For a layman, conflict refers to some form of friction or discord arising within a group against the other, but actually it is an internal war over resources, goods and political power. Any conflict whether it is interstate, intrastate or extra state, it has serious effects on any economy.
It involves three types of economic costs:
(i) when nations and groups allocate resources for the fight, the opportunity cost of the alternative goods that could be produced and sold with those resources such as food is borne;
(ii) when violence manifests in the region, goods and resources are destroyed causing a deficit in the supply of essential commodities;
(iii) violence during conflict causes production, trade and distribution of goods to stall, causing significant economic loss and instability in market prices.
Kashmir has been in a war like situation since 1947. Besides the loss of human lives, the conflict has led to the destruction of territorial resources. Due to counter-terrorist strategies, military forces set up camps in the forests disturbing the natural habitat of the wild animals, who then wander into human settlements causing threat to human lives. The total forest area of J&K is 20.23 lakh hectares, has always played an important role in the economy of the state. Various independent industries such as eco-tourism, turpentine, willow, and joinery have their origins in the jungles.
Not long ago, J&K had the thickest forest cover in the subcontinent, but the ongoing conflict has had devastating effects on it. Timber smuggling, though not a new phenomenon, witnessed a spurt from 1989, when insurgency started. Since then, the Kashmir Valley has lost more than 59 square miles of forest land.
There are over thousand water bodies in the state, and the main rivers are Jhelum, Chenab, Tawi and Indus. After the escalation of the conflict, post 1990, numerous military installations have been raised along the banks of these major rivers and lakes to keep vigil on terrorists. But, in the process, the ecological damage suffered is huge. The absence of an efficient and effective system of waste disposal, is posing a threat to the ecology of water, as waste is let free into the bodies leading to an increase in toxicity. It also renders the water useless for human consumption and endangers its aquatic life.
The three-decade-long conflict had badly hit the every socio-economic activity in the Kashmir Valley. Apart from the damage done to the art and craft sector, Kashmir tourism has been badly hit. It is estimated that tourist footfalls in 1988 were as high as 0.72 million, but this period of prosperity was followed by a severe dip in 1991, when it the count was reduced to a mere 6287 tourists annually.
Historical sites and other tourist spots are now under the control of the military. Due to drastic increase in the insurgency, it is estimated that the state of J&K lost around 27 million tourists from 1989-2002, leading to a revenue loss of 3.6 million USD and mass unemployment. The handicraft industry that used to provide employment to 30,000 people has witnessed a sharp decline in the demand for their art work.
This ongoing conflict has done irreparable damage to households and their sources of livelihood. Many traders, farmers and businesspeople have had to shift the stem of their earnings to other industries that have a larger consumer market. There is also a huge psychological cost borne while making such transitions and it must never be forgotten or trivialized.
Deptt of Economy