in J&K’s power sector, necessitating urgent reforms to improve revenue generation and reduce subsidy dependence.
Addressing J&K’s debt crisis requires a multi-pronged approach centred on fiscal discipline, revenue augmentation, and expenditure rationalisation. The Government must prioritise reducing its reliance on loans while implementing measures to enhance revenue collection. Strengthening the tax administration, widening the tax base, and plugging revenue leakages are critical to improving fiscal sustainability. Proper implementation of the GST and property tax can provide a steady revenue stream. Attracting private investment, promoting entrepreneurship, and leveraging J&K’s unique resources-such as tourism, horticulture, and handicrafts-can generate additional revenue. A robust industrial policy focusing on ease of doing business is essential. The Government must rationalise expenditure by curbing non-essential spending, optimising administrative costs, and ensuring efficient resource allocation. Rationalising subsidies and improving public-sector efficiency can lead to significant savings.
The presence of UDAY loans indicates chronic issues in the power sector, including distribution losses and inefficiencies. Implementing power sector reforms, promoting renewable energy adoption, and ensuring better tariff collection can mitigate financial stress. Public-private partnerships, multilateral funding, and special economic initiatives can help reduce the dependence on debt financing. Encouraging investments in infrastructure through innovative financing models can ease the fiscal burden.
Institutional reforms aimed at improving financial transparency, debt monitoring, and budgetary discipline will be crucial. The Government must ensure that borrowing aligns with long-term fiscal sustainability rather than serving short-term political objectives. J&K’s debt scenario underscores the need for responsible governance and sound fiscal policies. The administration must take immediate corrective steps to ensure that debt remains within manageable limits, balancing development needs with fiscal prudence.
The political leadership, financial policymakers, and economic stakeholders have to work collectively to address these concerns. Transparency in financial management, regular debt audits, and public accountability mechanisms should be strengthened to maintain fiscal discipline. The choices made today will determine the UT’s economic trajectory for years to come.
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