October 1, 2021 10:35 pm

J&K’s Unfolding Economic Black Hole

Image Credits: AP

“KASHMIRI businessmen fear closure of 85% industrial units”, read a headline in one of the top business newspapers of India. The statement was made by the representatives of Federation of Chambers of Industries Kashmir (FCIK) during their meeting with the Union Minister of State for Commerce, in the third week of September 2021. Given the magnitude and duration of economic turbulence witnessed by the region since the last few years, this number is anything but an exaggeration. It’s a matter of established fact that the economy of Jammu & Kashmir is going through a downward spiral since the vortex of Article 370 abrogation engulfed it in 2019. Almost all the regional economic indicators have witnessed dangerously unhealthy patterns. Far from charming headlines and discourse management events, the situation on ground has never been this bad in the last three decades. Besides the economy as a whole, Govt finances too have suffered deep losses. The rate of business foreclosures and bankruptcies has never been this brazen. Impoverishment and living unaffordability are rising rapidly, the economy and livelihoods on the other hand are contracting aggressively. The region’s economy is fast developing into a toxic black hole which is slowly but surely swallowing everything in its way.

As per University of Hampton Professor, Dr. Dejenie Alemayehu, “Any system that is established from relations from different groups, continues to exist if the relations remain fair and the forces (that are created from the relations to keep the system alive) remain on balance and valid to all parts.

However, when one of the forces dominates to the extent of diminishing the strength or eliminating the powers of others, then only a force of pulling towards the dominant entity remains and that leads to the collapse of the system”. This is what he refers to as a black hole syndrome.

The economic situation unfolding in the region which derives its chaos from the underlying collapsed political framework, very well fits the criteria of a blackhole syndrome as defined by Dr. Dejenie.

Besides Kashmir economy, the economic stress on the other side of the Jawahar Tunnel i.e., in Jammu division has started to become quite tangible. Economies, no matter how small, take decades to create and sustain balanced exchanges which support and strengthen the participating entities. The rapid changes have collapsed all the pillars simultaneously leaving a debris of economic hopelessness and despair. The disruptions in the economic exchanges coupled with capitalistic advances are creating an economic black hole of ugly proportions. Ranging from loss of labour-intensive mining business to encroachment in liquor trade, these forces have started pinching Jammu business community aggressively. Latest assault being the entry of a retail giant which has left regional retailers worried and anguished. Discontinuance of darbar move too is expected to dwindle the migratory demand of otherwise thriving retail sector of Jammu during winters. In wake of this unfolding risk profile and uncertainty, indigenous investment sentiment has taken a serious blow.

Kashmiri businesses on the other hand are fighting a survival war of different proportions. Given the scale of income shock, the consumer demand has consistently declined to pick up which is resulting in slumped sales. Trading sector which soaks more than a quarter of the region’s work force is therefore severely impacted. Transport, Manufacturing, Tourism and Construction, every sector is in red. Exports and foreign remittances too have dried up resulting in the furthering of economic slump in Kashmir. To make matters worse, the highhandedness from the narcissistic bureaucratic system towards businesses and public welfare is killing the sentiment of revival even further. Economic packages remain primarily loaded with debt financing and are mostly limited to announcements and headline management. The targeted beneficiaries, however, continue to wait for the implementation of all these magnanimous announcements. The same was even voiced by FCIK during their meeting with the Union Minister of State for Commerce. Lack of concrete policy response for containing this economic mayhem is gradually leading to a socio-economic crisis in the region.

Rising unemployment and untamed inflation are breaking all the hell loose on households and businesses. As per Centre for Monitoring Indian Economy (CMIE), J&K’s average unemployment for the last twelve months, preceding August 2021, has been around a whopping 14% with youth (15 to 29 years of age) unemployment skying to around 25%. All India average for the same period has been around 8%. These numbers sketch a very grim scenario depicting the sheer volume of bread earners sitting idle without a dignified livelihood. This is pushing a large portion of households towards abject poverty and negatively impacting the other essential socio-economic indicators of the region.

The growing joblessness has majorly affected Kashmiri working women. Amid distress, most of them settle for the low job-profiles despite having high-degrees. In fact, the newly unveiled annual survey by the National Statistical Office (NSO) has revealed that the erstwhile state of Jammu and Kashmir ranks fifth nationwide in having the lowest number of females employed as legislators, senior officials and managers. The NSO’s, “Annual Report, Periodic Labour Force Survey(PLFS), JULY 2019 – JUNE 2020”, report revealed that in 231 villages of rural J&K more than 8900 persons were surveyed and in 1400 households of 175 blocks in Urban J&K, over 6300 persons were surveyed.

As per the survey, the ratio of female workers to total workers in the positions of legislators, senior officials and managerial posts is 10.4 percent in J&K. The erstwhile state is preceded by the states of Assam (6.2 percent), Haryana (7.7 percent), Delhi (9.2 percent) and Andaman & N. island (10.1 Percent).

