The ‘Central Sector Scheme for Industrial Development of Jammu and Kashmir-2021’ was announced by the Lt Governor of Jammu and Kashmir recently. This new industrial policy of J&K is the largest incentive to date, intending to spend an outlay of Rs.28,400 crore on the industrial development of Jammu and Kashmir for the next 15 years. As per the plan document, it is expected to generate an investment of Rs.20,000 crore and employment of 4.5 lakh over the plan period. This is the first block-level development project that intends to undertake the process of industrialization at the very grassroots level using the local resources, skill, and talent available domestically. The policy specifically promises an era of socio-economic development in the region, catering to the aspirations of the people of Jammu and Kashmir.
The main focus of the policy is employment generation and new investment creation. Self-employment has been proposed as a way to a balanced socio-economic development of J&K. It is assured in the scheme that new investments will be attracted in a manner that unprecedented growth and development will be set in motion. The scheme intends to make the resource use optimal, harnessing local skill, talent, and available resources and creating backward and forward linkages. The policy also highlights the aim of industrial development via. collaboration and convergence, indirectly hinting at making investment channels for outside investors open and easy. The creation of Special Economic Zones (SEZs) is also on cards claiming to put the industrial focus on backward areas to enhance their industrial viability. For the existing entrepreneurship in J&K, the new industrial policy has the least to offer. For a period of 05 years, Industrial Policy JK-2021 guarantees a 05% working capital support.
On the practical front, however, so much optimism might not be associated with the new industrial policy. Before endeavoring on any new project in any sector it is essential to take stock of the existing conditions. Impact evaluations of the older policies and the current position assessment of the sector under consideration are the key to future success. The existing business in Kashmir is in shambles due to the exogenous shocks of 2016, 2019, and 2020. There has been a recurring decrease in demand leading to a decrease in production and sales simultaneously in the region due to the conflict shock of 2016, the abrogation of Article 370 in 2019, and the Covid-19 crisis of 2020. The number of units turning NPS has been on the rise ever since. The cost of credit has been increasing due to uncertainty and low firm activity. All these factors combined have led to an overall shrink in the firm activity in the region.
It is pertinent to mention that potential entrepreneurs are as important as the existing entrepreneurs. The industrial growth, development, and increase in efficiency and Total Factor Productivity depend on the enthusiasm and quality of potential entrepreneurs. Currently, there is a pessimistic business environment in the region of J&K. The current entrepreneurship is in distress and in no manner setting a positive example for the potential entrepreneurs to join in the secondary sector. No strong scheme has come from the government to eradicate the problems of the existing entrepreneurs in J&K. This in itself is a big question mark on the new policy that intends to undertake job creation and investment through the creation of new firms and industrial units. Given the current scenario of industrialization in J&K, backed by anecdotal research from fragile areas across the globe it can be predicted that this policy has the least power to motivate the potential entrepreneurs to join in the self-employment ventures.
The optimal utilization of resources depends on the efficiency of the firms in the region and the Total Factor Productivity Growth (TFPG) experienced by the region in the past periods. Academic research shows that the efficiency level of the firms in J&K averages between 28 and 33%, pointing to high industrial inefficiency and under-utilization of resources. The TFPG over the past two decades has averaged between 08 and 10, again very dim. To enhance the efficiency and TFPG several initiatives and incentives is needed on the state’s end. The research and development expenditure in the secondary sector should increase and must get more than 03% of SGDP. At the same time, a strong subsidy must be provided to the industrial sector to get high-end technology and incorporate it into the production process. No such provision has been made in past and is absent in this policy as well. This again puts a question mark on the inwards looking developmental nature of the policy and the fund usage of Rs.28,400 crore amount.
The creation of Special Economic Zones (SEZs) in a fragile, conflict-affected, and geographically isolated area can’t be successfully charted along the lines of backwardness. The basic pre-requisites to set any sort of industry are duly to be taken care of. A complete ground-level analysis of climate, environment, locally available resources, conflict-affected regions, local population, skill and literacy rate, regions of higher intensity of conflict, and other important business environmental factors need a due evaluation before declaring any place as an SEZ.
The New Industrial Policy of J&K needs research and need-based reconsideration. The policy document claims that it is a block-level developmental project. The amount and period of the project are decent enough to usher dawn of industrialization in Jammu and Kashmir, provided proper planning is done and appropriate implantation made. At the same time, it is important that nothing has been written between the lines that the policy is a direct intervention to boost the local industrialization and not a channel to bring in outsiders overtaking the local process of self-employment.
Dr.Javaid is Sr. Assistant Professor, Department of Economics, University of Kashmir.
Dhaar Mehak is a researcher from the same department.