The Narendra Modi-led NDA government abolished Article 370 and Article 35A of the Constitution which granted special status to the erstwhile state of Jammu and Kashmir (J&K). Removal of the temporary provisions of the Indian Constitution was opposed by the Congress and other opposition parties but the ruling alliance argued that Article 370 and Article 35A has not benefited the people of the state and alienated them from national mainstream.
From 2000 to 2016, J&K, with approximately 1 percent of India’s population, received almost 10 percent of central government allocations, while big states like Uttar Pradesh received only 8.2 percent of the funds despite having 13 percent of country’s population. Per capita allocation was Rs 91,300 for residents of J&K, while only Rs 4,300 was allocated to the residents of Uttar Pradesh. If the J&K economy is still fragile despite receiving disproportionate amount of central government assistance, then local politicians are to be blamed for this who harvested the unrest to further their political ambitions. States like Assam also faced insurgency but their economy grew consistently.
J&K, Himachal Pradesh and Assam – Growth trend
Source: Central Statistical Organisation
Neighbouring Himachal Pradesh has recorded better economic growth than J&K in all aspects. Agitation, insurgency and special status of J&K posed practical challenges for business community which impacted the economic growth.
Source: MOSPI
J&K and Ladakh have immense potential for economic growth. Scrapping of Article 370 and Article 35A will attract flow of investments in sectors like tourism, food processing, handicrafts etc. The newly created Union Territories have a unique advantage in the form of weather, which can be leveraged to develop pharmaceutical and food processing industry.
The government notified certain areas as Special Economic Zones (SEZ) in Himachal Pradesh and offered income tax incentives for setting up manufacturing facilities. The state government also offered concession and expedited the clearance of investment proposals. Baddi is a small industrial town in Himachal Pradesh, which has become a hub for contract manufacturing in northern India and this model can be replicated in J&K and Ladakh.
The central government should provide investment-linked tax incentives for setting up manufacturing units or alternatively profit-linked tax deduction can also be considered for some period because J&K and Ladakh need special attention at least during the initial phase. Indirect tax waiver or refund mechanism should also be considered for a limited period to promote investment.
Tourism is another area with immense potential to generate employment. The number of tourists visiting the Vaishno Devi shrine in Jammu, and Dal Lake in Kashmir can be a perfect example to demonstrate how tourism can change the life of locals. There are various famous religious places in the union territories that can be promoted as tourist destinations on similar lines of Vaishno Devi shrine. Tourism and adventure sports should be given due attention. Increase in visitors from all over the country will also help Kashmiris assimilate and become part of the mainstream. J&K is famous for its handicraft, and proper channels should be established to ensure that weavers get a fair price.
The PM has taken a historic and courageous decision to abolish the controversial provisions of Indian Constitution. Now success is dependent on accelerating the economic development so that people of the newly created union territories can start seeing the dividends of this transformation.
(The author is a chartered accountant and anti-money laundering specialist. Views are personal)
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