Farce of sunshine economy: Is J&K really the fastest expanding State economy?

According to a new series of gross State domestic product data published by the Central Statistics Office, Jammu and Kashmir along with Arunachal Pradesh has been declared as the fastest expanding State economy in 2015-16. But is the ground reality in sync with the official data?

Jammu and Kashmir’s public debt as part of GDP continues to be 52% as per the recent Economic Survey. Even the fiscal liability has increased from Rs 44,003 cr to Rs 55,000 cr by 2015-16 ending. This is a significant increase of 10%.

These numbers are telling. They make Kashmir’s economy unpromising for its citizens. The high debt-to-GDP ratio further underlines the State’s inability to pay back its debt, thus making the State on high risk of default. This sorry state of economic affairs exists despite the State’s GDP growth rate of 14% (double of the Indian average of 7%).

However, one needs to understand that stating numbers can never explain the reason behind them. And for a layman to understand the relation between the numbers, one needs to ask and inspect: how come the economy is growing at 14% when public debt continues to be at staggering 52%?

The simple answer to this is that in order to keep a steady pace of growth, the state government has been borrowing a lot from the Central government.

So, to say that Kashmir has managed to grow at fast pace—despite political disturbances and other host of problems—would be a blatant lie.

The growth based on debt is artificial and is bound to slow down the moment the plug of borrowing is removed.

But why has J&K been borrowing so much, despite being aware of its inability to pay back the debt?

There are a lot of factors responsible for this.

First, J&K lacks requisite infrastructure, which can bring sufficient revenue to meet its expenditure. For this, the entire blame cannot put on turmoil or on the state government. Natural factors like rough landscape, rural populace, etc also play a part in it.
Then comes the J&K’s fiscal mess.

Notably, unable to meet its revenue expenditure, State borrowed money to finance it. This reflects the financial health of J&K’s economy and its over dependence on the central coffers.

Besides, J&K till now is a special category state receiving 90% of its funds in grants and 10% in loans.

Another detrimental factor in it is the slow demise of tourism.

The geopolitical instability has impacted every socio-economic activity in Kashmir. Besides art and crafts sector, tourism has been the worst hit.

And then comes the never-ending problem of unemployment.

But despite all this, the state counts on agriculture — occupying an important place in J&K’s economy. It contributes 25% to GDP and provides employment to a large number of people.

A part of agriculture, horticulture is the mainstay of J&K economy. However, it has been worst hit by the disturbances. Also, the fertile lands near LoC have become barren due to the relentless shelling and laying of landmines. And having no option left, the villagers out there have long moved out of their traditional occupations and suffered equally in terms of man and material.

It leaves us to industry.

Handicrafts industry is the major contributor to the manufacturing sector, but it hasn’t been able to rise up on growth trajectory due to the disruption caused by the turmoil and paucity of funds.

Industries can create jobs when they have a robust and flexible infrastructure, both physical and capital. So, the youth of the state who are skilled and educated fail to get jobs due to this impediment.

Besides, a serious thought should be spared on a paradigm shift of resistance, keeping the economic avenues at the centre-stage.
Fact remains, that Kashmir is being forced to borrow more than its ability to pay back. And the only way out of this is to work for achieving economic emancipation.

Without economic equality, says Prof Cole, political liberty is a myth.

Such assertion is no alien thing in Kashmir. It’s often being debated on shop-fronts, cafes, canteens, classrooms and drawing rooms. The debaters often come up with mixed, heated and animated responses.

But whatever the rationale behind their conclusions, fact remains, that economic strength is the bedrock for any nation state to continue their struggle for rights.

However, so far, that economic strength is no where visible on the horizon—despite the Central Statistics Office making us believe that ours is a sunshine economy.


Hailing from Srinagar, the writer is a Graduate in Economics and Human Resource Management from Delhi University and is currently pursuing her Masters in Developmental Economics from IGNOU.

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