RBI concerned over rising debt of J&K

Praises State budget proposals in annual report

Neeraj Rohmetra
JAMMU, Apr 17: Reserve Bank of India (RBI) has appreciated several policy proposals initiated by the State Government in the budget for 2011-12, which are aimed at fiscal consolidation process in line with the recommendations of the Thirteenth Finance Commission.
However, the Governing body has expressed serious concerns over the high debt-GSDP (Gross State Domestive Production) ratio of Jammu and Kashmir, which is highest among the special category States.
These observations have been made by the Reserve Bank of India State in its recently released annual report titled: “Finances: A Study of Budgets”.
The report states that despite higher grants from the Centre muting the impact of higher expenditure vis-à-vis the resource base of special category States, their debt-GSDP ratios are generally observed to be higher. “Among the Special category States, the highest debt-GSDP ratio – which is an important indicator of the health of economy was recorded by Jammu and Kashmir and Manipur. In 2010-11, the ratio declined in all special category States except Jammu and Kashmir and Mizoram”.
While eulogizing the various policy measures in the recently announced budget for 2011-12 in the border State, the Report commented that the policy measures were broadly aimed at augmenting tax revenues. While some States have desisted from implementing any new tax measures by declaring their budgets as ‘tax-free’ budgets, others including Jammu and Kashmir had gone in favour of expanding the tax base as well as increasing the rates of taxation.
“The major policy initiatives included increase of VAT rate on certain commodities such as tobacco and allied products; rationalizing taxes such as revision of the Passenger Goods Taxation Act and widening the tax net by covering advertisement hoardings. The State also undertook certain tax measures, both on supply as well as on the demand side, to tackle high food inflation. Measures taken on the demand side include tax exemption for cereals and measures on the supply side to promote agricultural production included exemption of VAT on items such as beehives”.
With the aim of empowering women and enabling them to reap the benefit of growth, the State has announced measures to implement schemes that arrest dropout rate of girl students in schools and enhance their employment prospects.
Commenting on the market borrowing program of the State Governments, the reports stated that an agreement had been signed between the State Government and the Reserve Bank of India to operationlise an arrangement of cash management from April 1,2011. “The Ways and Means Advances (WMA) and Overdrafts (OD) limit for the Jammu and Kashmir had been placed at Rs 102.4 billion for the financial year 2011-12”.
The special category States including Jammu and Kashmir had also witnessed improvement in their revenue account at the consolidated level, showing surpluses in their revenue accounts.
While revising the deficit and Debt Targets, it had also been suggested that the State Government reduce fiscal deficit with equi-proportional adjustments each year to 5.3 per cent (2010-11), 4.7 per cent (2011-12), 4.2% (2012-13), 3.6 percent (2013-14) and 3.0 percent (2014-15). Further, the State should also take measures to reduce outstanding debt as a percent of GSDP to 56.1 percent (2010-11), 55.1 percent (2011-12), 53.6 percent (2012-13), 51.6 per cent (2013-14) and 49.3 per cent (2014-15).

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