Economic growth of Jammu and Kashmir

A laborer carries a box of apples at a wholesale market in Jammu, India, Wednesday, Sept. 29, 2010. Since June, Kashmir has been rocked by violent anti-government protests and the subsequent crackdowns by security forces that have killed several people. The conflict has disrupted all aspects of life, businesses have lost millions of dollars and the fruit industry is one of the sectors which has suffered losses. (AP Photo/Channi Anand)
A laborer carries a box of apples at a wholesale market in Jammu, India, Wednesday, Sept. 29, 2010. Since June, Kashmir has been rocked by violent anti-government protests and the subsequent crackdowns by security forces that have killed several people. The conflict has disrupted all aspects of life, businesses have lost millions of dollars and the fruit industry is one of the sectors which has suffered losses. (AP Photo/Channi Anand)

By Showkat Anwar Bhat

[A] wave of optimism has swept across the economic development of our state.  In the past thirty years, absolute poverty has descended substantially, almost entirely due to sustained growth. The decrease in poverty in India is likely to remain steady because India will continue to grow at a fast pace for another fifteen years at least and may be able to reach the position China enjoys today. In a very poor country, it is arithmetically impossible to reduce poverty without growth. If everyone is poor, poverty will reduce growth regardless of how it is distributed. But some kinds of growth reduce poverty more effectively than others. This is known as Inclusive growth.

The growth performance of the state of Jammu and Kashmir from the third five year plan to the fifth five year plan has not increased more than 5.5 percent at the constant prices. As per the estimates, our State has recorded 5.52 percent of the growth rate of GSDP, while at the national level the GDP growth was 6.48 percent (Economic Survey of Jammu and Kashmir 2010-11). The per capita gross state income at constant prices (2004-05) is 30, 886 rupees in the year 2009-10, against National per capita income of 38,060 rupees, which is lower than national level. The overall contribution of all the three sectors of the GSDP is low in comparison to GDP of the country. The agriculture and industrial sectors did not yield any significant development in terms of growth in 2010. The growth of industrial sector which is likely to grow at 6.7 percent has helped to maintain the growth momentum in the state economy. While analyzing the contribution of different sectors to the GSDP of state, it has been found that contribution of primary sector has declined from 28.48 percent in 2004-05 to 22.63 percent in 2009-10, while the contribution of secondary sector and tertiary sector has a positive increase of 27.33 percent and 47.82 percent in 2009-10.   The overall growth is mainly driven by the service sector which is the biggest obstacle to our economy for sustained growth.

On the one hand, the growth rate of GSDP of State is lower than the national growth rates while on the other hand both poverty and unemployment rates of state are lower than the national level. The total poverty at national level is 27.38 percent, while the poverty rates of our state is 24.21 percent (Economic Survey of Jammu and Kashmir 2010-11). These are certain contradicting puzzlements in our state economy. From all sectors the overall growth rate of our state is lower than the national and also the growth of the northern states of country. In GSDP growth rate, our state has the sixth rank and in terms of per capita income, while as it has the fifth rank in all northern states of India. In comparison to poverty rates, Jammu and Kashmir has the lowest poverty rate as per the estimates of 2004-05 made by the Planning Commission of India. The poverty rate as shown   by the planning commission on the basis of data collected by the NSSO through its socio-economic survey viz-viz Jammu and Kashmir state has been a matter of debate and controversy in the state.

There are two main reasons of low poverty rates in our state. First the resources and assets of the state are equally distributed due to which average per capita income is above the poverty line. Second, the state economy is composed of higher service sector like tourism, trade and commerce and employment in the government sector. The contribution of government sector to GSDP of state is only 13 -14 percent.  These service growth rates are short lived and the state of Jammu and Kashmir passes through spells of mercurial and temporary growth which makes the state dependent on others. If all the sectors of the economy can grow at the sustained growth, then the poverty of the state can fall at the minimum rate and its unemployment falls at frictional level. It has been found empirically that when average household income rise by one percent, poverty rate fall by about two percent as much on average. With the passage of time, growth almost bites deeply into poverty. As per the Okun’s Law, one percent increase in income leads 2.5 percent decline in the unemployment rate.  But there is an inconsistency with this law in our State. Both poverty and unemployment rate show declining trend but without increase in the economic growth of state.

There are three main factors that play their role in generating the economic growth of a country i.e. Labour, Capital and Resources. All these three driving forces cannot play their constructive role in developing our state economy. On an average, every year Jammu and Kashmir imports 4.5 lac laborers from rest of the country. Our state has shortage of labor, due to which it cannot show its best performance in terms of growth rate. Second important determinant of growth is the capital which pushes the economy at higher rate than others factors of production. This determinant of economic growth also fails to achieve the efficiency in our state, because of low industrial base and low technical knowhow. As per the Neo-Classical concept of economic growth, there is an increase in investment which leads to an increase in the capital stock of the economy by which the economy can move towards its positive rate of growth. But the investment in our state is less as compared to the other states, which is another obstacle to the high growth of the state economy. Third and most important determinant of the economic growth are the natural resources of the country. The state of Jammu and Kashmir is rich in natural resources like good quality of environment, water, forests, aquatics, wild life, medicinal plants e.t.c.. For most of developing and backward economies the key domestic resource is land and if all others natural resources are properly used and utilized the productivity of the land will increase and income growth rates will rise.

