Omar Abdullah’s second budget emphasised fiscal realism and structural reform, outlining an infrastructure-led, capital-intensive strategy to boost production with a narrow resource base, reports Masood Hussain
Concluding the motion of thanks to the speech delivered by Lt Governor Manoj Sinha on the eve of his second consecutive budget presentation, Omar Abdullah hinted at the crisis he is in. “We were in the budget-making and all of a sudden, the finance secretary, who was pivotal to the exercise, was transferred,” Omar told the assembly. “It took the Chief Secretary to get into a real effort to retain the officer till February 19.”
Omar did not accuse anyone of this, but he clearly detailed the systemic disempowerment of the system he has been leading for nearly 16 months. The central services are not under his control, and the erstwhile Jammu and Kashmir cadre is subsumed into the AGMUT cadre, and the decisions take place somewhere else.
Interventions beyond the authority of the Jammu and Kashmir Chief Minister, who used to have a lot of power and authority before Jammu and Kashmir was converted into a federally-managed and almost-LG ruled Union territory, might have left telltale things in Omar’s 105-minute-long speech. People have already picked the mismatch in key numbers between the budget and the Economic Survey, a key document that was placed on the table, a day ahead of the budget. Interestingly, the two documents are produced by the Finance Department and the Planning and Monitoring Department. Though Omar heads both, the bureaucratic heads are different.
The survey indicates slow growth, but the budget documents tell an appreciative growth story. Even the size of Jammu and Kashmir’s modest economy has two different figures, with a difference of Rs 2000 crore, in the two documents. “Usually these two documents supplement each other; the survey tells the story of the state of the economy, and the budget comes with solutions, and figures remain the same,” one retired official of Jammu and Kashmir said. “The government will manage spending what it eventually gets, but this confusion will get into the research as the scholars will get frustrated about which one to take on face value.”
Regardless of the figures, the fact remains that when Omar Abdullah rose to present his second budget, the tone of his speech suggested less a routine financial exercise and more a reckoning with structural realities. The document he tabled did not attempt rhetorical flourish or grand populism. Instead, it read like a diagnosis of an economy weighed down by inherited constraints, high committed expenditure, weak internal revenues, infrastructure gaps and an enduring dependence on external support, and a statement of intent to gradually correct that imbalance through investment and institutional reform.
Interesting Economy
Jammu and Kashmir is a small economy, the size of which Omar put at Rs 2,88,422 crore. It is an interesting economy as well because it earns from ‘export’ and survives on ‘import’. That is perhaps why, even at the peak of turmoil, the people continued have their two ends meet, and the cost of the crisis did not lead people to beg on the roads. That is perhaps why policymakers need to scale the two ends of the income and expenditure of a society in such a way that a fair balance is maintained.
Historically, this has occupied the mind space of all the policy makers in the recent past, and Omar is not excluded. In his budget speech, he argued that Jammu and Kashmir can no longer afford to run primarily on consumption and salaries. It must begin producing more than it spends, creating assets rather than liabilities, and expanding its own revenue base rather than leaning excessively on Central transfers. That premise shapes nearly every major intervention proposed for the coming financial year.
Omar acknowledged candidly that the Union Territory’s finances remain structurally tight. Own tax and non-tax revenues, he noted, meet barely a quarter of total requirements, while salaries, pensions and debt servicing consume close to 60 per cent of expenditure. The arithmetic leaves little room for developmental spending and forces the government into a narrow fiscal corridor where even modest new initiatives strain resources. It is this imbalance, he argued, that the present Budget seeks to correct through better revenue mobilisation, tighter expenditure control and a decisive shift toward capital creation.
Omar’s emphasis was on capital expenditure, rather than subsidy-led expansion, and seemingly, it is his fiscal strategy. Throughout the speech, infrastructure appears not as a supporting element but as the principal engine of growth. Roads, power generation, irrigation, urban services and disaster mitigation are treated as investments that will multiply economic returns over time. The government has leaned heavily on the Centre’s Special Assistance to States for Capital Investment programme, under which Jammu and Kashmir has secured large tranches of long-term, interest-free loans intended specifically for asset creation. These funds, the Chief Minister said, would be deployed to build durable infrastructure capable of supporting private investment and expanding productive capacity.
