ZT Economic Analysis Team
A set of deep-rooted economic challenges awaits India’s new government.
Arresting an economic slowdown and nursing the nation’s financial sector back to health will be the immediate priorities for the next Narendra Modi government. A slowing global economy and a protracted trade war between the U.S. and China add to the urgency to fix things at home.
With 7% expansion in the year through March, India has held the crown as the world’s fastest-growing major economy. But that’s quickly changing this year as consumption — which makes up 61% of India’s gross domestic product — weakens sharply, with ripple effects on new investments. GDP data due May 31 will probably show growth cooled in the three months through March from a six-quarter low of 6.6%.
Key economic challenges that could impact J&K too:
Going into the elections, both Modi’s Bharatiya Janata Party and the main opposition Indian National Congress were big on pledges to spend billions of dollars to provide income support to the poor and farmers. Keeping that promise at a time when tax collections have undershot targets may come at the cost of India missing, yet again, its fiscal deficit target of 3.4% of GDP for this year. Global credit rating companies are monitoring the number closely and any downgrade could push the nation’s debt into the junk category.
In the days to come, some subsidies to the agriculture sector are likely to go. Jammu & Kashmir’s horticulture sector will have to look out.
The new government at New Delhi will have to find ways to productively employ about 1 million people entering the workforce every month. India hasn’t published official employment data in more than two years, but a leaked statistics office report — which was rejected by the government — puts the unemployment rate at a 45-year high of 6.1%. The Centre for Monitoring Indian Economy Pvt., a private research firm, estimates the jobless rate rose to 7.6% in April.
Jammu & Kashmir state has huge enemployment problem. Each year about 1.2 lakh graduates and post-graduates enter the labour market with little or no jobs. In the coming days, how the new elected MPs will pursue policy advocacy on this matter for J&K remains to be seen.
A series of defaults by beleaguered shadow financier Infrastructure Leasing & Financial Services Ltd. last year exposed fault lines among India’s non-bank lenders, which accounted for a third of all new loans over the previous three years. While Modi’s government’s seized control of the company to contain the crisis, a lingering credit crunch has curbed loans and affected consumer spending. That’s separately triggered concerns about mutual funds that hold debt issued by non-bank finance companies.
In contrast, J&K’s situation is not that worrisome. J&K Bank’s 2018-19 profits have demonstrated that despite the overall crunch and bad asset situation in the banking sector, J&K’s credit situation, including absorption, is not that bad.
India last posted a monthly trade surplus in March 2002. Rapid economic expansion since then has meant the nation’s imports have far outgrown exports, with oil being the nation’s biggest purchase. That’s pushed the current-account deficit to more than 2% of GDP last year, making it a key vulnerability for the economy. While India is trying to narrow the shortfall by reducing its reliance on imports and boosting exports, that will prove difficult in a global environment of slowing growth and rising trade protectionism.
J&K faces a big challenge of widening of its trade deficit. Imports are rising constantly, while as, since 2015, exports are constantly going down. As highlighted by Ziraat Times in a recent cover story, most of J&K’s key exports are marking a downslide.
Fixed investments have been almost stagnant at about 30% of GDP in the past four years, while foreign direct investment has declined recently — partly because of the uncertainty ahead of the election, but also due to politically-inspired protectionism and bureaucratic bottlenecks, which have kept investors away. India has missed out on the flow of FDI into regions like Southeast Asia as companies shift production to avoid rising tariffs in the U.S. and China. A stable government with continuity in policy and progress on reforms could boost the sentiment.
Looking at J&K’s investment scenario, private investment as a percentage to GSDP continues to shrink. The overall investment environment is bad. Potential investors’ confidence in the economy is dented for the lingering political uncertainty and major logistical hiccups to the markets.
Business Leaders Spell Out Economic Priorities:
Jammu & Kashmir has just elected six new members to the Parliament. National Conference’s landslide victory in Kashmir region matches that of the BJP in Jammu and Ladakh regions.
J&K’s new Members of the Parliament (MPs) will be going to the Parliament House at a time when the state’s economy is in dire straits. The state’s manufacturing sector is reeling under a big slump. The services sector is unable to register impressive growth for a serious lack of private investment and good tourism. Although the agriculture sector is relatively doing well, a realization of its greater potential depends on more growth-friendly public policies and a significantly improved infrastructure and supply chain.
Jammu & Kashmir’s business community believes that the newly-elected members of the Parliament have a task clearly cut out when it comes to advocating policy practices that could give a fillip to J&K’s struggling economy.
