After enduring a year of back-to-back lockdowns, Kashmir’s economy has well passed its breaking point. The alarm bells have been raised by several stakeholders as sector after sector, industries in Kashmir are reporting huge losses.

Even as the pandemic is unlikely to die down any time soon, the business community in Kashmir is grappling with an existential crisis. Will businesses return back to normal and jobs come back? Will the customer change his spending patterns? Is the revival on the cards or we have to brace for a deep and a prolonged lockdown?

Resilience keeps Kashmir’s economy afloat but a stimulus is desperately required, wrote The Kashmir Walla this week.

This much is certain: the pandemic and the yearlong lockdown will lead to permanent shifts in political and economic structures that will become apparent only later. To help us make sense of the ground shifting beneath our feet, The Kashmir Walla’s Minaam Shah talked to Jammu and Kashmir’s former Finance Minister, Haseeb Drabu, to weigh in with his analysis and predictions for the economic scenario in Kashmir.

The interview is lightly edited for brevity. Here are the excerpts.

The Kashmir Walla: Considering that the valley is largely export-oriented, do you see the impact of the pandemic taking a heavier toll on the local economy?

Haseeb Drabu: The economy of Kashmir is not only an export-oriented one but also an import-dependent economy. As such, the impact of the pandemic lockdown will be much more severe. The main difference from an economic point of view is that while the earlier shutdowns were localised; the pandemic lockdown is a global one. 

During the localised shutdowns, the production activity used to continue to some extent. Quite a bit of the output of the economy – especially from the household enterprises, horticulture and the artisanal sectors – is produced. For instance, the artisanal production process which is a household informal type of a production system. Or even the horticultural sector.

Also, while local trade and transactional activity would get curtailed, import from outside the valley and exports to the rest of the country and the world would still be done, even if at a lower level. So the income generation would take place from sales outside the state. Added to this, the non-resident Kashmiri inflows in the form of remittances will also continue.

With the pandemic, even this anaemic economic cycle has been disrupted. Even if goods continue to be produced in the Valley, their value cannot be realised in the market. With the national and international markets shut, there is no realisation of the value that is being generated in the process of production. Much of the inputs that go into the productive activities within the local economy has caused a supply side disruption. Hence, curtailed production to that extent. This will extend the adverse impact of the pandemic to the medium term as well, in addition to the short run losses that we are seeing.

Kashmir’s administration is being run entirely by bureaucrats rather elected politicians who understand the local economy and are well-versed with local business lobbying groups. Do you see that process getting disrupted after the abrogation?

Well, the bureaucracy has been like this for as long as I can remember. 

Yes, to the extent that there is President’s rule, the political stakeholder-ship is absent. I don’t think it is about understanding the local economy but about two things; first, it is about a stake in the system. A local politician has both a personal stake as well as a “professional” stake, if he doesn’t do well for his constituency, be in terms of a geographical area or a community, he will not be elected. An appointed person has no such stakes. Mr. Murmu [first Lieutenant Governor of J-K, Girish Chandra Murmu], who spent almost one year here, is now the CAG [Comptroller and Auditor General of India], Mr. Malik [last Governor of the erstwhile state of J-K, Satya Pal Malik], who was also here for a year or so, went off to Goa and now Meghalaya!

The second part, often ignored but is important, is the local socio-economic connect. What you might like to call the social base of the ruling elite. A local political person is socially networked – through his family, friends and fraternity–he is aware of the sentiment and situation on the ground. The current regime lacks that social base. It, of course, [also] lacks political legitimacy. They together make it an alien ruling elite.

In the pre militancy era, the rise of a new middle class was instrumental in shaping the politics of the 1990s. In that context, what do you perceive as the fallout of the current economic slump in Kashmir?

There are bound to be a series of sequential changes down the line; a shift from self-employed to wage labour is the most obvious one. Not out of any state coercion but out of market compulsion. It will come across as a rational decision – the Kashmiri farmer will choose wage work because of a higher wage. In the process he will get alienated, if not expropriated, from his land. The small, medium and micro enterprises will also face a similar fate. The business fraternity in the valley that emerged in a regulated quasi-protected economy, will have to reinvent itself if it has to survive. For them the partner of yesteryears will now become a competitor, if not an adversary. 

Associated with these will be a change in the social structure of the Valley. The owners of relatively sizable trade and commerce enterprises, will either become or be replaced by the “rentier capitalists” class. In many cases the nascent industrial class will partner with India Inc. How this gets done, will depend on the policies of the government. It is quite possible that the local business class would be seen as a “comprador bourgeoisie” and to represent their interests, you could well see a political formation driven by this class. In some ways you are already seeing it.

What needs to be done to revive the economy?

Kashmir can be the model for sustainable economies of tomorrow. I see Kashmir as a cultural economy at the heart of which is the incredible craft sector that is social in its organisation, material in its production and sustainable in its development. It needs technology, innovation and disruptive collaborations. The artisanal economy that Kashmir has can be a viable force in opposition to existing systems of production through the humanization of work and commerce.

Globally, it is the culture and creative economy which is now growing exponentially as a result of online shopfronts and home-based micro-enterprise. Then there is the apple economy, the horticultural sector if you like. The Valley, on its own, is the sixth-largest producer of apples in the world. With very little investment it can become the second-largest apple producer in the world. Finally, there is a tourism and visitor economy with its services sector linkages. None of this industrial-manufacturing stuff that the government is planning needs to be done here. It will do more harm than good. We need to get linked not in a manufacturing subcontracting assembly line but to the global value chain.