Jammu and Kashmir is one of the North India’s most visited tourist destinations and home to the Himalayas, lakes, wetlands and meadows. With a vast potential to cater to a diverse group of tourists, the Union Territory is well-known for world renowned spiritual destinations such as Vaishno Devi shrine, Amarnath, Hazratbal shrine.
With around 60 per cent of the total geography being mountainous, the economy of J&K is mainly dependent on agriculture, animal husbandry, handicrafts and tourism along with other sectors such as industry and services. However, the main source of employment in J&K is agriculture and horticulture and floriculture, sericulture, animal husbandry and handicraft being secondary vocation for most of the state natives.
The role of industry, services and the government in providing employment has been very limited. As far as the roles of governments (state and Central) are concerned, the Central Government has been driving force in the economy of J&K. The government has really worked hard to launch investor-friendly policies with focus on ease of doing business. The UT offers one of the lowest industrial power tariff to the industries having their manufacturing bases there.
J&K is among one of the largest producer of apple, walnut, cherry and almond in India. It has three agro-climatic zones, which enable cultivation of unique produce like saffron, berries, figs and special variety of Basmati rice. It also offers a conducive climate for rich floriculture.
J&K has the potential to become a major food processing hub since only one per cent of the apples and only 25 per cent of the walnuts are processed currently in the UT. The total demand of CA storage is around four lakh metric tonnes (MT).
J&K is also among one of the largest wool producing regions in India with annual production around 7,218 MT, besides being one of the finest silk producers worldwide and it also has the presence of oldest traditional cottage industry.
The Union Territory is well-known for its handloom and handicraft items that include carpets, papier machie, crewel, chain stitch, etc. There are around 43,000 weavers and 3.5 lakh artisans who are currently associated with this handlooms and handicrafts industry, and about Rs4,000 crore handicrafts exports were done in the past five years.
Ranked number seven in India Health Index in 2016-17 and 2017-18, there are prominent pharmaceutical units present in J&K. The region also has ample availability of mineral and agriculture raw material and has flourishing industrial ecosystem in 57 industrial estates.
Further, J&K accounts for 10.25 per cent of India’s total hydel power production with the presence of three perennial rivers — Chenab, Ravi and Jhelum. Currently, only 23 per cent of the hydro energy is harnessed.
Volatile but growing GDP
The gross state domestic product (GSDP) growth rate of J&K has been very volatile over time in comparison to overall GDP growth rate of India. During the period of 2011-12 to 2018-19, the GSDP CAGR of J&K is found to 13.63 per cent against 6.7 per cent for India (GoI, 2019).
The industry sector saw an expansion at a CAGR of 5.84 per cent from 2011-12 to 2020-21, driven by manufacturing, construction, electricity, gas and water supply. The agriculture and allied sector increased at a CAGR of 8.69 per cent between 2011-12 and 2020-21
The industrial growth rate in the state has been fluctuating from 26.2 per cent to 3.4 per cent during the period of 2015-16 to 2018-19 (Govt. of J&K, 2019). The growth in service sector has also been ranging from 10.8 per cent to 1.4 per cent during the same period. The growth in agriculture sector during the same period has followed the same pattern varying from 24.7 per cent to 2.5 per cent.
The Tendulkar poverty line puts the level of poverty in J&K at 10.35 per cent against an all-India average of 21.92 per cent (Government of J&K, 2017). Similarly, the relative inequality (distribution of income as well as consumption) is much better and more evenly spread (Upadhyay, 2015). Similar results are found by many other studies like the Bhat & Yashmin (2017).
Considering the economic base and natural conditions in J&K, there are many sectors that could offer huge opportunities to the investors. These include hydropower generation, transportation, tourism, pharmaceuticals, biotechnology information technology, horticulture, sericulture, dairy products, food processing and real estate, etc.
The climate of J&K can prove bliss to pharmaceutical companies for research and development as well as manufacturing. Large numbers of companies from pharmaceutical and biotechnology sector have already invested in the state. There are already more than 135 units engaged either in manufacturing or research and development in pharmaceutical sector.
At current prices, the services sector contributed 62.63 per cent to J&K’s Gross State Value Added (GSVA) in 2020-21, followed by the industry (19.3 per cent) and agriculture and allied industries (18.07 per cent) sectors. The services sector witnessed the fastest growth among the three sectors (from 2011-12 to 2020-21), witnessing a CAGR of 10.16 per cent.
According to the Department for Promotion of Industry and Internal Trade, the cumulative FDI inflow in J&K was valued at $0.21 million between October 2019 and March 2021.
The electricity and services sectors are the major contributors in the economic growth of the UT. Moreover, due to the UT being mineral rich, there exist numerous business opportunities in various sectors, mainly, agriculture, handloom, handicrafts, etc.
In 2020, four investments of Rs151 crore ($20.83 million) were proposed in the UT. In April 2021, the government of J&K signed 456 MoUs with various firms for a potential investment worth Rs23,152 crore (US$3.17 billion).
Some of the major initiatives undertaken by the government to promote investment in the region are:
According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), the Union Territory has attracted foreign direct investment (FDI) equity inflows worth US$6 million during the period April 2000 to June 2019. The same is valued at $0.21 million between October 2019 and March 2021.
J&K has an attractive industrial policy with a single-window clearance mechanism. The industrial land is also allotted at concessional rate for up to 90 years.
The Emaar Group will develop a five lakh sq ft shopping mall in Srinagar, as per the MoU signed by the Governments of Dubai and J&K to facilitate investments.
In October 2021, the J&K administration signed another MoU with Government of Dubai for real estate development, industrial parks, IT towers, multi-purpose towers and many more, as per the Ministry of Commerce.
Dubai-based DP World and the Government of J&K have signed an MoU to explore opportunities to develop trade infrastructure in the UT. The agreement will see discussions on a multi-modal logistics park and hub in Jammu, comprising warehouses and specialised storage solutions.
In April 2021, the government of J&K signed 456 MoUs with various firms for a potential investment worth Rs23,152 crore ($3.17 million).
-— Source: Department of Industries and Commerce, Jammu and Kashmir