Ziraat Times spoke to the state’s business leaders and entrepreneurs to understand what economic priorities they think the new MPs should address and advocate for in the Parliament. Here is what the business leaders and entrepreneurs have to say.
Top priority should be fixing Srinagar-Jammu Highway
The top priority should be our only link road, which is Jammu National Highway.
We have a huge potential for job creation in Kashmir as we have industries like Tourism, Handicrafts, Agriculture, Horticulture and they need to be promoted.
Former President, KCCI
Tourism should be the first priority as it is the backbone of our economy
Tourism should be the first priority as it is the backbone of our economy.
They should talk to the government of India and create avenues for more job creation, be it private or govt sector.
Chairman, PHD Chamber, J&K Chapter
National Highway has caused big disruption. That needs to be the first priority
National Highway has caused a big disruption and that needs to be the first top priority as it has impacted our horticulture Industry and we suffered huge losses.
Creating a positive environment should be the next priority as job creation and investment opportunities will follow. The next focus should be on ease of doing business so that there would be a sigh of relief for entrepreneurs. We are yet left with a lot of natural resources that remain unexplored.
Entrepreneur & CEO
Fruitmaster Agro Fresh Pvt Ltd.
The first thing new MPs should be focusing on is connectivity
The first thing they should be focusing on is the connectivity. The central government has been investing always and we have to ensure that the projects meet certain deadlines. Railway connectivity, air connectivity needs to be ensured. Night flights should not be barred and Kargil airport needs to be made fully operational.
The second thing is at the industrial policy level. There is huge potential in the tourism industry and it can lead to great employment opportunities. There are lots of places that are yet to be explored in terms of tourism circuits and much emphasis should be on new tourist circuits.
There needs to be the intervention by way of value addition to the industry. J&K is a high-cost economy and we have high technical knowledge. Productivity in agriculture and horticulture industry should be increased and more focus should be on marketing.
Economist, Jammu University
Promotion of power sector and return of power projects has to top the agenda
Promotion of the state power sector and return of power projects from NHPC.
Promotion and protection of the Horticulture sector.
The revival of the industrial sector which includes Tourism and Handicrafts.
Industry benefits should be provided to horticulture
1. Horticulture industry should be boosted and if not industry status but industrial benefits should be provided. It can be a setback for the Horticulture Industry.
2. To waive off the KCC loan, our new MP’s can play a good role for that. It is for the farmer at the grass root level.
3. Considering the current situation of the highway, alternate routes are need of an hour. Alternate routes can save the horticulture industry from the turmoil that it goes through.
Fayaz Ahmad Malik
Agriculture and horticulture sectors need attention
First and foremost our economy depends on horticulture. Around 70 % of people are directly and indirectly associated with this sector. Since Mohd. Akbar Lone belongs to a horticulture zone and even Dr. Farooq Abdullah has many orchards; they should bring reforms to this sector.
Secondly, we are dependent on National Highway NH44. This highway is in bad shape from Qaziqund to Ramban. Our MP’s should raise these issues in parliament. Also, Mugul Road should be given a National highway status that would act as an alternative route. We cannot move forward unless or until we have good road connectivity with the rest of the nation. Product to and from Kashmir struggles.
Thirdly, tourism depends on the conditions of the valley. If there are disturbances tourist flow will decrease. And hence we are dependent on agriculture and horticulture. These sectors should be boosted.
Bashir Ahmad Bashir
Fruit growers association, Parimpora
Efforts should be taken to improve the Horticulture sector in our state
1. The horticulture sector is the backbone economy of Jammu and Kashmir. Efforts should be taken to improve the Horticulture sector in our state.
2. Jammu and Kashmir’s road connectivity with the rest of the country should be open for 27*7.
3. The government should step in to address the recession and to reduce business stress in Jammu and Kashmir.
Muhammad Yaseen Khan
Chairman, Kashmir Economic Alliance
GST implementation should be simplified
1. GST implementation should be simplified as far as small traders are concerned and some kind of relaxation should be provided to them.
2. There is a lapse of 1600 crore rupees(central package) just because it’s DPR was not framed on time.
It was pertaining to Tourism projects, New Destinations, and improvement of highways.
3. Industry in Jammu and Kashmir need more incentives to be export-oriented.
Jammu Chamber of Commerce and Industry (JCCI)
New MPs should expose so-called economic packages for J&K
1. On the economic front, I would like to say that they should expose the so-called packages which were used in the name of development because on the ground it’s too little money that is being pumped in.
