Views from Srinagar
THE general trade depression prevailing over past some time in Kashmir is a major economic concern for this place. This may be overshadowed by the gigantic political challenges that the state has been through, the concern is real one nonetheless. The bad thing is that this depression is not going to dissipate in the near future.
The steady decline in the growth in various vital sectors of our economy is quite visible and disturbing. The manufacturing industry— not indeed our core sector in terms of its strength— remains to be in the doldrums. The sickness of our units has become rather infectious.
The construction industry— overwhelmingly unorganized in its nature, continues to be ill-at-ease primarily post-2014 great floods in Kashmir. The state of public construction industry is no different. Post-2014 deluge, the reconstruction and redevelopment of public infrastructure surely make us no envy for others.
The decline in the two sectors— the industry and the construction— is squarely attributable to overall poor performance of the state economy. Both the industries vastly depend on the local demand that has been under stress reasonably for a good amount of time now.
The political unease largely triggered and trailed by the public maelstroms of 2008, 2010 and 2016 has had an extremely negative impact on factors that help drive demand in any economy. Both the investment and the optimum utilization of the existing capacity have taken a beating.
Forget about the outside state investments coming to Jammu and Kashmir— that actually had never been forthcoming in the past a little less than three tumultuous decades—the domestic investors have held back their hands into an appallingly unpromising atmosphere.
Sadly, the public investment that could — and ideally should— have “bailed out” the private sector, presumably failed in its duty. With the total spending in the economy remaining in spasmodic mode, the aggregate demand would grow in some near future is highly improbable.
The state of the export-oriented sectors of our economy does not seem to be promising either— at least for a while from now. Be it the fruit, spice or handicraft— bulk of which goes to different states in the country— the market does not seem to be famishing in the face of decline in growth in India. The estimates of gross domestic product released by the Central Statistics Office (CSO) for the first quarter of current financial year show that in Q1, the GDP grew by 5.7% and the gross value added (GVA) at basic prices grew by 5.6%. In the corresponding quarter of the previous year, the GDP had grown at 7.9% and the GVA at 7.6%. There is a decline in growth rate by almost 2 percentage points. What does this hold for us? Not difficult to guess.
The market for our export-oriented sectors has virtually gone into hibernation with no hope of its waking up in the immediate future. The demonetisation stung has badly emasculated the growth so much so that the International Monetary Fund has forecasted that the move could dampen India’s growth by one percentage point in the current fiscal year and 0.4 percentage point next year. The IMF expects India to record a growth of 6.6 percent for the current year, and 7.2 percent next year. Earlier, IMF had projected 7.6 percent this year and next year. No wonder, the World Bank’s former chief economist Kaushik Basu has said this (downturn in India’s growth) is the “hefty price” the country had to pay for demonetisation.
Coming to our service sectors, the forecast is not upbeat. The tourism industry has failed to rev up since 2012, the year that itself had seen some signs of revival of this industry after a three-year long slump. The continued political uncertainty marked by frequent public groundswells and the nasty anti-Kashmir campaign by a section of outside state electronic media has cast a gloom on the hospitality industry of Kashmir. Even as our tourism players rummage through the cities and metropolis of India round the year to lure tourists to Kashmir, the efforts have so far borne little fruit.
Now coming to the scenario of employment! Jobs are the scarce commodity in Kashmir. With almost every sector of our economy under distress, quite little jobs have been created over past five years in the private sector in Kashmir. The two ways that help create jobs are: investments and capital formation— both are important for the real growth of the economy. When the household savings and investments have taken a beating, capital formation cannot be expected. Then there is the problem of widespread underemployment that has largely and understandably gone unnoticed in the face of mounting challenge of unemployment in Kashmir.
So, has the Keynesian economics, born in the 1930s, become dramatically relevant again today at least for us? Can we afford any further fall in aggregate effective demand for goods and services? Can we burry our head under the sand and let the things go like they go? But the big question for all of us is that do the state government have really the potential to bail out the private sector by sufficient dole-outs when it itself is hard pressed on financial front?