The Kashmir Gambit

Under Delhi rule: Will J&K become less restive, more prosperous now as Modi has promised?

When it comes to mismanagement and corruption, few states can match Jammu and Kashmir. Consider this: so weak is the private sector that the state government’s expenditure is 57% of the Gross State Domestic Product (GSDP). In neighbouring Himachal Pradesh, also a hill state, it is 28%.

This dependence on government expenditure is, of course, largely funded by the Centre, which provides over 50% of J&K’s revenue receipts, apart from its share of taxes collected by the Centre which J&K is constitutionally mandated to receive.

A massively bloated government workforce -- around 5.5 lakhs, of whom 70% are from the Valley -- ensures that over a quarter of its total receipts (both taxes and borrowing) are consumed by salaries and pensions. Its per capita Net State Domestic Product at Rs 94,000 is almost half of that of Himachal’s Rs 1.76 lakh, its road density less than a fifth of Himachal’s and, unlike Himachal, its power sector is poorly managed.

All this points to the fact that central funds meant for the state’s development suffer from immense leakage – that is, they are looted by a corrupt and self-serving elite that encompasses the political establishment, the bureaucracy and sections of the business community, who act as coterie capitalists for the former.

Art. 370: The culprit?

Did Article 370 have a role to play in the mess that J&K finds itself? Contrary to popular or even “well informed” opinion, Article 370 has nothing to do with land ownership or government jobs. This provision, before the momentous announcements of the previous days, restricted the application of the Constitution of India and the powers of the Indian Parliament to make laws with respect to J&K. The Constitution and laws made by Parliament would fully apply for those areas that were listed in the Instrument of Accession of 1947, and for other subjects, their application required concurrence by the state’s Constituent Assembly and later the state legislature with such modifications as it deemed fit before the President by order extended that law to the state.

It was such a Presidential Order that inserted Article 35A into the Constitution of India that prevented the courts from striking down any law made by the state when it came to defining a permanent resident of the state or regarding preferential treatment for these permanent residents in acquisition of immovable property, state government jobs, settling in the state and right to scholarships and other forms of aid that the state provided.

The state’s law, protected by Article 35A, forbids the sale of land to those who are not permanent residents but allows for the leasing of land by the government for industrial, commercial, non-profitable and non-political purposes.

But similar rules exist in most of India’s hill states -- Himachal Pradesh, Uttarakhand, Meghalaya, Nagaland, Manipur, etc. For example, Himachal Pradesh has laws restricting the sale of agricultural land to non-agriculturists and requiring non-domiciles to seek state government permission to buy land. Yet, Himachal has been able to attract sufficient investment in industry, which contributes 42% of its GSDP. For J&K, it’s a mere 25% despite periodical industrial packages that were far more attractive. The reasons are simple: J&K’s poor connectivity and power infrastructure and an unfriendly business climate have ensured that the volume of investment made has been low and does not match the state’s endowments.

Failure of governance

Thus, J&K’s failure to industrialise is the result of poor governance, and not necessarily due to Article 370. In the same vein, J&K has failed to create new tourism circuits although considerable potential for that exists.

While the Valley is internationally known and witnesses large arrivals during periods of normalcy, tourist arrivals in Jammu are restricted to pilgrims who come to Shree Mata Vaishno Devi in Katra. Potential tourist destinations and circuits in Jammu that could easily rival those of Himachal have neither been developed nor encouraged. Similarly, Kargil’s potential has been left untapped.

Tourism is a great employment multiplier, but its neglect has meant that job opportunities outside of government have been limited. Observers from Jammu and Ladakh have long suspected that because the unexploited potential is largely in these areas, the Valley-centric polity is reticent about pushing economic development. Given generous central funding, the easiest option has been to increase unproductive government employment, which itself is overwhelmingly dominated by the residents of the Valley. Thus, where industry and tourism are concerned, it is poor governance, not so much Article 370 or 35A, that has stifled economic growth. This is not made better by the generous central government funding, which acts as a disincentive for the state government to impose fiscal discipline and create an environment where the private sector creates productive jobs.

