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PROFILE
For A Greener Valley
Will the new chief minister be able to get Jammu & Kashmir out of its economic rut?
FEROZ AHMED
13 Feb 2009
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New Tracks: The Baramullah rail service is one of the few infrastructure projects
in the state (Pic by Mohid Amin War) |
So prized, yet so wretched! Jammu & Kashmir (J&K) is worth going to war for, yet it is an abject last on BW’s Indian states’ investment competitiveness ranking. The political unrest in Kashmir since 1989 has prevented the state from making the transition from a basic economy to one thriving on modern skills and technology. The conflict has ensured that administration is the dominant economic activity in the state.
Still, there has been a slight thaw in the state — which has virtually been in economic ice age for quite long — in the past few years with the central government subsidising capital and lowering taxes to nudge corporate India to invest, at least in the peaceful part, Jammu.
Importantly, the new chief minister of the state, Omar Abdullah, has started out by putting economy before politics. Within a fortnight of taking over, he visited Mumbai to convey that message to India Inc. and to exhort them to believe in the future of J&K.
However, Abdullah will have to offer more than just hope to bring capital home. There is a lot that needs fixing in the state before it figures on the investment map, especially when there are more economically evolved and business-friendly states in the race to attract industry’s interest.
He may have to begin with improving the key development indicators of the state, which look quite dismal. The literacy level is low at 55 per cent, with female literacy at just 43 per cent. The gender ratio is adverse with just 900 females for every 1000 males. And there are only 21 phones per 1,000 individuals.
Also, the state government finances are rather twisted, because of insurgency in Kashmir. More than half of its 2008-09 budget of Rs 18,400 crore is funded by central grants and nearly 40 per cent of the expenses are on public administration. Its own tax revenues account for just 20 per cent of the total expenditure.
The bloated bureaucracy of the state does not help the cause of investors either. Companies that have invested in Jammu — everybody understandably avoided Kashmir — complain about the vexing attitude of the local officialdom. “They apply the rules in letter and not in spirit,” says one harried investor. “The local babus are consistently difficult,” says another.
To make matters worse, the state has recently lost its most luring sop from the central government — a complete excise duty refund. In the 2008-09 budget, the Centre restricted this refund to the value-addition done by factories located in J&K. Ram Sahai, chairman of the PHD Chamber of Commerce and Industry’s (PHDCCI) state unit, says that the inflow of investment has come to a standstill since then. “After the Prime Minister’s Reconstruction Package for J&K in 2002, the state received nearly Rs 5,000 crore investment from outside, but with the central government diluting the incentive half-way into its promised tenure, the feasibility of the investors’ units in the state has gone awry,” he says.
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