It is arithmetically impossible to reduce poverty without growth. But some kind of growth reduces poverty more effectively than others. The distribution of income can change as average income rise, becoming more or less equal. Like the expansion of small scale farming, will rise the income of rural cultivators thereby can cut the poverty very quickly. The expansion of capital-intensive mining industries, on the other hand, can result in jobless growth, making little impression on poverty. In the twenty first century, agriculture continues to be a fundamental instrument for sustainable development and poverty reduction. There are certain interrelated determents on which inclusive growth is likely to prevail in state economy.

I. Poverty Reduction and increase in quantity and quality of employment

One important determinant of the inclusive growth is reduction of poverty of all sections of the society at the minimum level. The target growth rate of the state economy at the beginning of eleventh five year plan was seven percent for 2007-08 and 7.5 percent for the year 2008-09. As the estimated Below Poverty Line (BPL) population ratio of the state has arrived at 21.63 percent (24.21 lac persons) with a dispersion of 26.14 percent (22.00 lac persons) for rural and 7.96 percent (2.21 lac persons) for urban area as per survey conducted in 2008 by Directorate of Economics and Statistics. Unemployment rate in State is 5.2 percent which is higher than all India level. The NSDP of the state during the 1980s increased at an annual rate of 2.17 percent the lowest growth rate recorded by any state.

II. Agricultural Development

Agriculture has the vital place in the economic development of state. Although the share of GSDP and employment over the years, however the pace of decline in its share of employment is less than that of GSDP. The share of agriculture and allied sector has declined from 28.3 percent in 2004-05 to 22.31 percent in 2009-10 at constant prices. With the natural resources base out of quantum of 1136370 hectares Gross area sown only 471134 hectares (41.45 percent) irrigated during the year 2008-09. The total cropped area during 2008-09 was estimated at 1137881 hectares which is estimated to have increase of 1144574 hectares in 2009-10 out of which are 41.1 percent irrigated. There are various causes of low growths in agricultural sector of the state, like

1. Hilly Terrain

2. Small and Fragmented land holdings

3. Fragile soil in hilly areas vulnerable to soil erosion.

4. Limit to mechanized farming and transportation of products.

5. Extreme limit in irrigation

6. Single cropping season

7. Inadequate and unorganized market system.

8. Distant markets for export outside state

9. Low ratio of  seed replacement

III. Social Sector Development

Social sector is another important component of inclusive growth of an economy, i.e. there should be social development in terms of health, education and environment e.t.c.. As per the estimates of Directorate of Economics and Statistics the total literacy of the state is 66.6 percent with the composition of 73.3 and 57.11 percent for male and female respectively. The very low percentage of literacy in the State is a legacy of the past and the cumulative effect of several factors i.e., the dearth of educational institutions, the economic backwardness of the people to finance the cost of educating their children. It was only during the post-independence period that the government launched a campaign of building up a network of educational institutions.

[pullquote]The state of Jammu and Kashmir is rich in natural resources like good quality of environment, water, forests, aquatics, wild life, medicinal plants e.t.c.. For most of developing and backward economies the key domestic resource is land and if all others natural resources are properly used and utilized the productivity of the land will increase and income growth rates will rise.[/pullquote]—Health has a vital role in the social to groom to the economy. The sex ratio in the state as per the 2011 census is 883 females per thousand males, while at the national level sex ratio is 940 females per thousand males. The main indicators of health include the expectation of life at birth and mortality. The expectation of life at birth in Jammu and Kashmir State is higher as compared to national average. The life expectancy in state is 65.3 years in comparison to 62.5 years at national level.  The infant mortality rate in state during 2002-2006 estimated at 45/1000 as compared to the national average.

IV. Reduction in regional disparities

This is one more imperative parameter of the inclusive growth process of the state. The state of Jammu and Kashmir faces the problem of inequality both in terms of income and developmental process of the state. It has been found that Jammu division is getting lions share in the funds allocation.

If above conditions are not practiced then it is impossible to achieve the inclusive growth. There are strong social, economic and political reasons for achieving broader and inclusive growth. Socially, lack of inclusive growth leads to unrest among the people. The measures which raise equity also promote economic growth. Lastly, the political argument is that no government in a democracy can afford to ignore large sections of workers and non-working population. If it is not inclusive it can generate very severe social tensions. Thus, politically, for having a stable and democratic society one needs to have inclusive growth.

The author is a Research Scholar at Department of Economics, University of Kashmir. He can be reached at showkatb155[at]gmail[dot]com

Photograph: newshopper.sulekha.com

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