The policy of import substitution aimed to replace the outside manufactured goods with locally produced to create employment and bring self-sufficiency was given a lot of thrust a decade ago.
It was considered a tested business idea to manufacture the goods which are otherwise imported from other states and feed the local market with these locally produced items. This seemed a cake walk.
But as the people started to work on such ideas, there were massive glitches in harbouring such a policy, though not noticed in early years. The idea of replacing the already available commodities in the market with locally manufactured ones when there are big fishes already present in the market is anything but viable. A small unit has difficulty in maintaining the face value or to compete with the multi-national companies or big business houses of the country. The brand and vision of an MNC, which feeds products to 1.28 billion people has a business model developed on the economy of scale. A small local unit cannot compete with this kind of a company, therefore had enormous failure rates.
The market projection, given to all the local manufactures, was made on the simple supply-demand hypothesis. But for an MNC there a number of advantages. It procures the raw material when the rates are down and produces on economy of scale, which helps them to create an end product with a competitive pricing edge. These corporate houses follow the simple rule of Warren Buffet, “be fearful when others are greedy and greedy when people are fearful”. This kind of strategy is not possible for a local manufacturer, which has neither capital nor R&D support, or any other advantage on its side.
It’s important to mention here that Kashmir market is seasonal and has limited market to cater to. On the other hand an MNC has market of 1.25 billion people that too round the year and raw material is available to it in the radius of 100 km with round the year connectivity.
Therefore, the prominent reason for not substituting the imported products with locally manufactured ones are cited as:
(I) Raw material is not available and is imported from outside.
(II) State has a small/limited market therefore less viability.
(III) Competing with an MNC in terms of branding and regulation is very difficult.
(IV) Price competition with an MNC is highly difficult.
Instead of keeping thrust on import substitution, Kashmir needs to look for more options to increase its exports. Maximum energy and time should be dedicated to produce a product that is unique and is not replaceable in mainland India.
Kashmir is situated in an ecological and climatic zone that is different from mainland India. The flora and fauna are entirely different and unique as compared to rest of India. The focus of our economy should be on exports rather than substituting imports, which is not viable option for Kashmir.
Being mediocre, and being the follower of an outside trends doesn’t make startups work in Kashmir. Kashmir is land of agriculture, skilled labour, craftsmen and traders.
The trade particularly is booming in Kashmir due to change in lifestyle and urbanisation. More commodities and products are imported into J&K, while as our exports are diminishing each day. This year our exports may not even cross Rs 10,000 crore, whereas imports have already leaped to Rs 45000 crore. So the gap between these two are much more than anticipated pushing the state to a debt cycle and flight of capital. Therefore, question pops up how to try to balance this import-export gap. And I believe answer to this future question lies in the past.
The only time witnessed in history when Kashmir was self-sufficient and prosperous was during the ‘era of enlightenment’ of Zain-ul-Abideen Badshah. The focus should be on reviving of skilled labour and production of raw materiel. Emphasis should be given on agriculture and horticulture sectors. We have to understand the fact that land of Kashmir is topographical and geographically different from rest of India. Therefore it has its own advantages and disadvantages anything successful in mainland India is not necessarily a good business idea here and vice versa.
Here is the list of businesses meant to flourish in Kashmir:
Animal husbandry Milk, cattle, chicken etc
Floriculture Medicinal, landscaping, ornamental
Skill development Handicraft, infrastructure
Food processing exotic, under cultivated
Investment Venture capital, joint ventures
Mining mineral Iron ore, sulphate,
Medicine & healthcare Hospital, medicinal research and pharma manufacturing
Education Schools, colleges and universities
Energy Solar, hydro, thermal
Transport Public transport, internal aviation
E-commerce Private public partnership
Horticulture Apple, apricot, cherry, pear etc
The notion of replicating any industrialisation of Gujarat and Delhi and adopting same policy will not work for this part of the world. During the industrial revolution of world, all the countries ferried the train of industrialisation but few choose to let it go like New Zealand and Netherlands. They understood the importance of topography and geographical advantage (from rest of world). These countries choose to stick to agriculture based economy and we know huge portion of world’s milk supply comes from New Zealand and 50 percent green products from Netherlands.
Manufacturing units with most of import-oriented raw materials has value addition of 10-20 percent to finished product. So with huge investment, return on investment (ROI) doesn’t sound viable and not the right precedence to set. So these energies and investments need to be channelised into proper way to increase our GDP.
Author is president of Consortium of Young Industrialists of Kashmir (CYIK) and runs an industrial manufacturing unit
mirsaqibali@gmail.com