An overview of Jammu Kashmir economy: Jammu and Kashmir’s economy is predominantly based on agriculture and allied activities. The Kashmir Valley is also known for its sericulture and cold water fisheries. The Kashmiri willow is used to make high-quality cricket bats, and they have a huge market for it. The Kashmiri saffron is world-renowned and brings a handsome amount of foreign exchange (about 49% of the state’s total exports). Agricultural exports from Jammu and Kashmir include apples, barley, cherries, corn, millet, oranges, rice, peaches, pears, saffron, sorghum, vegetables, and wheat, while manufactured exports include handicrafts, rugs, and shawls.
Horticulture plays a vital role in the economic development of the state. With an annual turnover of over Rs. 300 crores, apart from foreign exchange of over Rs. 80 crores, this sector is the next biggest source of income in the state’s economy. Horticultural produce from the state includes apples, apricots, cherries, pears, plums, almonds and walnuts.
The Doda district has deposits of high-grade sapphire. Though small, the manufacturing and services sector is growing rapidly, especially in the Jammu division. In recent years, several consumer goods companies have opened manufacturing units in the region. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has identified several industrial sectors which can attract investment in the state, and accordingly, it is working with the union and the state government to set up industrial parks and special economic zones. In the fiscal year, 2005–06, exports from the state amounted to Rs. 1,150 crore. However, industrial development in the state faces several major constraints including extreme mountainous landscape and power shortage. The state is one of the largest recipients of grants from New Delhi, totalling $ 812 million per year. In an attempt to improve the infrastructure in the state, the Indian government has commenced work on the ambitious Kashmir Railway project which is being constructed by Konkan Railway Corporation and IRCON at a cost of more than US$2.5 billion.
Before insurgency intensified in 1989, tourism formed an important part of the Kashmiri economy. The tourism economy in the Kashmir valley was worst hit. However, the holy shrines of Jammu and the Buddhist monasteries of Ladakh continue to remain popular pilgrimage and tourism destinations. Every year, thousands of Hindu pilgrims visit holy shrines of Vaishno Devi and Amarnath which has had a significant impact on the state’s economy. The Vaishno Devi yatra alone contributes Rs. 475 crore to the local economy annually. Gulmarg, one of the most popular ski resort destinations in India, is also home to the world’s highest green golf course.
However, with the scrapping of article 370 and 35-A, all these sectors of Jammu and Kashmir’s economy has taken a toll. Due to increasing violence, the dissent of people, internet and connectivity shut down it has become even more difficult to carry out business than usual.
What is article 370?: The article was drafted in Part XXI of the Constitution as a: Temporary, Transitional and Special Provisions. The article allowed the state a certain amount of autonomy and special status – its own constitution, a separate flag and freedom to make laws. Foreign affairs, defence and communications remained the preserve of the central government.
As a result, Jammu and Kashmir could make its own rules (article 370 along with 35-A) relating to permanent residency, ownership of property and fundamental rights. It could also bar Indians from outside the state from purchasing property or settling there. The constitutional provision has underpinned India’s often fraught relationship with Kashmir, the only Muslim-majority region to join India at partition.
Many Kashmiris believe that the BJP ultimately wants to change the demographic character of the Muslim-majority region by allowing non-Kashmiris to buy land there.
What changed on the ground after the abrogation?: After 5th August 2019, the state of Jammu and Kashmir has been divided into three smaller regions which are to be centrally administered based on the majority i.e., Jammu with Hindu majority, Kashmir with a Muslim majority and Ladakh with Buddhist majority.
Jammu Kashmir will no longer have a separate constitution but will have to abide by the Indian constitution much like any other state.
All Indian laws will be automatically applicable on Kashmiris, and people from outside the state will be able to buy property there.
