By Arjimand Hussain Talib

AHT

What is Jammu & Kashmir’s annual economic produce? What is the economic growth rate?

Well, these are some of the least-discussed questions in the state. Issues other than economic are so overwhelming to people that macroeconomic matters barely matter. But critical economic issues must matter, for they are intrinsically linked with everything else that takes most of our attention.  

Official government data makes us believe that the Gross State Domestic Product (GSDP) of Jammu and Kashmir for 2018-19 (at constant prices) was about  Rs 1,16,637 crore. That is 6.9% higher than the estimate for 2017-18. The state’s economy is said to have grown at 6.9% in 2018-19.  That is less than the 8.5% growth rate estimated for 2017-18. Astoundingly, J&K has even reported economic growth rate hovering around 10% during the last fifteen years period.

To those who follow emerging economies’ annual economic growth figures, 7-10% economic growth would sound astronomical. That too for an economy subdued by years of conflict and squeezed economic potential. 

For several weeks now, Ziraat Times has been looking at the question of how accurate are J&K’s GSDP figures in the light of the change in methodology in calculating India’s GDP? We also sought to understand how reliable are the reported annual economic growth rates.

We set out doing two things: one analyse the pattern of growth rate during the last 15 years and juxtapose that growth with the political and economic context of those years. Two, most importantly, we set to analyse the impact of the revision of the country’s and states’ GDP figures with the change in the GDP calculation methodology. 

Interestingly, even as most of the states have now revised their GSDP figures, guided by the new methodology, Jammu & Kashmir is yet to figure out its revised GSDP figures and growth rates.  Our team has been in constant touch with the technical staff at J&K government’s Economics and Statistics Department to understand the methodology they use in data collection and the calculation of GSDP itself. It has been an illuminating exercise, but one which has helped unravel many critical questions.

This analysis indicates that a major revision of J&K’s GSDP figures and annual economic growth rates for the last decade or so is inevitable. That is simply because the methodology to calculate GSDP has undergone a major change. 

One of the critical implications of the change in the earlier methodology is the impact of revised GSDP figures on J&K’s debt-to-GSDP ratios. J&K’s debt-to-GSDP ratio is the worst among all the states in the country. In other words, we usually borrow much more than what is prudent to borrow. Quite naturally, any larger borrowing quantum in disregard to accurate GSDP figures could have serious implications. 

Now the challenge is this: if J&K’s GSDP figures are indeed revised – as what has happened with most of the states – after the application of the new methodology, J&K’s debt-to-GSDP rail is likely to deteriorate further. That would mean we might have actually been borrowing far more than what usually is prescribed for the states to borrow. 

Any major discrepancy in the reported GSDP and annual growth rate figures of the previous years could mean that our assumptions underpinning our borrowing limits and repayment capacity might well be logically questionable. And, yet, we have had little or no inkling of all this happening.

Sadly, such major macroeconomic developments in Jammu & Kashmir go largely unnoticed and unquestioned because there is a serious dearth of interest outside of the government institutions in critically analyzing J&K’s economic matters, including its GSDP calculation methodology and its profound impact on people’s lives. The state’s civil society and academia have rarely engaged in a serious process of scrutinizing the state’s data collection procedures and processes. Worse, the astronomical growth rate figures have seldom been scrutinized and questioned. 

It is no small matter that J&K is one of the four states in the country whose fiscal deficit has crossed the 3.5% conditional limit vis-a-vis its GSDP. J&K’s fiscal deficit was actually 4.9% of the GSDP in 2018-19. Still worse, RBI data accessed by Ziraat Times indicates that Jammu and Kashmir is also estimated to have the highest liabilities in the country – at 50% of its GSDP.

Today, a large chunk of J&K’s annual budget allocations go into repayment of debt and its servicing. That leaves too little for tangible jobs and wealth-generating assets. 

As J&K state departments responsible for collecting GSDP-related data and analysis finalise the revised GSDP figures for the state, it is a time for reflection and a wider debate. The state’s civil society, business associations and leaders must engage in deeper policy debate, research and analysis to ensure that state policy decisions taken on behalf of the people of the state are robust enough. 

Overlooking these critical matters would come at a big cost, which, in the long term, could manifest in even more difficult economic circumstances in Jammu & Kashmir.

(The author is founder Ziraat Times. Email: editor@ziraattimes.com)

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