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The Big Business Push

J&K wants more factories, jobs, business activities, and trade in order to contribute more to the Indian economy. But is it ready for business yet?

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Addressing the nation from the ramparts of the Red Fort in Delhi on the occasion of India’s 73rd Independence Day, Prime Minister Narendra Modi called upon Indian businesses to invest in Jammu and Kashmir. Modi especially asked the film, tourism, and food processing and export industries to look at investing in Jammu and Kashmir. His government followed it up by scheduling an ‘investors’ summit’ in Srinagar from October 12 under the aegis of the Confederation of Indian Industries (CII). There is no doubt massive untapped or under-tapped business potential in the erstwhile state. 

Evidently, the government is keen that J&K becomes an active contributor to the Indian economy as swiftly as possible. But the moot question is: Is J&K ready for business, especially in the backdrop of the abrogation of Article 370 rescinding the special status granted to it since 1948 and the mood in the valley over the manner in which the local people perceive the whole thing was done?  

A massive troop build-up and cutting up off communication links ahead of the nullification of Article 370 and carving up of the Himalayan state into two Union territories of Jammu and Kashmir and Ladakh have thrown life out gear in the valley, creating an atmosphere of uncertainty on the ground. There is no way of knowing when the region will be ready to expand business, welcome new businesses and generate better opportunities for the large younger population.  

Responding to Modi’s Independence Day call, large corporate houses have come out in support of the troubled state with their respective business plans. Reliance Industries Chairman Mukesh Ambani was among the first to promise investment in J&K. His company has announced setting up of a special task force for making investment decision in the state. 

The October summit is intended to pave the way for laying the roadmap for attracting investments to the erstwhile state. Consultancy firm Ernst & Young has been roped in by the CII to identify areas of potential investment as well as key challenges such as land laws, poor transport, and delay in clearances that might affect the business environment for potential investors. 

J&K officials, on their part, have identified pharmaceuticals, food processing, healthcare, education and manufacturing as new focus areas for the Jammu region, while for the valley, they have zeroed in on healthcare, dairy, renewable energy, handicrafts and horticulture. 

Navin Kumar Choudhary, Secretary, Industry & Commerce, Jammu & Kashmir says that his department has been in touch with all major corporate groups that are relevant to the new Union Territory’s demography and all details are getting finalized. 

“We have reached out to all major and medium level players,” he says, adding, “Due to the geography we are keen on medium and small-scale industries than big companies,” he said. 

Sameer Gupta, Chairman, Northern Region, CII says sectors such as IT, auto, wellness and medical tourism will open up soon. “Ladakh is best suited for firms in solar power because of its radiation levels, so we are also targeting the power sector,” he says. 

“The area of Anantnag and Baramulla is well known for cement and other raw materials. We will also showcase case studies of medium and small industries that are operating successfully in J&K. J&K has the advantage of low cost of power, availability of water and low-cost labour, which can attract investors,” Gupta adds. 

Among large corporates, FMCG major ITC has confirmed its participation in the summit. “The proposed investor’s summit will provide an opportunity to examine the prospects and potential in Jammu and Kashmir,” says a company spokesperson.

TCSiON, the specialized education arm of Tata Consultancy says the company has already conveyed its intent to have more examinations in J&K for students so that they don’t have to go out to qualify for jobs.

However, some local Kashmiri industry associations want the summit to be postponed till the political situation becomes normal. They want issues related to the non-availability of land for industrial development, delays in clearances, lack of subsidy for the tourism sector, poor implementation of crop insurance schemes, rehabilitation of areas affected by floods, and decongestion in Srinagar, among other things, to be sorted out by those in-charge of governance before such an event takes place. 

Rakesh Gupta of Jammu Chamber of Commerce and Industry wants the system of approval of clearances and corruption that prevents startups from taking off in Jammu & Kashmir to be addressed. “They have to first make it easier for existing and aspiring businessmen here,” he says. “It will be better if the summit happens after the land laws and other changes after the removal of Article 360 and 35A are in place,” Gupta was recently quoted by a media outlet as saying. 

However, at the time of going to press, there were reports that the proposed summit has been put off for a later date. 

State of J&K economy

Jammu and Kashmir’s economy has so far remained rudimentary at best with horticulture and floriculture as its mainstay. In order to better understand its coming future, it is essential to examine its recent past, particularly a past of celebrating small and medium business enterprises and the vast potential it holds going forward. 

Agriculture: Around 70 per cent of the population of the state resides in the rural areas and are directly or indirectly dependent upon the sector for their livelihood and employability. The contribution of agriculture towards gross state domestic product (GSDP) has remained constant, indicating the onset of a declining trend. Paddy, maize and wheat account for more than 90 per cent of the total food grain production in the state. 

Floriculture: Studies show that the extent of employment generated by flower crops is in the range of 913-1,210 man days per hectare, which is more than the employment generated by food crops, which is in the range of 105-305 man days per hectare. Similarly, the income generated by flower crops is to the extent of Rs 8-9 lakh per hectare compared to Rs 4,000-Rs 52,000 in case of food crops.

Apple: It is the most important fruit crop of J&K taking up about 48 per cent of the area as per the horticulture census 2016-17. It is also important in terms of production (17.26 lakh metric tonne) and provides the maximum marketable surplus of about 30 per cent of A-grade, 40 per cent of B-grade and 30 per cent of C-grade of pre-falls and culled apples totalling around 5.18 lakh mt which then needs to be exploited as raw material input for the processing industry. Increased production due to various developmental schemes has yielded good results and exports worth around Rs 6,500 crore was reported in FY17. 

Food processing: This industry offers tremendous opportunity for commercial exploitation of the state’s horticulture products but commercial processing is around 1 per cent only due to lack of post-harvest and processing facilities as well as unscientific grading and packaging. Therefore, it offers individuals, joint ventures and government organisations opportunities for exploiting the potential. Area under fruits cultivation in J&K has increased from 2.95 lakh hectare in 2007-08 to 3.38 lakh hectare in 2016-17. The production has increased from 16.36 lakh mt in 2007-08 to 22.35 lakh mt in 2016-17.

Youth Unemployment: Unemployment is one of the major challenges facing the state today. With the number of educated unemployed youth running into lakhs, the need for employment creation through youth entrepreneurship is undeniable. This challenge has its own specific dimensions and, therefore, requires specific targeted responses. According to the 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 state is also renowned for handloom and handicrafts products. 

Geographically, this northern-most state of India shares its international border with China, Afghanistan and Pakistan, lies in the Greater-Himalayan ranges and is enclosed with mountains and valleys. Chenab, Jhelum and Ravi rivers, all part of the Indus river system, flow through the state. 

The state is well-connected with an international airport in Srinagar and two domestic airports in Jammu and Leh. It is home to about 53 industrial estates and 32,226 small-scale industrial units with an investment of over $793 million. There are several upcoming ropeways and cable car projects to facilitate better tourist movement.

India Inc is hoping for normalisation of conditions in the state at the earliest for it to be able to cash in the first-mover advantage. Of course, everything will depend on how fast the local administration (along with Delhi) comes out with a fast-track, single-window approval process for starting business in this beautiful state.

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