Rural development thwarted

When it comes to rural development, the state has deliberately ensured that the Panchayati Raj institutions are kept at bay. Given Article 370, the 73rd Amendment is not automatically extended to J&K. J&K’s polity has ensured that it remains this way. In spite of a massive turnout (close to 80%) in the elections to the panchayats in 2011, the state government chose to starve the panchayats of funds. In the absence of enabling laws, the state chose to forego over Rs 1,000 crore earmarked for the panchayats by the then Finance Commission, rather than empower these bodies. Block Panchayats were never constituted, and the state’s Panchayat Act does not provide for Zilla Parishads! All rural development funds are thus spent through government departments with no popular oversight. The impact of such spending understandably is low. Thus, agricultural growth remains poor and the rural economy has not been able to create jobs. Here, poor governance and the abuse of Article 370 is visible.

The refusal of the state to extend the 74th Amendment has ensured that Urban Local Bodies constituted under the state’s own constitution remain administratively and financially weak. Given growing urbanisation and the fact that most economic activity takes place in urban areas, the lack of urban infrastructure also weakens the ability of the economy to grow and create jobs.

Empowering rural and urban bodies by strengthening the process of democratic decentralisation and community empowerment is at the heart of the 73rd and 74th Amendments. It is based on the premise that development is a participatory process. Yet, this is not the case and this centralised administrative structure that muzzles local bodies is made possible at least in part because of Article 370 which ensured that the state’s politicians could block such legislation. Article 370, which Gulzarilal Nanda had described as a tunnel to extend the Constitution’s provisions to J&K, was transformed into a valve by state politicians who used it to block any legislation aimed at community empowerment and extended only legislation that promised to increase the state’s revenues.

J&K has not done as well as it should have primarily because it is poorly governed. The continued flow of central government funds (it receives the highest per capita grant of all states), far in excess of what it receives as constitutionally mandated, acts as a disincentive to reforms. Article 370 insulates the state from progressive legislation that would otherwise decentralise power and increase discipline in governance and transparency. Thus, to ensure that the residents of J&K witness all-round development, the repeal of Article 370 is not enough. Infrastructure in terms of connectivity, reforms in the power sector and ensuring ease of doing business are vital. Both internal and external investment depend on these. Additionally, development is a participatory process where democratically elected local bodies have to be empowered and made partners in the development process. The hard part starts now.

But there is a lot to build on. The sheer diversity and a spectrum of micro-climates enables J&K grow a wide variety of fruits. J&K is known for apples. It also grows high-value low-volume nuts and fruits like walnuts and apricots. The task before the government is to increase productivity per hectare of these crops from their abysmally low levels and process them so that value is added. When it comes to crops like rice, Basmati cultivated in Jammu is only now being exported to the rest of the country and outside. This too needs to be scaled up, which requires a jump in productivity. A variety of crops and edible items like Rajma, Morel, spices can be marketed and exported. There is also enormous potential in medicinal plants and their processing. Indeed, there are entrepreneurs and technopreneurs who are successfully doing it, but their numbers are limited. The large number of scientific institutions, a large body of scientists and natural endowments in the state make the setting up of a knowledge cluster possible. What is required is intervention from India’s venture and angel capitalists, backed by improved governance.

J&K is famous for its handicrafts, but there is a need to re-energise the existing handicraft clusters to promote these arts and modernise production lines so that the novelty is not lost and more income and employment is generated. Customers willingly pay premium prices for such products. When it comes to tourism, there are sufficient potential tourism circuits that can attract tourists who are willing to pay a premium price for the experience. This requires infrastructure to be put in place so that the carrying capacity of this region, located in a particularly fragile Himalayan ecosystem, increases.

A very good example of this was demonstrated by the former governor Jagmohan when he set up the Shree Mata Vaishno Devi Shrine Board to regulate pilgrimage tourism to the shrine of the deity at Katra. The infrastructure that was set up is entirely self-financing and accommodates over seven million visitors in the fragile Himalayan foothills. The challenge is to do it in other parts of the state.

(The writer is a professor of the Department of Economics at the University of Jammu)