Rakesh Magotra
Jammu and Kashmir’s Chief Secretary Dr Arun Kumar Mehta last month made an ambitious statement that the government was planning to double the size of the Union Territory’s economy over the next five years. The statement, albeit ambitious, does reflect the priorities of the government and the direction that it intends to take. Given the volatile socio-political environment that the union territory, and erstwhile state, has witnessed over the last several decades, a focus by the government on economics transcending the politics is a benign sign for the region.
How challenging it would be to double the size of the UT’s economy in five years? Let’s understand it like this: As per the official data, the size of the UT’s economy in Financial Year 2021-22 was Rs 1.89 lakh crore, which is expected to grow to Rs 2.03 lakh crore in the current fiscal, an expected growth rate of 7.5 per cent. Incidentally, the projected growth rate for the current fiscal is the same as the actual growth rate achieved during the last fiscal. If the UT’s economy continues to grow at this pace for the next five years, its size would increase from Rs 1.89 lakh crore to Rs 2.71 lakh crore. This translates to the economy expanding by around 43 per cent in 5 years, a long shot from doubling in size.
To make a realistic comparison let us have a look at the historical data of the economic growth in J&K over the last five years. In 2016-17, the size of the J&K’s economy was Rs 1.26 lakh crore. So in five years, the economy grew to Rs1.89 lakh crore. So essentially, the economy grew by just one-third in the last five years.
The next logical question that arises is – at what pace the economy needs to grow if it has to double in size in the next five years. The answer is an annual growth rate of 15 per cent; which may seem unrealistic to achieve but the good news is that it has happened before. The Jammu and Kashmir’s economy actually grew by 17.5 per cent in FY 2018-19, which was preceded by a growth rate of 12.7 per cent in FY 2017-18. The challenge is to sustain this kind of growth rate for a consecutive five-year period.
Now let us get to some specifics and try to understand how can this ambitious and salubrious goal be achieved? In any economy, public and private investment, especially the latter, are the engines of growth. Banks and financial institutions are expected to play a major role, a fact that has been acknowledged by Dr Arun Kumar Mehta when he made the ambitious statement. Moreover, Dr Mehta added that the roll out of new industrial policy would usher in a new era that would witness “large-scale development and investment” in the UT over the coming years which would directly contribute to doubling the size of its economy.
Earlier this year, the government had notified the New Central Sector Scheme for Industrial Development of Union Territory of Jammu & Kashmir to attract capital investments. With a financial outlay of Rs 28,400 crore till year 2037, the scheme provides four types of incentives namely including “Capital Investment Incentive”, “Capital Interest Subvention”, “GST Linked Incentive” and “Working Capital Interest Subvention”. The government also claimed that it had already received proposals for investments worth around Rs 51,000 crore.
Sector wise, apart from the financial sector, industries and infrastructure sector are expected to play a major role in this journey. Another major potential areas is tourism where there is a lot of potential to be unlocked. If the government makes earnest efforts to bring all stakeholders together, and empower and educate them, there is a huge potential to take the already popular sector to the next level.
The government seems to have recognised this potential and as per Union Finance Minister Nirmala Sitharaman’s speech in the Parliament the tourism department had identified 75 off-beat destinations across the Union Territory of J&K which will be developed through Public and Private Investment model under run-up to 75th “Azadi Ka Amrit Mahotsav” with proper infrastructure and requisite facilities for tourists. The good news is that the tourism sector is already registering an increase in footfall of tourists with around 1.43 lakh tourists visiting Kashmir in December, 2021, the highest in the last seven years. “Winter season has witnessed 100 per cent high-end hotel occupancy in Srinagar and at prominent tourist destinations particularly Gulmarg and Pahalgam,” Sitharaman said.
Apart from that, this year’s Budget for the UT of Jammu and Kashmir also makes evident the government’s intentions to boost investment in the region. For instance, the capital expenditure in the UT has increased from 7-8% of its GDP till FY21 to 18.58 per cent in FY 22. It is projected to further increase in FY23 to 20.29 per cent of the UT’s GDP. In nominal terms, the Capital Expenditure increased from Rs 14,784 crore in FY21 to Rs 35,208 crore, more than double, in FY22. In the current fiscal, the Capital Expenditure is projected at Rs 41,335 crore.
Concomitantly and perhaps most importantly, the government has to take full advantage of the demographic dividend that the UT has to offer in order to consistently achieve that kind of growth rate. As per the 2011 Census data, J&K has around 5 million youth between the age of 16 to 35 years. If this young population contributes to the economy to their full potential, it is surely possible to maintain high economic growth rate for decades. However, to fully realize their potential, it is imperative to do skill-matching so that not only the youth get employed to contribute to the UT’s and nation’s economy, but also employed at the right job doing what they would be most productive for the economic growth. Also, going beyond skill matching, the government would also need to focus on skill anticipation, which the International Labour Organization defines as “a strategic and systematic process through which labour market actors identify and prepare to meet future skills needs, thus helping to avoid potential gaps between skills demand and supply”. It is only through skill anticipation and skill matching that we can fully utilize the demographic dividend and stick to the high growth trajectory that is required to meet the ambitious goal of doubling the UT economy in five years.
So it is quite evident that the idea of doubling J&K’s economy in five years is not just a slogan, but the government is serious about making it come true. It is possible but a real challenge for the government. As long as the government is up for this challenge and proceeds with a comprehensive strategy and clear focus to achieve this goal, we would have an economy of the size of Rs 3.8 lakh crore in 2027.
I would conclude with cautious optimism; to double the size of the economy in just five years is going to be an uphill task even in the most conducive economic environment. And given the global economic uncertainty, which may also impact India in multiple ways, it may be even bigger challenge. It can be met only with complete commitment from the government and an undeterred resolve to stay on the path of development and economic growth despite the political challenges and distractions that may come along. I am also tempted to say that the Banking sector especially the premier financial institution of the state having the most geographical and emotional outreach in the UT of J&K needs to play on the front foot in T20 mode and provide the catalytic booster dose of credit growth in the economy to fuel the entrepreneurial fire.
(The author is a DeputyGeneral Manager in JK Bank and an EMBA student @ IIM Amritsar. )
Follow our WhatsApp channel
