By Haseeb A Drabu:

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Mr. Haseeb A Drabu

Last week, Union finance minister Arun Jaitley, in a blog post, ‘The Rule of Law and the State of Jammu & Kashmir’, wrote that Article 35A was inserted “surreptitiously” in the Constitution, and is “constitutionally vulnerable”, adding that it’s “hampering J&K’s development”. Contrary to such a contention, Articles 35A and 370, which accord J&K a special constitutional position in the Union, have actually made J&K an inclusive economy.

The biggest benefit of Article 35A has been the radical restructuring of agrarian relations. Land reforms carried out were possible only because of this law. In 1950, when the J&K government initiated ‘land to tiller’, it was not legally possible to do so under the Indian Constitution. Till 1978, Right to Property under Article 19 was a fundamental right. It was only with the 44th amendment that it became a statutory right under Article 300A. What prevented the J&K Big Landed Estates Abolition Act, 1950, from being annulled on the grounds of infringing Article 19(1)(f) was Article 35A(b).

Non-compensatory land reforms, along with massive debt write-offs from 1950 to 1973, transformed rural lives and underlie J&K’s better-than national average human development indicators. This, despite all the mayhem since 1989. The poverty ratio in J&K is 10%, less than half the all-India level.

Similarly, relative inequality, the distribution of income and consumption, is much more evenly spread across J&K’s population, making it one of the most egalitarian economies within India, with its income inequality coefficient of 0.221for rural households being the lowest in India. Indebtedness is much lower at 12.67, compared to the national average of 31.44. The debt-to-asset ratio is 0.64 compared to 3.23 nationally.

Another economic enfranchising feature of Article 35A is the near absence of landless labour in J&K. Less than 2% of the workforce are agricultural labourers, the all-India average being 23%. In Gujarat, with the highest private corporate investment, it is nearly 33%.

Jaitley explains the lack of private corporate investment in J&K by the restriction on land ownership. “The state does not have adequate financial resources. Its ability to raise more has been crippled by Article 35A. No investor is willing to set up an industry, hotel, private educational institutions or private hospitals since he can neither buy land or property nor can his executives do so.” In J&K, land for industrial development is available to outsiders and foreigners like elsewhere in India. The J&K government offers land for industry on a 90-year lease, renewable, in all the industrial estates — at throwaway prices.

Even the State Subject Notification of 1927, which begot Article 35A, had Class 4 state subjects that included ‘companies in which the government are financially interested, or as to the economic benefit to the state or to the financial stability of the Government are satisfied’. Indeed, in 1963, when J&K still had its own prime minister, the Birla Group set up the Chenab Textile Mill. Hotel Oberois used to be in Srinagar till the 1990s, which is now The Grand. The Indian Hotels group is running a Taj property, as is the Four Seasons chain, as is Radisson. ITC is in partnership running a couple of ventures. These are not enough, but they do point to the underlying business model: partnership with a state subject. Many countries all over the world have it.

But there is a more important issue Each and every Indian state has been developed by public investment, especially those via central public sector enterprises (CPSEs). The rank correlation between CPSE investment and level of development of J&K is 0.87. Private investments have piggybacked on public investment. There are 339 CPSEs in India having investments of .`23 lakh crore, employing 10.88 lakh people as on March 31, 2018. Of these, only three are in J&K. The capital invested of the three combined is a pitiful .`165 crore. To add insult to injury, they employ 21 people.

GoI and its companies face no Article 35A barriers. Its security, regulatory and administrative buildings have been constructed with or without paperwork. At last count, 428,000 kanals (53,500 acres) of land are under the unauthorised usage of the central security forces. This is in addition to lakhs of kanals acquired, requisitioned and leased in by the security agencies.

So why then has there practically been zero public corporate investments in J&K in the last 70 years? The fact is that GoI has not invested growth capital in J&K. Private investment also didn’t venture in.

Private investment, especially foreign investment, doesn’t come into J&K because of one reason: J&K’s UN-sanctified ‘disputed status’, which doesn’t endorse or accept boundaries and names. And not because of the special status accorded by Article 35A.

(This article first appeared in The Economic Times, April 2, 2019)


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