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Conflict In Economy: The Other Perspective

By Bilal Hussain

10 September, 2010

The ongoing curfews and protests in Kashmir Valley are ruining the state’s economy, a fact that most wouldn’t disagree with. It is this verity that the government at its max tries to publicize through all available mediums for open consumption and to make an opinion, which would quell the prevailing political unrest in the valley. While, it is also a fact that normalcy paves way for economic expansion, but is it happen in Kashmir? Or Does normalcy acts as a gizmo for ‘economic captivity’ of the state?

Even as the government is hard pressed to use ‘economic losses’ as a ploy to subdue the popular sentiment of Kashmiris, 63 years suppression has left few to subscribe to this ruse. In the past few weeks what is appearing in the media is ‘the state losses INR 21,000 crores in 85 days and government suffers INR 161 crores daily on account of taxes and other levies’ while other reports say ‘INR 6500 crores loss due to strikes’. How far the reports are correct and hold merit?

While there are many methods of calculating the economic losses suffered by an economy, one which is frequently used is: to compute losses by checking its impact on the Gross State Domestic Product [GSDP], a measurement of the economic output of a state, it is the sum of all value added by industries within the state and serves as a counterpart to the gross domestic product. As per the economic survey repot 2010 by Jammu and Kashmir Directorate of Economics and Statistics [DES], the GSDP at current prices for the state stood at INR 38297.58 crores [advance estimates].

The GSDP of around INR 38,000 crores means each day the state produces goods and service wroth INR 104 crores. Let’s take a round figure of INR 100 crores a day and for Kashmir it is almost 50 per cent which means INR 50 crore a day. As per the DES report contribution of primary, secondary and tertiary sectors to the state GDP for 2009-10 [Preliminary estimates] has been 24.62 per cent, 29.58 per cent and 45.80 per cent respectively, it is mainly tertiary sectors that are initial victims in any conflict.

The production of agriculture, horticulture, domestic handcrafts, and other related economic sectors that act as backbone to state’s economy didn’t had too much adverse impact in the valley because of curfew and protests. Some of the sectors that got hit are tourism, and trade. Due to the ongoing political unrest the loss suffered by the valley would be around INR 20 to 25 crores a day as the impact doesn’t include all economic sectors and for 80 days it is around INR 1600 crores and NOT‘INR 21,000 crores’, as reported by certain section of media.

Since the government is single largest employer in the state so the loss in terms of lost working days need to be computed. The state has over 4.5 lakh employees and roughly 2.25 lakh would be from the valley. Let’s assume that daily services of 1.25 lakh employees is lost, which is an opportunity loss for Kashmir economy. According to an estimate by Finance Department, government of Jammu and Kashmir (J&K) spends INR 6593 crores for the year 2009-10 (BE) on account of salaries. Going by this figure, it means government spends about INR 18 crores on daily basis on salaries. Almost half of the employees report to their offices in the valley; as police, largest employer in the state, medical staff and other essential services employee do turn up to their duties. Back to figures, state spends daily INR 9 crores on salaries in valley; since only half 1.25 lakh don’t make it to their jobs put a loss of INR 4.5 crores daily to state exchequer. For 80 days of lost working days it amounts to INR 360 crores and NOT ‘INR 6,500 crore’ as mentioned by certain section of media.

Now, looking at the loss suffered on account of the tax revenue collected by the government. According to an estimate by Finance Department, government of Jammu and Kashmir (J&K) manages around INR 3011 crores [State’s Own Tax Revenues] annually as tax revenue. As the market demand for products in general got reduced due to the prevailing unrest, the suppliers have reduced supplies by 40 percent. As the valley imports reduced by almost 50 per cent during the present unrest, the loss of to the state wouldn’t be over INR 164 crores for 80 days on this count.

Beyond, J&K’s economy other economies linked to the Valley too suffers and are undergoing sever losses as compared to the valley’s economy. Kashmir is a consumer economy and any kind of unrest here causes losses to other states most, as the ripples of curfew and protests were felt outside the state as poultry farmers in Punjab have severely got hit by the continuing unrest in J&K which has hampered imports of their products to the valley.

According to an estimate, poultry traders in Punjab supply over half a million eggs and 40,000 to 50,000 chickens per day to meet the demand within the J&K. These supplies cost nearly 50 million rupees per day. Nearly 90 per cent of the poultry farmers of the border belt of the Punjab are dependent on the supply to J&K, as there is huge demand of poultry products throughout the year in the state.

Kashmir is the biggest mutton consumer in India. Estimates put the quantum of annual imports of mutton, milk and poultry to Rs 16000 crore. About 5000 sheep and goats are consumed daily in the valley. While the annual figures of the quantity of mutton consumed in the Valley, including Ladakh, is at 340.32 Lakh Kilograms. Of these, 210 lakh kilograms were imported from various Indian states while the remaining 130.32 lakh kilograms come from the local market. It is high time to take several measures to discourage the imports and at the same time to increase production locally so as to achieve self sufficiency in the state.

To mention, markets in the Valley, barring few days, have remained closed for past over two months in protest against killings of 69 people, mostly teenagers by troopers and injuries to hundreds of civilians in Kashmir.

What normalcy means in Kashmir: Out of the estimated hydro power potential of 20,000 MWs in the state, 16480 MWs have been identified of which only approximately 14 percent i.e. 2318 MWs have been exploited so far. With the commissioning of 450 MW Phase-I of Baglihar Hydroelectric Power Project in December 2008, the installed capacity of the state sector power projects has reached 758.70 MWs. While, the installed capacity of central sector power projects from three commissioned projects is 1680 MWs. The demand of power in J&K state, as per the 16th Power Survey conducted by Ministry of Energy, GoI is around 2120 MWs. All this amply shows how during normalcy the J&K’s resources are being exploited by the outsiders, which otherwise could have pivoted way for economic development for the state.

The ‘economic captivity’ doesn’t stop here the government is shelving huge sums on the ‘infrastructure development’ of the state by contracting works to outsiders on daily basis, which benefits more to outsiders rather than its denizens.

While the state talks high about policies on unemployment, it miserable fails to control the influx of the migrant labors to the valley, which according to some reports would be around 4 lakhs laborers in the peak season, usually summers. Although, informal migrant labors do contribute their bit in infrastructure development but at cost by washout good chunk of finances from the state. Not curbing, but a tab on the influx could have meant jobs to locals which otherwise goes all the way to outsiders. However, the administration uses the influx numbers as tourist figures to project normalcy to outside world.

The normalcy too costs heavily on Kashmir’s economy; it too merits a detailed cost benefit analysis on whether normalcy cots more or unrest? Day in and day out the state’s economic dependency is increasing on outsiders. A last thought to end the piece, is unrest or normalcy jeopardizing J&K’s economy?

(Author could be reached at ibilalhussain@gmail.com)