Kickstarting Kashmir's economy will be PM Narendra Modi's next challenge

Greater influx of labour and capital from rest of India will enable Kashmir and Kashmiris to come out of their economic rut

With Article 370, which gave special status to Jammu & Kashmir, now abrogated, the doors to development in the troubled Union Territory that has long been stuck in an economic rut despite its abundant natural resources, business potential and tourism avenues could finally be thrown open to one and all. An average Kashmiri earned just about Rs 5,000 a month in 2016-17, almost half of what an average Indian earned every month. While there is no visible poverty in Kashmir owing to strong community bonds, the state has been stuck in an economic rut if Reserve Bank of India (RBI) data is anything to go by. An average Kashmiri still earns considerably more than other poor states of India like Bihar, Uttar Pradesh and Madhya Pradesh. But since 2004-05, these poor states, or the BIMARU states, have seen much sharper increases in their per capita income than Jammu and Kashmir. While the average income of Indians increased almost four fold during the last decade and a half, residents of Jammu and Kashmir saw their per capita incomes increase by two and a half times during this period. This put them at par with certain north eastern states like Nagaland, Mizoram and Meghalaya, but better than some other states like West Bengal. Clearly a state, which has tremendous business potential owing to its diverse geographic landscape that include the plains of Jammu division and the natural resources of Kashmir division, hasn’t progressed with the rest of India. Even if the new base year (2011-12) is taken into consideration, the per capita income of a Kashmiri has risen by just 17 per cent from 2011-12 to 2016-17. Residents in other parts of India have seen their incomes rise at twice this rate. 

One of the foremost benefits of the abrogation of Article 370 would be the freedom for non-permanent residents of the state to buy property and invest money in the state. Owing to discriminatory policies, many businesses were shying away from investing in manufacturing, services and tourism in the state. One of the key parameters of business interest and development – gross fixed capital formation – has been languishing in Kashmir. In 2016-17, the gross fixed capital formation in Kashmir stood at Rs 645 crore – back to its 2006 levels. The sorry state of business activity in Kashmir can be gauged from the fact that in 2004, gross fixed capital formation in Kashmir was double than that of Bihar – one of India’s poorest states. But now this key development and investment parameter is four times higher in Bihar as compared to Kashmir. 

Since 2011-12, when a new base year was adopted for domestic product calculations, Kashmir’s gross domestic product in the manufacturing sector has grown at just 32 per cent – lower than national average of almost 50 per cent. In fact, manufacturing GDP growth in Kashmir has been lower than much poorer states like Bihar, Madhya Pradesh and Uttar Pradesh. While the rough mountainous terrain of Kashmir may not be conducive to setting up factories (barring the Jammu region), a look at the growth of services in the state also paints an extremely sorry picture. Given its tourism potential and the proliferation of internet, the services sector in Kashmir too has failed to match up with the rest of India. The service sector GDP in the Union Territory (UT) grew at 32 per cent from 2011-12 to 2016-17; same as its manufacturing GDP growth. This was again less than the all India average where service sector GDP grew 52 per cent. In fact, it was considerably lower than all BIMARU states including Rajasthan.

Probably the only bright spot for Kashmir has been its low unemployment rates. This has been primarily on account of the inability of non-permanent residents of the state to bag whatever little jobs are available either in the government, or the private sector in Kashmir. With that about to change, it remains to be seen how Kashmiris adjust and prosper in the new economic and social order that awaits them.