Jammu and Kashmir's economic landscape: Of progress and challenges

But the region spends a considerably higher amount on generating assets relative to its economic size compared to the average seen in other states

The economic landscape of Jammu and Kashmir (J&K), which is set to hold its first Assembly elections as a Union Territory this September and October, paints a mixed picture. The region has seen far less capital expenditure than initially announced.

Since 2018-19, the actual expenditure on asset generation has consistently fallen short of Budget Estimates. On average, J&K has only managed to spend 40 per cent of its projected capital expenditure. For example, the UT projected Rs 41,335 crore in capex for 2022-23, but the actual spending was Rs 14,666 crore. Similarly, in FY22, it budgeted nearly Rs 40,000 crore but ended up spending only Rs 15,309 crore.

Despite this, J&K allocates a higher proportion of its economic resources to generating assets compared to the average Indian state/UT. It spent 6.43 per cent of its gross state domestic product (GSDP) on capital expenditure, while the national average of all states stood at 4.53 per cent in FY23. Projections, however, are steeper, with the region’s capex expected to have risen above 13 per cent of GSDP in FY24 (Revised Estimate) and hit 14 per cent in FY25 (Budget Estimate).

Three-fourths of J&K’s capital spending is driven by central government support and repayment of loans. The Prime Minister’s Development Package, a reconstruction plan announced in 2015 with an initial outlay of over Rs 80,000 crore, accounts for more than 40 per cent of total capex each year. The allocation under this programme for the current year stands at Rs 16,500 crore — the highest in seven years. The abrogation of Article 370 and the reorganisation of the erstwhile state have left the UT of J&K with projects worth Rs 58,000 crore. 

Expenditure under other central sector schemes makes up another 21 per cent of capex.

To attract investment, both domestic and foreign, into the UT, the Centre has introduced various industrial policies and schemes. According to the J&K Budget, tabled by the Union Finance Minister Nirmala Sitharaman in Parliament, “a total of 889 units with investment of Rs 18,185 crore and employment of 46,857 have already started work on the ground.” Some reports suggest that J&K has received investment proposals worth more than Rs 90,000 crore, and over the past three years, it has attracted Rs 5,000 crore in industrial investments.

Despite this, the startup ecosystem in J&K remains relatively small. In 2022, the region had fewer than 200 officially recognised startups, according to figures presented in Parliament.