The government says this will bring development to the region. Prime Minister Narendra Modi has said the decision to bifurcate J&K was taken after a “great deal of thought” and that it would certainly benefit the people of Jammu and Kashmir and Ladakh. He said he was confident that after the abrogation of Article 370, the investment would start coming in. He said that leading businesses had already shown interest in investing in J&K (in an interview with the Economics Times). He further said, the revocation of 370 will lead to “Stability, market access, and predictable laws” in the state, which could help it gain investment, especially in key sectors like tourism, agriculture, IT, healthcare among others. “This will help develop an ecosystem which will give better rewards to the skills, hard work and products of the people in the region”.
The actual impact of the abrogation of the article on the economy: According to an article by India Today, The current slowdown in Indian economy is well depicted in Jammu and Kashmir’s labour market conditions as an unemployment rate of 7.9 per cent in June 2019 was, in fact, the highest in 33 months i.e. since September 2016. According to Centre for Monitoring Indian Economy (CMIE) monthly time series data on unemployment, among all the states, Jammu & Kashmir had the highest monthly average unemployment rate of 15 per cent between January 2016 and July 2019. It is more than double the national monthly average unemployment rate of 6.4 per cent during the period.
The government spending on industry sector as a per cent of the GSDP has not really picked up in recent years and the total capital expenditure on industry declined to Rs 114 crore in 2016-17 from Rs 153.4 crore in the previous year. At one point, the state government was offering 14 different incentives to the industry. But the delay in sanctioning them did not create the desired results. The Investments have been sluggish in the entire country so Jammu and Kashmir is no exception. According to the World Bank Survey of 2016, the Northern state was ranked 29th out of 33 states and UTs in one of the worst-performing lists for investments.
On 6th and 9th November and between December 12 and 14 in parts of Jammu, an untimely heavy snowfall increased the strains on farmers. KCCI said no serious exercise has been undertaken to either assess the losses or to support the helpless farmers. “Tourism sector is in shambles. Artisans and weavers are jobless. With estimated losses of around Rs 2,520 crore, manufacturing is in tatters,” it said.
The Kashmir economy suffered a loss to the tune of around Rs 17,878 crore in four months of restrictions and shut down in the valley following the abrogation of Article 370 and creation of two union territories out of Jammu and Kashmir. A time span of 120 days has been assumed for the calculations. Borrowers of financial institutions have lost their capacity to fulfil their commitments and a substantial number of accounts are likely to turn bankrupt, many business establishments have closed down or are contemplating closure. The sectors directly dependent on the internet like information technology and e-commerce have been ruined. The government intervention in the horticulture sector for which Rs 8,000 crore was earmarked for the purchase of apples has come a cropper and caused price turmoil and panic sales.
Conclusively, the horticulture sector is in distress, tourism is in shambles, and students are suffering because of the ongoing internet blockade. Due to Internet clampdown students have to spend 100-200 INR to fill the forms of competitive exams. It is for the first time in the past 70 years that rural Kashmir is facing such a great degree of the economic slowdown. The apple industry in Kashmir, worth INR 80 billion which contributes eight per cent of J&K’s GDP, has been worst affected. Threats from militants, coupled with the government’s severe clampdown delayed the harvest for over a month, dealing a crippling blow to the industry during the peak harvest season. By the time the government intervened and apple, produce was procured and marketed by NAFED, the damage had been done. Much before this intervention, hundreds of farmers were forced to either sell their produce at throwaway prices or just watch their produce rot.
However, the government has been taking initiatives to revive the economy of Kashmir. Narendra Modi is currently planning for massive investor’s summit in J&K. Industry associations have already come out with their praise, with both the Confederation of Indian Industry (CII) and Assocham noting that the removal of Article 370 and Article 35A will spur private investment.
According to some experts though 370 has an impact on Kashmir economy it is just one among the several factors and certainly not the silver bullet.
What can be concluded is that the future of Jammu and Kashmir still remains uncertain. If the development of the economy means bringing the state under the umbrella of one constitution, the constitution which guarantees us the freedom of speech and expression and movement, how does the government plans to uphold it with so many restrictions imposed is what the real challenge is.