Besides unemployment, the cruel spike in inflation is turning the situation into a fatal cocktail. Inflation for the month of August 2021 for J&K was recorded at 7.65. It is consistently hovering above 7 with 7.42 in June and 7.81 in July. With no intervention from the Govt, Inflation in J&K is making living excruciatingly hard for an already ailing economy. All India average, however, slowed down from 5.59 in July to 5.30 in August. J&Ks inflation is second highest in India after Telangana (7.92). With joblessness and choked earnings, this consistently sharp rise in inflation is making life a living nightmare for the economically destitute sections of the region.

Lately, a newly unveiled survey by the NITI Aayog, a public policy think tank of the Government of India, revealed that 12.58 percent of the total population in Jammu and Kashmir is ‘poor’.

The report, “National Multidimensional Poverty Index (MPI) Baseline Report” is the debutant report of its kind prepared by the NITI Aayog. As per this report, 12.58 percent of the total population in J&K including Ladakh is poor. Pertinently, as per survey by Sustainable Development Goals (SDG) Index 2021, at least 10.35 percent population in Jammu and Kashmir was living below the national poverty line with the rural areas holding more poverty than the urban areas. The figures were revealed by the economic survey report, based on the state-specific poverty lines and estimates of poverty for rural and urban areas of the states.

The MPI report has further revealed that more than 47 percent of the population in J&K is deprived of proper sanitation. As per the report, J&K also has a gruelling number of malnourished people who are deprived of nutritional food. “The percentage of the total population who are deprived of nutrition in J&K is 25.9 percent,” the report reads.

The report has also stated that in the uncensored headcount category, 12.7 percent of the population in J&K is deprived of maternal health, 45.2 percent of population is deprived of cooking fuel, 29.6 of housing, 16.2 percent of assets, 2.9 percent of electricity, 1.8 percent in child and adolescent Mortality, 6.8 percent of years of school, 14.2 percent of drinking water and 3.9 percent of bank accounts.

As per MPI report, in J&K the highest headcount for poor was recorded in Ramban district where the rate stood at 35.26 percent preceded by Doda (28.92), Rajouri (27.52), Udhampur (26.83) and Kishtwar (24.29). The lowest MPI in J&K was recorded in Srinagar where the percentage was recorded at 1.21 percent. In Ladakh, Kargil and Ladakh recorded an MPI of 19.4 percent and 5.36 percent, respectively.

According to the report, in J&K and Ladakh highest headcount of poor was recorded in Rural J&K and Ladakh where the rate was recorded at 16.39 percent and in Urban J&K and Ladakh the rate was recorded at 3.5 percent.

Notably, the MPI utilises the National Family Health Survey (NFHS), which is conducted under the Ministry of Health and Family Welfare (MoHFW) coordinated by International Institute for Population Sciences (IIPS).

It is pertinent to mention here that the preparation of the given MPI Parameter Dashboard to rank states and UTs, and a State Reform Action Plan (SRAP) has taken into consideration various factors which include the percentage of population deprived of nutrition, maternal health and school education.

The national MPI is constructed directly from each person’s profile of deprivations across each indicator, built from a single household survey that captures the data on all the indicators. The report was compiled in two ways that included analysing the percentage of people who are multidimensionally poor and deprived in each indicator one by one and analysing the weighted contributions of each indicator to the national MPI. In the Global MPI 2020, India ranked 62nd among 107 countries with an MPI score of 0.123 and 27.91 percent headcount ratio, based on the NFHS-4 (2015-16) data.

Another data point which depicts a very grim picture of the state of economic affairs in the region, post August 5, 2019, is the pattern of income tax collections. Although a very limited percentage of the earning population in the region is eligible for paying direct taxes, however, the patterns of the drop indicate a significant contraction. From Rs. 541.40 crore in FY 2018-19 to only Rs. 267.28 crore in FY 2020-21, there is a drop of around 50 percent in direct taxes collection in J&K. This is a staggering number. This clearly shows the severity of the impact on people’s earnings.

Factors like rising inflation, joblessness, dwindling incomes etc, being cyclic, might turn a corner in near future, however, the onslaught of selfish advances by deep pocketed business houses is something which is altering the economic dynamics of the region permanently. This new reality is shrinking the space for indigenous businesses at a rapid pace. The removal of stop gaps in things like tendering etc has demolished the protective entry barriers which otherwise used to secure the livelihood of millions of J&K based businesses. The sheer amount of capital with comparatively large corporations has tilted the playing field mercilessly and exposed the regional players to an economic challenge which they are unable to stand. In absence of democratically elected representatives who otherwise were answerable to the public for securing indigenous interests, the unilateral policies by bureaucrats is leading to an undercurrent of mistrust, anguish and worrying uncertainty among people. It’s therefore time for policymakers to understand this situation and devise policies which are equitable, justice oriented and economically viable.


Views expressed in the article are the author’s own and do not necessarily represent the editorial stance of Kashmir Observer 

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Ejaz Ayoub

Ejaz Ayoub has been working in the BFSI industry in the field of Financial Risk Management, Strategy and Foreign Exchange. He can be reached at:ejaz.ayoub@gmail.com.
Ejaz Ayoub

Ejaz Ayoub has been working in the BFSI industry in the field of Financial Risk Management, Strategy and Foreign Exchange. He can be reached at:ejaz.ayoub@gmail.com.

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