The Income
The figure of Omar’s second budget is ambitious. Omar said he intends to spend Rs 127767 crore, a figure that is the highest ever given the volume of the budgets that Finance Ministers in Jammu and Kashmir or the central Finance Minister (who presented all budgets – 2021, 2022, 2023 and 2024) have presented. The larger reality is that never in its history has Jammu and Kashmir ever been able to spend Rs one lakh crore a year.
Before Omar’s intent and the strategy are discussed, it is better to understand where this money will come from and where it will go.
Jammu and Kashmir has its own resources, albeit narrow. It levies taxes, and it provides services for which it seeks costs. Jammu and Kashmir will have a total tax collection for 2026-27 at Rs 20,700 crore. It includes Rs 13000 crore of GST (in 2025-26, we estimate of collecting Rs 11500 crore only); Rs 3000 crore of excite duty (Rs 2990 for 2025-26); Rs 2100 crore of taxes on sales and trade; Rs 1100 crore from stamp duty (2025-26 estimate is Rs 1900 crore) an additional Rs 1500 crore from other taxes.
The services provided (non-tax revenue) are anticipated to be Rs 11100 crore (for 2025-26, it is revised at Rs 12104 crore). It will include the power tariff of Rs 7100 crore and other incomes of Rs 4000 crore.
Omar’s budget has no targets for additional resource mobilisation for the next fiscal. Last year, he had anticipated an income of Rs 7453 crore under this head, but data shared in the budget suggest that not a single penny was mobilised so far, as a result of which no such figure was put in the budget for 2026-27.
The major income to the erstwhile state is the central devolution. For 2026-27, the central grants were put at Rs 58218 crore. In the current fiscal, the revised estimates put this figure at Rs 56136 crore, which is Rs 2488 crore less than what was originally estimated at the presentation of the budget.
The entitled grants include Rs 42752 crore of revenue deficit grant (already announced in the central budget last week); Rs 1550 crore of reimbursement of police expenditure; Rs 279 crore of SDRF, Rs 50 crore of SRE, Rs 187 crore of other central schemes – a total of Rs 44818 crore. Besides, it anticipates getting Rs 13400 crore as central sponsored schemes against the current fiscal’s Rs 12246 crore. No money has come to Jammu and Kashmir under PMDP, locally named TAMIER.
A general impression is that the central devolutions are actually the largesse. It is incorrect. Jammu and Kashmir, as part of the Union of India, has a percentage of the central kitty as per the formula. After the state was converted into a UT, the same funds are routed through the Ministry of Home Affairs as grants. These were earlier coming straightaway to the consolidated fund. This is part of Jammu and Kashmir’s own revenue.
Omar’s budget suggests that it will also have a range of debts and non-debt creating incomes (marginal) that will add upto another Rs 23749 crore. Technically, these are called Capital Receipts. This includes Rs 17073 of borrowings (in 2025-26, the revised figure put this section at Rs 14493); Rs 1189 crore from monetisation of assets; loans from NPS and provident fund to the tune of Rs 2421 crore; and Rs 66 crore from other sources.
However, the major element of the capital receipts is SASCI (Special Assistance to States for Capital Investment), which will fetch the Jammu and Kashmir government an interest-free debt of Rs 3000 crore. It was said that even in the last fiscal, the government accessed Rs 3587 crore of SASCI funds. These funds, aimed at helping states develop tourist spots comes as interest-free debt and are supposed to be returned after 50 years. Speaking to the house, a day ahead of the budget, Omar said he had put up a real fight with the government at the centre to make this happen, and it eventually happened. Jammu and Kashmir had earlier been denied funds under this because it had ceased to be a state, and now that decision has been revoked, and funds have started moving.
Omar’s ambitious figure still required Rs 14000 crore. This will come as Ways and Means Advance (an RBI arrangement his government negotiated in his last term) and an overdraft of Rs 2000 crore. Omar said that these two figures would always be part of the public finance but would rarely be mentioned in the budgets. In 2024-25, this figure made up Rs 28000 crore and was reduced to Rs 13312 crore for 2025-26. So, he got the cat out of the bag, finally. These are short-term debts that are routinely managed within the fiscal year.
