As a union territory Jammu & Kashmir will not be a burden on the Centre’s finances, here’s why

By: |
Updated: August 10, 2019 12:30 PM

The thrust of successive union governments on the development of Jammu & Kashmir to counter's Pakistan's proxy war has resulted in the massive transfer of resources to the state.

narendra modi, jammu and kashmir, jammu and kashmir bifurcation, Article 370, government employee, LadakhPM Modi promised prosperity and political freedom to Kashmiris in his address to the nation.

Article 370: After scrapping the special status of Jammu & Kashmir and converting it into a union territory, Prime Minister Narendra Modi Thursday promised prosperity and political freedom to the Kashmiri people. Now the Union government will directly supervise the Jammu & Kashmir administration and all the decisions will be taken by the Centre and its nominee lieutenant general. However, this historic decision will not result in a burden on the Union government’s finances. Even before abrogation of special status of Jammu & Kashmir, three-fourth of its revenue receipts for this financial year was to come from the Central government and Consolidated Fund of India.

According to the state budget for FY 2019-20 which was presented in last December, the state’s gross expenditure was pegged at Rs 88,911 crore, an increase of more than 10% over the previous fiscal. The state government had estimated that it will manage Rs 66,000 crore from revenue receipts and Rs 13,411 crore from capital receipts.

Jammu & Kashmir’s own tax revenue will account for just Rs 11,538 crore which is less than 18% of the total revenue receipts. The remaining amount of Rs 48,895 crore was to be received from the Union government by way central transfers and as the share of Jammu & Kashmir in central taxes.

ALSO READ: PM Modi assures political freedom, prosperity to Kashmiris

Of the total receipts of Rs 48,895 crore from the centre, the share of Jammu & Kashmir in central taxes has been estimated at Rs 13,229 crore, which is just 27% of the total fund to be received from the Centre this year. While the grants and other transfers will account for nearly three fourth of this amount which has been pegged at Rs 35,666 crore.

The share of Jammu & Kashmir in central taxes is as per the formula recommended by the 14th finance commission headed by former Reserve Bank governor YV Reddy.

If the total fund to be received from the Central government this year is calculated against the total expenditure which is pegged at Rs 89,000 crore then the Central government’s contribution in the form of transfers to the state and the state’s share in the divisible pool will be equal to 55% of Jammu and Kashmir’s gross budget this year.

ALSO READ: Few backers in Congress for Rahul Gandhi’s take on Article 370, division of Jammu & Kashmir

Successive Union governments have traditionally spent a huge amount on the development of Jammu & Kashmir. Development of social and physical infrastructure was considered an essential element of the government’s counter-insurgency strategy that was aimed at winning the hearts and minds of Kashmiris. This heavy investment was considered necessary to foil the proxy war waged by Pakistan.

Do you know What is FinMin releases Rs 9,871 cr grant to 17 state, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI central board short of 9 non-official directors
2Paytm CEO Vijay Shekhar Sharma ahead of IPO: ‘India in exciting phase of growth; expected to become $5 trillion economy in 5-10 years’
3Honest taxpayers deserve to be recognised for paying due share of taxes: Sitharaman