A budget to revive J&K’s economy

On March 23, when Parliament passed Jammu and Kashmir’s budget, it was its third budget after the reorganisation of the erstwhile state. While the budget itself stands out in some aspects, it is best looked at as a key element in a strategy of transformation that began three years ago with the writing down of Articles 370 and 35A and the full integration of the erstwhile state with the Union. Firstly, the overall size of the budget witnessed a sharp rise last year when it registered a nearly 51 per cent increase over the previous year. The current year’s budget size has seen a more modest increase of 11 per cent, but the cumulative increase since the reorganisation of the erstwhile state is a significant 67 per cent, accounting for an additional Rs 45,532 crore of resources. A simple analysis would show that total spending in the budget as a ratio of the Union Territory’s Gross State Domestic Product (GSDP) for 2022-23 is projected to be more than 55 per cent. The corresponding figure for a comparative hill state like Himachal Pradesh is only 28 per cent. This traditionally high figure, a distinct feature of the J&K economy, indicates not just an abnormally high dependence on public expenditure (largely financed by the Centre) but also a historical failure to develop a strong private sector capable of generating either taxable revenues or productive employment. Given this context, what can be the transformative strategy that will address the traditional weaknesses in the economy and wean it away from its dependence on an oversized government propped by central largesse? The key to any economic revival and to ending the near-obsessive quest for government employment is the development of the private sector. This, in turn, has at least three major requirements – infrastructure, human capital and a favourable policy and regulatory environment. Let us look at how these concerns are being addressed. First, even a casual look at the capex trends would indicate a jump of nearly 179 per cent compared to the 2020-21 figures. When central government expenditure on roads and railways is taken into account, the actual capital expenditure is nearly double the amount reflected in the UT’s budget. But large outlays count for little if poorly spent, as in the past. That those inefficiencies are now behind us is borne out not just by the flurry of large power, road and infrastructure projects being executed but also by the completion of decades-old languishing projects. But growth is capex dependent only in part. In certain sectors, especially service sectors like tourism, smart budgetary provisioning can yield disproportionately high returns. While tourism has been traditionally associated with J&K, the erstwhile state surprisingly never figured even among the top 10 states in this sector. By providing support for the development of 75 new destinations, the budget seeks to expand the tourism pie while bringing in more equity in this employment-elastic sector. Revival of traditional fairs in remote areas, incentivising rural homestays, targeted public investment in roads and urban infrastructure are aimed at expanding the tourism even while increasing the carrying capacity of these destinations and building local capacities. This seems to be working — tourist inflows in J&K hit a seven-year high in November last year.
For too long there was abnormally high dependence on public expenditure and a historical failure to develop a strong private sector.
The budget’s accent on horticulture addresses both productivity and income issues of the sector. The thrust on cold storage capacity expansion, increase in fruit productivity through high intensity orcharding, support to high value-low volume agro-products like aromatic and cash crops are all budget initiatives. In convergence with other initiatives like GI certification for saffron and basmati and rural road building to create access of vegetables and other crops to markets, these are meaningful efforts. Indeed if productivity is increased to international standards, it can lead to quadrupling the size of this sector and if supplemented by value addition to fruit (currently very low), it can significantly increase growth and employment. Finally, the New Industrial Development Scheme for J&K announced in 2021 is not just the most attractive of its kind, but also learns from the misses of the past. Its promise of a higher incentive for investment in remote areas will help balanced development while enabling J&K to leverage its land abundance in areas hitherto neglected. The emphasis on the employment generation metric while allocating land will discourage “screwdriver” industries. The addition of services component will encourage sunrise sectors like IT/ITES, health, medical tourism, films and education. While all these elements will add to productive capacity, the uniqueness of the strategy lies in leveraging India’s global reach, such as the recent trade agreement with the UAE to seek markets, investments and tourists. Given the proximity and familiarity of UAE with J&K, its Gulf strategy seeks to build on these links and potentialities. Lastly, a sustained security effort has ensured that acts of terror have been pushed below a level where they can no longer significantly impact the investment climate. For too long the J&K economy has been weighed down by its constraints. Many of which were simply the result of bad policies. Now, led by a clear policy direction, an economic transformation is underway. If executed well, this transformation will see a new J&K that will host the discerning traveler looking for exciting destinations to tour and explore. It will produce fruit and fruit products that will be objet de désir of any global citizen. It will offer to the world its handicrafts that are the product of millennia of experience and culture. It will eventually generate over one-third of India’s hydropower. Its health, wellness and education ecosystem will be non parallel in the country. It also has the potential to host many of the IT, ITES, pharmaceutical, textile and electronics industries. It is but rarely that the future beckons thus. This moment is not ours to lose.
(While Rohit Kansal is a senior IAS Officer presently holding the position of Principal Secretary Higher Eduation, Depankar Sengupta is a Professor at Jammu University. Courtesy………….indianexpress.com.Views are author’s own)