The Expenditure
On the other side of the balance sheet is the expenditure. The committed (revenue) expenditure of the erstwhile state stands at Rs 80640 crore. This includes the salary of its staff worth Rs 24683 crore, the pension to its retired employees, which has been put at Rs 15777 crore. The revised estimate figures for these two expenditures for 2025-26 stand at Rs 24938 crore and Rs 16011 crore, respectively, and both the figures are more than the figures anticipated at the presentation of the budget.
It is worth mentioning here that Omar is heading a small government now, given the people it has on its rolls. The Home Ministry has already taken under its control and funding the Jammu and Kashmir Police, the most populous of its departments. Now, the government has on its rolls 2.7 lakh employees in various government departments, 21340 in the public sector (corporations) it owns, 11982 in aided institutions other than local bodies and 8919 employees serving the local bodies. This makes a total of 312241.
The debt servicing (interest) and the repayment of debts are two major expenditures. Omar’s budget documents suggest the government plans to pay an interest of Rs 12283 crore, and Rs 7809 crore of debt would be returned this fiscal. This means Rs 20092 crore would be taken by debts.
Power purchase is a major mess for a water-abundant and energy-deficient Jammu and Kashmir. The budget estimates that it would require Rs 9300 crore for purchasing power.
Besides, Rs 6576 crore will go into grant-in-aid, and other heads will take Rs 7640 crore.
This leaves Omar’s government with Rs 16327 crore of funds for developmental activities and Rs 8909 crore plus 4381 crore of matching share by the state in CSS for developmental activities. This is a total of Rs 29617 crore. The finance department, unlike the standard practice, has not shared the actual expenditure on developmental activities of the last three years. Budget being a continuous process, the incomes and expenditures are assessed on estimated, revised, pre-actuals and actuals in four budget presentations so that it offers a clear trend of what is happening. The pre-actuals of 2023-24 suggest the government did reach an actual developmental expenditure of Rs 20409 crore.
Omar’s Limitations
When most of the income is clearly telling a finance minister, where it is going in the next 365 days, he remains restricted in playing with the ideas. All ideas need money, and Jammu and Kashmir has a narrow base for development.
Omar’s argument was straightforward: a region long defined by fragility must first strengthen its physical backbone. Without reliable roads, stable power, functional irrigation and modern urban systems, industrial growth and employment generation will remain aspirational. Capital expenditure, in this framework, is not merely construction spending; it is a precondition for economic transformation. But where is the money that would get into all this? In fact, the central government is spending more than Jammu and Kashmir’s capital expenditure on developmental activities in a year because it has various strategic projects as its priority.
That is perhaps why Omar got into various centrally sponsored schemes to make a difference. He devoted considerable attention to the primary sector, recognising that a significant share of Jammu and Kashmir’s population continues to depend on farming and allied activities for income. For decades, however, agriculture has remained vulnerable to low productivity, fragmented landholdings and weak market linkages. The new approach seeks to move away from subsistence and toward enterprise.
Primary Sector
The Holistic Agriculture Development Programme o(HADP) occupies centre stage in this effort. Conceived as a comprehensive overhaul rather than a piecemeal intervention, the programme aims to raise productivity, diversify crops, modernise practices and strengthen value chains from farm to market. Omar’s speech spoke of expanding cultivated areas, improving seed replacement rates, promoting protected cultivation through greenhouses and polyhouses, and using digital platforms to connect farmers with advisory services and markets. Irrigation potential is being enhanced, insurance coverage expanded, and support services institutionalised
What emerges is a deliberate attempt to reposition agriculture as an income-generating sector capable of absorbing labour and stimulating rural demand. The dairy segment illustrates this shift particularly well. For this sector, Omar outlined a more investment-heavy and structural intervention. The government intends to move milk production from fragmented household-level activity to an organised, processing-led system that guarantees procurement, reduces wastage and ensures better returns for farmers. He suggested establishing multiple milk processing plants and a significant expansion of milk processing capacity across the Union Territory. By strengthening chilling, collection and processing infrastructure, the administration aims to create an assured market for dairy farmers and build a formal supply chain from villages to consumers. His objective is threefold: to raise farmer incomes through reliable procurement, to reduce dependence on imported dairy products by increasing local output, and to generate employment across the dairy value chain, including collection, transport and processing.
