Economic Structure of J&K

Where do we stand and what needs to be done

TUESDAY TAKE

AJAZ AYOUB

The pillars of any state rest on the building blocks of Economy, Environment, Education, Employment and Healthcare. Although each block is important for the stability and growth of a civilization but “Economy” is the corner stone on which the prosperity of a state rests. When we talk of measuring the size and performance of any economy we take assistance from time tested and globally accepted quantitative techniques of economics. One such prime indicator of measuring national income is the “Gross Domestic Product” (GDP).
Let’s do some math:
Fig: J&K’s GSDP growth Vs National GDP growth rate since 2005-06:
J&K contributes approximately 0.76 % to national GDP and ranks 20th in the list of contributing states. As shown in the above graphical representation the national GDP growth rates have slumped from 9.48% in 2005-06 to 6.88% in 2011-2012 while as J&K’s “Gross State Domestic Product” (GSDP) growth rate has shown an improvement from 5.78% to 6.78%. Thanks to deteriorating national GDP numbers we have somehow managed to catch up with the national aggregates. Another important point to understand here is the “base” on which the growth multiplication factor is applied which in case of National GDP is huge compared to small sized GSDP of J&K. Therefore even a small percentage growth on a bigger base means proportionally bigger incremental growth to National aggregates in absolute terms compared to a small GSDP base of J&K. In addition to GSDP one of the concerning indicators of our state economy is the fiscal deficit. We are among the states with highest fiscal deficit in the country which measures to 4.62% for FY 2012 ranking 3rd in the worst list of deficits after Manipur and Pondicherry and irony is that we rank 2nd in the list of highest grant receiving state from central govt. which amounts to 7.55 billion USD. This makes J&K the most indebted state with a debt-GSDP ratio of around 60%. Debt-to-GSDP ratio is an indicator of health of an economy. A lower debt-to-GSDP ratio means an economy is producing enough to pay back its debts. A higher debt-to-GSDP ratio is a highly unfavorable situation. Now a cherry on the cake; RBI in its latest publication dated 10th Jan 2013 reduced the target Debt-GSDP ratio for J&K state to 49.3 % (2014-15) which boils down to reducing the numerator or in other words it means paying back a substantial amount of money to the central govt. Another socio-economic indicator of Jammu Kashmir is the per capita income which in case of J&K is Rs 24,214.00 which is quite low as compared to the national average of 33,283.00 and we rank 21st in terms of per capita income among all the Indian states.

Sectoral composition of J&K’s GSDP:
The three components of J&K’s GSDP are Agriculture & Allied sector, Industry & Manufacturing and Services. The respective contribution of these sectors during 2011-12 was 19.35 %, 26.41 % and 54.24 %. During the last few years of planning between 2004-05 and 2011-12, the share of agriculture in GDP has fallen by approximately one third from 28.00% to 19.35%, whereas the share of industry has decreased from 28.23% to 26.41% and the share of services has improved from 43.71% to 54.24%. It is observed that services sector is emerging as an important growth driver and the manufacturing sector is relatively stagnant while agricultural productivity has decreased significantly. It is a point of concern that the combined contribution from primary and secondary sectors is becoming less than the lone contribution from service sector which is a very unhealthy condition for sustaining growth in the long run. 

Identifying the weak link:
J&K needs to focus on its weakest contributor “Agriculture” which ironically supports more than 60% of employment and the effects can be easily seen in the disparity ratio between average incomes of agriculturists and non-agriculturists which has been increasing since long. This means that a major population (60% people) of J&K is becoming poorer. Also, keeping in consideration the scope of expansion in Manufacturing sector and Service sector (primarily with tourism industry under its kitty) the major bottle neck that can hold us back is the Agriculture sector.
The agricultural sector has shown a lower performance due to a number of factors such as illiteracy, insufficient finance, insufficient irrigation facilities, power availability, inadequate marketing facilities and under pricing of agricultural products. The average size of the farms is very small and approximately 90% of land holdings are of the size of 2-4 Kanals, which in turn results in low productivity. The sector has not adopted modern technology and agricultural practices to a larger extent. Also decline in plan allocations investment and investment credit are contributing factors.

What needs to be done?
There is an urgent need to keep a check on agrarian land which is getting misused by land mafia across the state. The urbanization pressure has directly impacted the size of land holdings and area under cultivation. In addition to that focus has to be made towards agricultural awareness, efficient irrigation methods, power facilities, marketing, logistics and proper product pricing. Since most parts in J&K have a single crop year, there is a need to promote green housing and other all weather methods of farming. There is also a need for opening Compressed Atmosphere Stores and Cold Chain Facilities for increasing the fresh fruit life keeping the contribution of horticulture into consideration. Other allied activity of agriculture which has a potential to add volumes to our economy is production of Sheep, Poultry, Fish and Dairy products which we mainly purchased from Delhi, Rajasthan and Punjab. Apart from contributing to GSDP and providing employment to youth, this allied industry of agriculture has a potential to make J&K self sufficient in terms of Food and Dairy.
Broad areas of focus for future should be Agricultural Research, Agricultural Extension, Training and Information Services, Marketing and Processing, Agricultural Credit, Diseases and Pests Control and above all setting performance targets to concerned departments. In addition to this focus should be on sub-sectors like livestock, fisheries, and the Cooperatives. The sooner we realize the backwardness of our primary sector the faster we increase our chances of emerging as an economically stable state.
Note: The data used in the write-up and for preparing the graphs is taken from official website of “Planning Commission of India”.

(Author is Risk Analyst: J&K bank. The views are his and not the institution he works for. Reach him at ejaz.ayoub@gmail.com)

Lastupdate on : Mon, 28 Jan 2013 21:30:00 Makkah time
Lastupdate on : Mon, 28 Jan 2013 18:30:00 GMT
Lastupdate on : Tue, 29 Jan 2013 00:00:00 IST




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