J&K's dependency on Centre alarming

Subodh Varma, TNN, Jul 19, 2010, 03.04am IST

Jammu & Kashmir continues through an endless cycle of calm-confrontation-curfew, it is facing a disastrous financial situation. Recently released Reserve Bank of India data on state finances shows how highly dependent J&K is on the central government's support.

In 2009-10, J&K received Rs 13,252 crore as grants from the Centre, which constitutes nearly 60% of the state's total expenditure. In fact, for the past two decades since the separatist movement spread in the Kashmir valley, the centre has been propping up the state through similar doles. In all, J&K has received grants amounting to Rs 94,409 crore between 1989-90 and 2009-10.

For over a decade, from 1994-95 to 2005-06, the state received 10-12% of all grants disbursed by the central government to the states. In 2009-10, this proportion had dipped slightly to about 8%. This is way above J&K's share of India's population, which is a mere 1%.

Is the Centre providing similar support to the other hotspot of insurgency in India — the northeast? Not quite. According to the RBI report, in 2009-10, the eight northeastern states received grants and loans worth Rs 29,084 crore from the Centre, which was 44% of their combined total expenditure, which is significantly lower than in J&K. These figures raise two questions about J&K: one, how is this money being spent, and two, why is it not helping in soothing the discontent that is obviously so widespread?

Spending on the social sector — schools, health, rural development, etc — in J&K is surprisingly low at about 30% of aggregate expenditure. That is the fourth lowest proportion among all states. The all-state average is 40% and states like Chhattisgarh (54%), Maharashtra (50%) and Rajasthan (46%) do much better. What is even more surprising in the case of J&K is that it has been stagnating at this level for nearly thirty years.

As can be expected for a mountainous region wracked by insurgency, administrative expenditure is high in J&K, working out to about 12% of all expenditure. But Himachal and Sikkim, other Himalayan states, spend only about 6% on administration. So, perhaps J&K's high administrative costs are largely due to the disturbed situation. But Tripura with 16% and Mizoram with 14% of funds spent on administration have managed to attain stability and peace. Obviously, the high expenditure on administration in J&K is not really working.

A clue to this conundrum can be found in the per capita spending by state governments. Three mountainous border states, Sikkim, Mizoram and Arunachal Pradesh, which have had militancy problems, but have been relatively stable for a long period, spent Rs 59 lakh, Rs 35 lakh and Rs 38 lakh per capita in 2009-10.

In J&K, the annual per capita spending by the state is far short of this, at about Rs 20 lakh. Meghalaya, Manipur and Nagaland — all states wracked by insurgency to varying degrees — have similar spending levels ranging between Rs 18 to 21 lakh per capita per annum. So, part of the answer to the question as to why pouring money into J&K is not solving the problem lies in the fact that not enough money is being spent, because the state itself is not generating enough revenue. The other part, of course, is whether money shown as spent is really reaching the people. What's your guess?