Besides, Omar sets out to expand poultry as a structured livelihood and enterprise activity rather than leave it as scattered backyard production. He intends to increase domestic availability of eggs and poultry meat by strengthening local production systems so that Jammu and Kashmir reduces dependence on supplies from outside.
To achieve this, the administration plans to promote scientific poultry farming, improve hatchery and chick supply, and strengthen veterinary and extension services that support farmers with technical guidance and disease control. The sector is being integrated into the larger livestock and allied agriculture framework under the HADP, to encourage small farmers, rural youth and women to take up poultry as a steady income source.
The Secondary Sector
Industry, too, finds a place within this broader narrative of structural reform. The Chief Minister’s tone here is pragmatic rather than promotional. Instead of announcing sweeping incentive packages, the speech concentrates on easing procedural bottlenecks that have historically discouraged investors. Regulatory simplification, self-certification mechanisms and faster clearances are presented as more effective than heavy-handed controls. The objective is to make it easier for businesses to begin operations and comply with rules without being trapped in layers of bureaucracy.
This regulatory rationalisation is complemented by measures aimed at reviving existing industrial capacity. The government recognises that many units have struggled due to financial stress and outdated infrastructure. By extending support mechanisms and enabling rehabilitation, the administration hopes to preserve jobs while encouraging modernisation. The broader message is that industrial growth will depend not merely on attracting new capital but also on unlocking the potential of what already exists
The Services Sector
Tourism, traditionally one of Jammu and Kashmir’s most visible sectors, was treated with a similar blend of optimism and caution. The region recorded over a crore and a half tourist visits in the past year, a figure the government views as evidence of resilience and renewed confidence. Yet the speech stops short of celebrating raw numbers alone. Instead, it emphasises the need to spread tourism geographically and seasonally, develop new destinations, and invest in environmental infrastructure to prevent overuse of fragile ecosystems. Waste management, sewage treatment, improved connectivity and diversified attractions are all part of a strategy aimed at converting episodic booms into sustained, year-round activity
In many ways, the power sector represents the most consequential gamble embedded in the Budget. For years, the cost of purchasing electricity has strained public finances, while technical and commercial losses have undermined distribution efficiency. Abdullah’s speech treated energy reform not merely as a utility issue but as a fiscal imperative.
The Social Dimension
Beyond infrastructure and production, the Budget acknowledged the social dimension of growth. Omar repeatedly returned to the idea that economic reform must translate into tangible improvements in everyday life.
One of the best things Omar did was to address his poll promise of 200 units of free power to the poor. Knowing fully well that in a twin power centres may not help him on this front, he used an existing heavily subsidised central scheme to offer solar power to the poor families. He also put the controversy at rest by offering six free LPG cylinders annually for eligible BPL families.
In his last Budget speech, Omar had announced a public transport relief measure aimed at improving mobility and social inclusion by providing free bus travel to women. This was a success, and this year he extended the same facility to specially-abled persons across Jammu and Kashmir.
In the last budget, he enhanced the marriage assistance from Rs 50,000 to Rs 75,000 per beneficiary for poor girls belonging to Antyodaya Anna Yojana (AAY) families, and the earlier educational eligibility condition of passing Class 8 was removed to widen access. Following these changes, the number of beneficiaries increased significantly from 26,000 in 2024-25 to 44,302 in 2025-26, resulting in an expenditure of Rs 234 crore as of December 2025, reflecting both expanded inclusion and higher per-case support.
On employment, however, Omar had nothing in his kitty. Public sector vacancies are being filled, he said, but the larger emphasis lies on preparing youth for private enterprise and entrepreneurship. On this front, as well, he limited himself to Mission Yuva, a self-employment scheme in which the banks extend loans, and the government offers interest subvention and quick release of funds.
Taken together, these initiatives reveal a consistent philosophy. The Budget seeks to replace a grant-driven model with one anchored in productivity, assets and self-reliance. Rather than distributing short-term relief, it attempts to create conditions in which growth becomes self-sustaining. The approach is cautious, sometimes technocratic, and least political but undeniably structural.
