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J&K Economy Is A Bullet Train Running On A Steam Engine

Competition is non-existent, marketing is patchy, supply chain is inefficient. Consumers suffer. The economy is under duress, but the strong community bonds hide poverty and distress well.

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A state is reborn. Let the celebrations begin. 

The labour pangs lasted 70 years, mostly because of political inertia.

Despite lower per capita income, the state does well across several indicators. Poverty rate is 10%, half of national average; urban employment rate is double. Literacy rate of 67% is par. Human Development Index is better, as are several other demographic barometers, including mortality rate, life expectancy etc.

However, the economy is erratic and lumpy, running on one wheel and imbalanced. The service sector contributes about 65% to the GDP, supporting 90% of the livelihood opportunities, that is largely unskilled and unproductive, earning less than half of national average. 

The economy is a paradox

The low wage, low productivity spirals a vicious cycle of low wages, low consumption, low investment and lower growth.

Low growth is a concern. Other related indicators are concerning too; manufacturing growth is lower than even the least developed states. Inadequate, underdeveloped infrastructure hinders industrialisation; land is in short supply. Technology is inaccessible. Talent and capacity is limited. Capital is scarce and always expensive. J&K has amongst the lowest credit-to-GDP ratio. 

Competition is non-existent, marketing is patchy, and supply chain is inefficient. Consumers suffer. The economy is under duress, but the strong community bonds hide poverty and distress well.

Opportunities are low hanging, and plenty. Tourism contributes just 7% to GDP, handicrafts, agriculture, and horticulture each, much less. So, there is hope, and potential multiplier. 

Potential alone won’t fetch investment  

Private investment of ₹1,200 crore says it well. 

The population of just 1.25 crore, makes investors apprehensive, lower purchasing power disheartened and ‘boosted’ growth nervous. State will need to define and design a sustainable industrial foundation, innovative and yet a robust implementation mechanism for sustainable and balanced development.

The ecosystem needs an overhaul. Start by opening the economy. Sound fiscal management and building capacity should be prioritised. Focus on a growth oriented and yet inclusive framework that encompasses good governance.

This is necessary and only the beginning and may not be enough. More needs to be done, many other issues need to be addressed, and on a war footing. Attracting investment needs a holistic package and sustained effort.

However, the centre needs to be careful in ‘opening’ the economy. A key to economic wellness and social harmony is higher employment rate. The key challenge, but not well articulated or recognised is ‘protecting’ jobs for the locals. ‘Migration into’ can be disrupting and may spiral mistrust and animosity to investment and integration.

Similarly, ‘migration out’ is not brain drain but ‘brain circulation’, enhancing  talent.

Bullet train running on steam engine

Political integration means nothing without economic integration. 

Economic prosperity depends on land, labour and capital. Labour and talent are nourished by sweat, flourished with courage of the heart, and strengthened by the muscles of the arm. There is no denying the fact that people in the state are hardy and brave. They have been fighting the system for years. They will seize the opportunities, do well and create a vibrant economy.

When the economic interest (livelihood, progress, wellbeing) clashes with political interest (religion, power), it is always the economic interest that wins.

The PM has taken a bold gamble. Economic ‘integration’ is his trump card; economic growth all the aces.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
jammu and kashmir economic growth

Dr. Vikas Singh

The author is a senior economist, columnist, author and a votary of inclusive development

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