SRINAGAR: Even as India emerges as the fastest-growing large economy in the world, Jammu and Kashmir has found itself at the top of a list it would rather avoid. According to the latest debt-at-risk analysis compiled by PRS Legislative Research and reported by Forbes India, the Union Territory now holds the highest debt-to-GDP ratio in the country, 51 per cent for the financial year 2025–26, the Indian Express reported.
The revelation comes at a time when the Indian economy has surpassed Japan to become the fourth-largest globally and is projected to overtake Germany within the next three years, according to NITI Aayog CEO B.V.R. Subrahmanyam. However, the fiscal picture across several Indian states and Union Territories tells a more uneven story, with regions like Jammu and Kashmir facing growing concerns about economic sustainability.
In stark contrast to fiscally disciplined states like Odisha, which reported the lowest debt-to-GDP ratio at just 12.7 per cent, Jammu and Kashmir’s elevated 51 per cent ratio signals potential long-term risks in managing public debt, especially in the face of limited private investment, high security-related expenditure, and a constrained local economy. The region also recorded a fiscal deficit of 5.6 per cent.
This fiscal stress comes amid the Centre’s recent decision to adopt the debt-to-GDP ratio as the key fiscal anchor from 2026–27 onwards, with a national target of reducing the ratio to 50±1 per cent by March 2031. For Jammu and Kashmir, already above this threshold, the policy shift could trigger stricter financial scrutiny and borrowing constraints in the future.
Jammu and Kashmir’s status as a Union Territory with a special administrative structure means that a large share of its expenditure is supported by central transfers. However, experts say the persistent gap between expenditure and revenue, limited local tax capacity, and a slow-growing economy have all contributed to its mounting debt burden. Capital-intensive infrastructure development, limited industrial base, and governance transitions since the revocation of its special status in 2019 have further compounded the fiscal challenges.
Other states with high debt burdens include Nagaland (47.8 per cent), Arunachal Pradesh (45.9 per cent), and Punjab (44.5 per cent). Interestingly, five of the top 10 high-debt states are from India’s northeast, underscoring the impact of structural economic disadvantages such as rugged geography, sparse populations, and weak industrial ecosystems.
Meanwhile, India’s economic trajectory at the national level remains bullish. Yet the contrast between states like Gujarat (15.3 per cent debt-to-GDP), Maharashtra (18.4 per cent), and Karnataka (24.9 per cent) — all with robust manufacturing and service sectors — and debt-stressed regions like Jammu and Kashmir underscores the growing inter-state disparity in fiscal resilience.
For Jammu and Kashmir, the road ahead will require a mix of structural economic reform, revenue mobilisation, and disciplined expenditure, especially as the Union Territory aims to attract private investment and promote tourism and infrastructure as growth engines. But without a clear plan to rein in debt, the high debt-to-GDP ratio may restrict the UT’s capacity to fund development projects and access favourable borrowing terms in the future.
