by Sri Varshith Kumar Reddy E
Jammu and Kashmir’s 2026–27 Budget expands welfare and capital spending, yet low own revenues and a heavy reliance on Central grants and loans keep fiscal self-reliance at a distance.
Safar taveel hai, the Chief Minister began, framing the 2026–27 Jammu and Kashmir Budget as the start of a long journey towards stability and prosperity. The arithmetic behind that journey is harder. A “net” budget of Rs 1,13,767 crore rests on a Union grant-in-aid of Rs 43,290.29 crore, booked entirely as a revenue transfer under the Ministry of Home Affairs. The essential question is whether this year’s exercise nudges J and K towards fiscal capacity or manages a chronic resource gap with more finesse.
On balance, this is a cautious budget. It enlarges social protection, keeps the fiscal deficit within the 3.69 per cent of GSDP target, taps a 50-year interest-free capital loan window from the Centre and allocates Rs 1,878 crore to a more modern agricultural strategy. At the same time, own revenues still finance only about a quarter of expenditure, committed liabilities swallow well over half of spending, and the Union’s cheque book underwrites the rest. For all the poetry about a long journey, the structural position has not moved much.
Delhi’s Cheque Book, Srinagar’s Speech
On the Union side, the 2026–27 Budget provides Rs 43,290.29 crore as grant-in-aid to Jammu and Kashmir, a 4.7 per cent increase over the previous year’s revised estimate. Of this, Rs 42,650.27 crore is “Central Assistance to Union Territories,” explicitly described as support to meet J and K’s resource gap. Smaller amounts flow to the UT Disaster Response Fund, the Jhelum–Tawi Flood Recovery Project and a modest “support for capital expenditure of UT.”
The classification matters as much as the quantum. The entire Rs 43,290.29 crore sits under the Revenue Section, as “Grants-in-aid to Union Territory Governments” under Major Head 3602 in Demand No. 58, “Transfers to Jammu and Kashmir,” which forms part of the Ministry of Home Affairs. There is no capital outlay head within this demand. In other words, the primary fiscal lifeline for J and K is not a predictable share of the central tax pool through Finance Commission devolution, but a negotiated revenue transfer inscribed inside the MHA’s budget.
This gives the UT an unusual profile. The Assembly debates allocations whose single largest resource line is controlled, classified and revised in New Delhi. Until the balance shifts from this grant-driven arrangement towards tax-based, formula-driven devolution, J and K’s annual statement will resemble an extended chapter of the Home Ministry’s demands more than a conventional state budget.
A budget boxed in by commitments
Within those constraints, Srinagar’s own numbers expose the narrow band within which policy can move. Out of the Rs 1,13,767 crore net budget, about Rs 80,640 crore goes to routine expenses, including salaries, pensions, interest payments and the running cost of existing schemes. Only Rs 33,127 crore is earmarked for development works, including roads, power projects, water supply and housing.
On the resource side, the government expects just Rs 31,800 crore from its own tax and non-tax revenues. By its own admission, this covers only about 25 per cent of budgetary needs. The rest is assembled through the Union’s grant-in-aid, flows under Centrally Sponsored Schemes and borrowing. Analyses of the budget emphasise that salaries, pensions and debt servicing together absorb a dominant share of expenditure, leaving relatively little space for new programmes once these committed liabilities are met.
The headline macro numbers look respectable. The fiscal deficit is pegged at 3.69 per cent of GSDP. Nominal GSDP is projected at around Rs 3.16 lakh crore with 9.5 per cent growth. The challenge lies beneath these aggregates. A deficit at that level, when built on such low own-revenue mobilisation and such high fixed costs, leaves little cushion for genuine choice. Almost every additional rupee for a new welfare scheme or capital project leans on Delhi’s resource-gap support or on fresh debt rather than on home-grown revenue buoyancy.
Welfare as insurance and as structural risk
The political centrepiece of the 2026–27 Budget is a package of 32 “people-first” initiatives. Six free LPG cylinders per year for all Antyodaya Anna Yojana households, full fee waivers for AAY students from Class 9 onwards in government schools and colleges, and a sponsorship scheme for 6,000 orphaned children offering Rs 4,000 per month through direct benefit transfer materially raise the welfare floor for the poorest. Enhanced foodgrain entitlements, social pensions and more generous marriage assistance reinforce this baseline.
Transport initiatives push in the same direction. Free ridership for women on Smart City buses and other government buses, free services for persons with disabilities and plans to induct around 200 additional e-buses, reduce the cost of mobility for those most dependent on public transport. In a region shaped by conflict, floods and repeated economic shocks, this is a rational attempt to stabilise household consumption and restore a measure of dignity.
The difficulty lies in how these measures are financed and framed. When own revenues pay for only one rupee out of four that the government spends, each permanent entitlement is effectively written on the Union’s balance sheet or against future borrowing. The projected fall in the tax-to-GSDP ratio from 7.5 per cent to 6.6 per cent deepens the concern. The tax base is not keeping pace with the output growth that the government is projecting. Relief-heavy budgets are easiest to defend when they are time-bound or when they clearly transition beneficiaries into more productive work and incomes. Here, the welfare expansion is open-ended while the revenue base remains narrow. Without a medium-term plan to lift tax effort and streamline subsidies, “people-first” can quietly settle into “permanently Union-financed.”
