Mis(management) of Public Finances

Mis(management) of Public Finances

The Comptroller and Auditor General of India(CAG) has pointed out various loopholes in the way money for development purposes is utilized in J&K. The report also criticizes the budgets presented by economist-turned-politician Haseeb Drabu. According to the report, 95 percent of public debt was utilized for repayment of the principal and interest on public debt of previous years. It was also used to meet regular shortfalls of revenue against expenditure in the fiscal year, when it should have been used for creation of assets and capital expenditure. By critiquing public finance and its management thereof- critical or even pivotal components of governance- the CAG has flagged and raised a red flag on the nature of governance in Jammu and Kashmir. If, for example, public debt is utilized for the creation of assets, the debt burden becomes less onerous because more income is generated for a state. The same would hold true for Jammu & Kashmir. The question is why does the administration spend the way it does? The reasons, generally speaking, pertain to the political economy of the state and the peculiarities of the nature of the state here. The state, in Jammu and Kashmir, is a peculiar entity and the way it is designed and crafted defies the typical definitions of the state, in many respects. Among other things, it is oriented towards the welfare of a certain class of peoples- mostly government employees. This then gives the state a bit of a rentier character wherein the expenditures of the state are disbursed towards salaries of this class of employees. The debt burden for the state is large because of the loose or even poor tax base of the state. This, naturally, has revenue implications. That is, a deep fiscal deficit is the natural corollary of these structural issues. Having said this, the administration cannot be absolved from its poor and inefficient pattern and nature of utilization of funds. In the final analysis, even if the causal processes and warped structures of the state in Jammu and Kashmir militate against absolute efficiency in utilization of funds, relative efficiency can be arrived at if there is political will and determination of part of powers that be. But, it would appear , that these powers not only become hostage to the perpetuation of vested interests, the status quo and the lure of patronage driven politics but also party to these. The result is a dismal governance performance which add another layer to the sufferings of the people.

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