2. The major problem our state is dealing with unemployment that’s an all-time high in comparison with mainland India and it’s double in J&K. You have to address infrastructural needs. You don’t have a reliable dependent highway. For the last 70 years, you don’t have one. Our MP’s should take this matter in parliament. We had 7 routes in 1947. Efforts should be taken to restore alternative routes that connect J&K with mainland India and finally with the rest of the world.
3. We lack in health and educational institutions. I think private investment should be allowed in these sectors that would be a wonderful thing. Entrepreneurship is the future of our state but our entrepreneurs lack the hand holding, facilitation, and policies and government should step in to help them.
Former President, FCIK
Ban on Pashmina wool must be revisited
Take skill development in a big way, and have district-wise targets. Ensure the Ministry of Food Processing extends the subsidy component for establishing Cold/CA Stores for next ten years. Create an umbrella of “health security through insurance cover ” to the farmers, Artisans, and tourism entrepreneurs, outside the national policy prescription.
Liberal funding ( interest subsidies) for establishing infrastructure in health, education and other employment degenerating enterprises.
Infrastructure in towns and cities for solid waste management ( including plastic waste management), The most urgent action warranted.Speedy completion of six-laning of National Highway (Jammu- Srinagar) and time-bound work on Zojila Tunnel Project. Ban on Pashmina wool and its other allied handicraft products was imposed because one activist (a retired employee of Ministry of Commerce) from Delhi, projected the case that Pashmina wool is harvested from dead goats (after slaughtering), which is not a fact, but it resulted in a worldwide ban on Pashmina.
The fact of the matter is that these goats shun its wool periodically and which gets collected on horny bushes in Chanthang area of Ladakh and adjoining areas. The wool is then picked up from these bushes by shepherds and sold to the dealers in Ladakh and Srinagar.
The case needs to be reopened and full appreciation of the facts placed before the competent tribunal for reviewing this ban on sale Pashmina wool and the products made out of it by our artisans.
Dr. G. N. Qasba
Development Expert and Former Commissioner,
Srinagar Municipal Corporation
J&K needs to have a robust land acquisition law. It needs pursual.
1. The main issue in Jammu and Kashmir is land acquisition. We don’t have a robust land acquisition law in our state. Central government should provide equal compensation to Jammu and Kashmir when they acquire land for projects like highways, railways and for other projects. There should be proper check and balances.
2. There are few so-called development projects which damage our forests like when they lay transmission lines they cut thousands of trees (45000). It has a toil on our agriculture and horticulture sectors and nearly 50000 fruit trees are disturbed. Pollination is also affected and ultimately production will be less. Development should be holistic, not disastrous. There should be green development.
3. The national highway should be restored and repaired for smooth flow of traffic.
Raja Muzzafar Bhat
Prominent Social Activist
The top priority should be the horticulture sector
1. The top priority for the government should be the horticulture sector. As per horticulture department figures, more than 700,000 families depend on the horticulture sector for income. Under this sector, the government needs to focus on both Pre-Harvest & Post-Harvest segments.
Under Pre-harvest the yield of our orchards needs to be increased from present 10 to 15 tons per hectare to 50 tons per hectare. The quality of our products also needs to improve. Currently, we produce close to 40% b grade fruit. Government has already introduced a scheme that provides incentives to the grower for shifting to High-Density orchards that increase yield and improve the quality of the produce.
The current scheme focuses on the import of planting material, however, I think the focus should shift from importing planting material to making trees in Kashmir by giving incentives for developing nurseries (as per international standards) in Kashmir.
By making world-class nurseries in Kashmir we will achieve to important objectives, first we will reduce the cost of planting material as there will be no duties & transportation cost as trees will be grown in Kashmir and second, we will be able to generate substantial employment for our youth. On the post-harvest side, the government needs to provide more incentives for developing CA stores & reefer trucks so that we can strengthen the distribution of the fruit we produce.
2. National highway: Smooth movement on the national highway is prerequisite for the development of any industry in the state. Fruit trucks have to wait for a week to cross from Srinagar to Jammu and from Jammu to Srinagar. Perishable Product industries such as meat, poultry, and fruit can have to incur huge losses due to blockage of National Highway.
3. Power Infrastructure: For the functioning of any Industry regular power supply at affordable prices is essential.
Fruit Master Agro Fresh Pvt. Ltd.