Capital investment: SASCI as a bridge, not a cure
With the Union’s J and K transfer classified entirely as revenue, the capital side of the story relies on a different instrument: the Scheme for Special Assistance to States for Capital Investment (SASCI). Nationally, SASCI carries an outlay of Rs 1.5 lakh crore and offers 50-year interest-free loans to states and UTs for specified capital projects. Jammu and Kashmir now accesses this window for roads, bridges, power infrastructure and disaster-mitigation works.
This arrangement helps the UT lift capital outlay without adding immediate interest costs or lobbying for explicit capital grants under Demand 58. It does, however, create a stream of long-term principal repayments. The economic case for SASCI hinges on whether the projects it funds raise productivity enough, through lower logistics costs, fewer flood losses or more reliable power, to generate future growth and revenue that outweigh the eventual liability.
The budget’s internal split, roughly three-quarters of spending on routine expenditure and one-quarter on development works, shows how slender the investment cushion remains even with SASCI. Since the Union’s J and K demand provides only a token amount specifically labelled as capital support, the bulk of infrastructure now rests on SASCI loans and market borrowings. That is a workable bridge across one or two plan periods. On its own, it does not cure the deeper problem of a weak revenue base financing an outsized state.
HADP: capacity-building within tight margins
Where the budget does move beyond immediate relief is in agriculture and allied sectors. The Rs 1,878 crore allocation for Agriculture and Allied Activities is closely tied to the Holistic Agriculture Development Programme, which bundles 29 projects across horticulture, livestock, crop diversification and value addition. The programme seeks to push farmers towards higher-value activities through a combination of back-ended subsidies, common infrastructure, market linkages and bank credit, with institutional finance expected to cover most of the project cost.
HADP’s stated aims are to create several lakh jobs and significantly raise the agricultural contribution to GSDP over the medium term. If actual implementation matches the design on paper, this is classic capacity-building expenditure. It creates productive assets in orchards, dairies and processing facilities, upgrades skills and can broaden the future tax base by integrating farmers and agri-enterprises into more formal value chains.
The constraint is again one of proportion and follow-through. At about 1.6 per cent of the total budget, HADP-related allocations have to work against a fiscal backdrop where salaries and pensions alone absorb many times that amount annually. The programme has the right intent and instruments, yet sits in a system where discretionary development spending is constantly under pressure. A clearer signal that a portion of future agricultural gains will be recycled into further productivity-enhancing investments rather than into additional current transfers would have made this plank feel more like a growth strategy and less like an isolated flagship.
The missing industrial safety net
Industry’s response to the budget reveals another fault line. Trade and industrial bodies have acknowledged the government’s emphasis on IT, services and tourism, the promise of new technology parks and continued focus on connectivity. At the same time, they have pointed to an absence of serious, targeted support for existing industrial units that have endured years of disruption and now face the withdrawal of earlier incentive regimes.
With turnover-based incentives and interest subsidies due to lapse, many MSMEs and local manufacturers face higher financing costs and tougher competition for government procurement. The budget does not offer a tailored bridge package, no transitional interest subvention, no restructured purchase preferences and no targeted credit guarantee to help these firms adjust. That omission matters in an economy where the state remains the single largest purchaser and where manufacturing is already the weakest leg of the growth story.
In this area, the idea of “cautious continuity” comes into sharp relief. The budget keeps faith with new capital and service-sector narratives such as smart cities, tourism circuits and IT hubs while leaving legacy industry to fend for itself. Over time, that choice risks depressing employment, eroding the local tax base and increasing dependence on service sectors that are more volatile and uneven in their distribution of gains.
Safar taveel hai, but on what path?
Judged against its immediate objectives, the 2026–27 J and K Budget delivers. It eases cost-of-living pressures at the bottom through 32 people-focused initiatives, holds the fiscal deficit at 3.69 per cent of GSDP, secures continued Union support under the MHA’s grant head and taps SASCI to prevent the infrastructure pipeline from stalling. It directs real, if limited, money towards a more modern agricultural strategy and some elements of human capital and urban mobility.
On the deeper test of structural change, the verdict is more restrained. The budget does not alter the basic pattern in which own revenues pay for about a quarter of expenditure, committed liabilities dominate spending, and the largest inflow appears as a revenue grant booked in Delhi’s MHA demands. It does not set out a time-bound plan to reverse the slide in the tax-to-GSDP ratio, slim down the weight of fixed costs or nurse existing industrial units through an orderly transition.
Safar taveel hai can be an honest recognition that recovery and growth take time. It can also become a way of normalising dependency over a longer horizon. This budget makes life more bearable for many households and keeps the macro numbers within the lines. It does not yet place Jammu and Kashmir on a path from fiscal dependence to genuine durability. The journey has begun on steadier feet; the destination, for now, remains the same.
(The author is a pracademic working on government policy and public institutions. Ideas are personal.)
