SRINAGAR: Jammu and Kashmir's economy grew at a healthy clip in 2024-25, with the Gross State Domestic Product (GSDP) expanding by 11.18 per cent over the previous year. Yet the latest report of the Comptroller and Auditor General of India (CAG), tabled in 2026 as Report No. 02, reveals a troubling paradox at the heart of J&K's finances: economic growth and fiscal self-reliance are moving in opposite directions.
The report, which covers the Union Territory's finances for the year 2024-25, finds that while the UT's revenue receipts increased by 6.12 per cent during the year, this growth was driven almost entirely by an increase in grants from the Government of India, not by any meaningful improvement in J&K's ability to generate its own revenue.
The CAG notes plainly that "growth of own tax revenue was 2.5 per cent". This figure stands in sharp contrast to the economy's double-digit expansion.
72 Paise of Every Rupee
The structural dependence of J&K on central transfers is not new, but the CAG report documents its scale in stark terms. Of the total revenue receipts of ₹74,401.16 crore in 2024-25, Grants-in-Aid from the Government of India accounted for ₹53,279.80 crore, constituting almost 72 per cent of J&K's total revenue receipts.
This ratio has remained stubbornly high across the five-year period examined in the report. Between 2020-21 and 2024-25, grants from the Centre ranged between 71 and 75 per cent of total revenue receipts in every single year. The CAG observes that this "reflects UT Government's high fiscal dependence on Grants-in-Aid from Government of India," and warns that "diversifying revenue resources and strengthening the local tax base are essential for sustainable fiscal stability and development."
The grants themselves rose from ₹49,774.14 crore in 2023-24 to ₹53,279.80 crore in 2024-25, an increase of over ₹3,500 crore. Without this infusion, J&K's revenue position would have worsened significantly. The report notes that the increase of ₹4,293.47 crore in total revenue receipts during 2024-25 was "mainly due to an increase in Grants-in-Aid."
A Weakening Share of a Growing Economy
The performance of J&K's own tax collections points out to the deeper flaws. J&K’s Tax Revenue, comprising SGST, state excise, vehicle tax, stamp duty and registration fees, taxes on sales and trade, and land revenue, rose by just ₹346.16 crore, or 2.49 per cent, in 2024-25, reaching ₹14,249.38 crore.
The CAG Report describes this as evidence of "a weakening revenue performance relative to the size of the economy." As a share of GSDP, Tax Revenue actually fell from 5.89 per cent in 2023-24 to 5.43 per cent in 2024-25. This means that J&K is collecting a smaller slice of a larger economic pie.
The shortfall against targets was equally alarming. The Budget Estimate for J&K’s own Tax Revenue in 2024-25 was ₹20,860 crore; actual collections came in at ₹14,249.38 crore, a shortfall of around 32 per cent. The report attributes this to "overestimation and unrealistic revenue forecasting," as well as "inefficiencies in revenue mobilisation."
The largest component of Tax Revenue - the State Goods and Services Tax - was budgeted at ₹14,000 crore but yielded only ₹8,585.93 crore, a gap of nearly ₹5,415 crore. State Excise and Land Revenue also registered declines from the previous year.
The buoyancy ratio, a measure of how responsively a revenue stream grows with the economy, for J&K's own revenue stood at just 0.35 in 2024-25, down sharply from 1.30 in 2023-24. A ratio below one means that own revenue is growing more slowly than the economy itself. In 2024-25, it was growing at less than a third of the GSDP's rate.
Committed Costs Crowd Out Development
The squeeze on J&K's fiscal space is further compounded by the structure of its expenditure. Out of total expenditure of ₹82,547.28 crore in 2024-25, revenue expenditure accounted for 85.37 per cent.
Within this, committed expenditure including salaries, pensions, and interest payments, consumed 68.30 per cent of revenue expenditure, leaving limited room for discretionary or developmental spending.
Interest payments alone reached ₹10,874.51 crore in 2024-25, up from ₹9,924.96 crore the previous year, as the government's debt burden continued to grow. Pension outgo rose sharply to ₹14,155.07 crore from ₹9,396.24 crore in 2023-24, largely due to payment of arrears from previous years.
Capital expenditure, the spending that builds roads, schools, hospitals, and productive infrastructure, declined marginally in absolute terms, from ₹12,089 crore in 2023-24 to ₹12,060 crore in 2024-25. As a share of GSDP, it fell from 5.12 per cent to 4.60 per cent, indicating, as the CAG puts it, "a relative slowdown in capital formation by the Government."
Debt Rising, Targets Missed
J&K's outstanding liabilities have risen steadily and steeply. From ₹14,880.48 crore in 2020-21, total outstanding liabilities reached ₹45,165.86 crore in 2024-25 — an increase of over 200 per cent in five years. As a share of GSDP, outstanding liabilities climbed from 8.87 per cent in 2020-21 to 17.21 per cent in 2024-25.
However, this figure does not capture the full picture. When liabilities of the erstwhile state of Jammu and Kashmir are included, outstanding liabilities stand at 48.47 per cent of GSDP — and this excludes off-budget borrowings of ₹23,197.08 crore.
The fiscal deficit in 2024-25 stood at ₹8,145.68 crore. J&K was unable to contain its deficit within the targets set in its own budget documents, a failure the report flags as a compliance concern under the J&K Fiscal Responsibility and Budget Management Act.
The CAG's overall assessment is measured but pointed. The consistent decline in J&K's total expenditure, revenue expenditure, and capital expenditure, all relative to GSDP, "indicates that the government's ability to generate revenue and its overall spending are failing to keep pace with the growth of its economy."
The report concludes that "the increasing debt load, high committed expenditure, and limited capital investment raise concerns about fiscal sustainability," and calls for "revenue augmentation, better expenditure control, and structural reforms to ensure long-term fiscal health."
In effect, the CAG has found that Jammu and Kashmir's economy may be growing, but its government is becoming, year by year, more dependent on New Delhi to stay afloat.
CAG Report on J&K Economy 2024-25
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