With liabilities 7.75 times own resources J&K heads for a debt trap
....................KT NEWS SERVICE
JAMMU, Sept 8: In a searing indictment of the financial mismanagement in Jammu and Kashmir the Comptroller and Auditor General has warned that the state is getting into a debt trap.
The CAG in its report for the year ending March 2003 has, without mincing any words, stated that the increasing ratio of fiscal liabilities to the Gross state's Domestic Product (GSDP) and revenue receipts indicates that the state is gradually getting into a debt trap.
The report adds that the higher buoyancy of the debt with regard to its revenue receipts indicates its increasing unsustainability. The state has also violated the cardinal rule of debt sustainability that the average interest paid by the state on its borrowings should not exceed the rate of growth of the GSDP.
These liabilities were 1.58 times of its own revenue receipts and 7.75 times of its own resources, comprising its own tax and non-tax revenue.
The fiscal liability of the state in 1998-99 was Rs 6835 crores growing at a rate of 9.01 percent over the previous year. The same ending March 2003 shot up to Rs 12279 crores making an average of Rs 9393 crores and an average rate of 14.54 percent.
The receipts both revenue and from its own resources in 1998-99 was Rs 151.59 crores and Rs 949.31 crores respectively. While there was a marginal increase to Rs 162.68 crores in 2002-03 the revenue from its own resources actually came down to Rs 646.95 crores in 2002-03.
This does not end there for the state government in addition to all these liabilities has also guaranteed loans to various corporations and others which stood at Rs 1231 crores. These guarantees which are in the nature of contingent liabilities were about 16 percent of the revenue receipts of the state. The report says that the direct fiscal liabilities of the state grew at a much faster rate compared to its own revenue receipts during the same period.
Fiscal liabilities, it may be mentioned here, are considered sustainable if the average interest paid is lower than the rate of growth of GSDP. In the case of Jammu and Kashmir the average interest rate on fiscal liabilities during 1998-2003 was lower than the rate of the growth of GSDP the spread turned negative in 2002-03.
Though the state had a revenue surplus of Rs 368 crores during 2002-03, this was largely due to adjustments of credits of Rs 318 crores pertaining to previous years. There was an overall revenue deficit during 1998-03. The ratio of revenue deficit and fiscal deficit indicates that the borrowed funds, except for the year 2002-03, were largely used to meet current consumption. The indicators of management of fiscal liabilities show unsustainable debt situation and vulnerability of state finances, the report adds.