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The situation in the Kashmir Valley deteriorated after the death of the Hizbul Mujahedeen terrorist Burhan Wani last year. The mutilation of two Indian army personnel by a Pakistan Special Forces team that came 250 metres across the LoC in the Poonch district worsened matters. In February 2017, three Indian soldiers were killed and five were injured when terrorists ambushed an army convoy in Shopian.

Due to its special status, the state receives the highest share of funds from the central government. It has also been given a special autonomous status as per Article 370 of the constitution.

Financial assistance

Prime Minister Narendra Modi declared an assistance of `80,000 crore to the state in November 2015 of which `19,000 crore has been disbursed for road infrastructure. In between November 2004 and June 2010, former Prime Minister Manmohan Singh had also announced two packages of `24,000 crore and `1,600 crore for the development of the state.

The state has received 10% of all central grants given to states over the 2000-2016 period despite having only 1% of the country’s population. On the other hand, Uttar Pradesh that constitutes of 13% of the population received 8.2% of central grants in the same period. J&K which has a population of 12.55 million according to 2011 Census received `91,300 per person over the last sixteen years while Uttar Pradesh only received `4,300 per person in the same time period. The state gets the highest share due to its border with Pakistan.

The state has no service tax and hence does not get a share of the same from the central repository. The funds allotted to this state are more than the amounts allotted to the hilly north-eastern states.

What is wrong?

Despite such tall financial assistance, the state’s economy remains poor. The frequent mayhem on the streets has marred the trade and slackened economic growth. Due to the prolonged curfew in 2016, trade and industry suffered a huge blow with losses hovering over `6,000 crore in the 45 days of strife.
Hotels, houseboats and shikaras had no takers. Carpets and shawls remained unsold in shops across Srinagar.  The tourism sector suffered gravely due to the turmoil.

The mismanagement of government finances was flagged by the Comptroller and Auditor General of India (CAG) in its  report on J&K’s finances for 2013-14 (April-March). “There were persistent errors in budgeting, savings, excessexpenditure and expenditure without provision. Anticipated savings were either not surrendered or surrendered at the end of the year leaving no scope for utilising these funds for other development purposes,” the CAG report noted. The diversion of government funds for other activities was also seen in 2004. Moreover, the power sector has suffered enormous losses. Government departments, after the banning of casual workers in 1994, have been paying wages from the operations and maintenance (O&M) component of capital expenditure or from maintenance and repairs. This resulted in irregular distribution of wages due to which around 61,000 people have been affected.

Even with all the central assistance and positive developmental indicators, the state’s finances remain fragile. As of March 2016, Jammu and Kashmir’s outstanding liabilities were worth 52.3% of its Gross State Domestic Product (GSDP).

It fared worse than other special category states – Mizoram, Manipur, Nagaland, and Himachal Pradesh and some other non-special category states. J&K’s deficit has been growing steadily in the past five years. While its outstanding
liabilities were worth `30,120 crore in 2010, they stood at `50,130 crore in 2016.

The standard of living is an indication of development

97.4% of all households in the state have electricity. 57.6% of J&K households have access to clean fuel for cooking, 52.5% use improved sanitation facilities and 85.7% of all births are institutional. 89.2 % of households have access to an improved water source. Jammu and Kashmir is in a better position compared to other insurgency-affected states, like Chhattisgarh, Nagaland, and Assam.