The bankruptcy of normalcy

Despite militancy, the state had never hit the bottom of the financial barrel. Experts now fear that a return of normalcy to the state could, ironically enough, lead to its penury

Iftikhar Gilani Delhi

A burgeoning population of orphans and widows notwithstanding, Jammu and Kashmir (J&K) has a healthier economy than most other Indian states. After years of turmoil, real estate prices have soared and lowered poverty ratios to a record level. But, ironically enough, experts fear that poverty may revisit the Kashmir Valley once peace returns to it.

In the 10th Plan Document for 2002-07, which got delayed by two years, the Planning Commission has calculated that the percentage of the below poverty line (BPL) population was the lowest in J&K. At the start of militancy in 1988, the BPL population in J&K was 23.82 per cent, which increased to 25.17 in 1993-94. It has nosedived since. The figures gathered in 1999-2000 showed the BPL population at just 3.48 per cent, contrasted to India's national average of 26.10 per cent.

A major cause for this goes back to the sweeping stroke-of-the-pen land reforms by former chief minister Sheikh Mohammad Abdullah in the early 1950s. The state has also been relatively egalitarian — no large landholdings exist. However, state finances have always been in the critical doldrums. With local revenues having collapsed under the impact of a long-lived militancy, coupled with severely diminished tourist traffic and a demoralised administration, the state has remained sadly dependent on New Delhi's largesse.

But, what has actually changed since 1990, since when, despite stubborn militancy, the poverty ratio has seen a steep decline? Economist Swaminathan Anklesaria Iyer provides an explanation: the huge concentration of armed and paramilitary forces, numbering over 600,000 in the state, has contributed to its economy. Officials here also maintain that a large portion of India's military budget is spent in J&K. Others believe that militancy has also brought with it hawala money, sent from across the world. The circulation of this clandestine money has helped the population breathe easily.

N S Jamwal, fellow at the Institute of Defence Studies and Analysis (IDSA), Delhi believes militancy has made people richer and the state poorer. He traces sources of cash to Pakistani intelligence agencies — whose objective is to keep militancy alive — and to the Kashmiri diaspora, who mainly fund voluntary organisations and political groups.  Indian intelligence is also generous in its largesse. A number of informers and political activists keep the state's economy in a good shape. However, Jamwal claims that according to the Indian intelligence agencies, about 90-95 per cent of the funds in Kashmir come through the hawala channel alone.

This is why Iyer fears that although J&K has suffered heavily during the past decade, the irony is that if peace returns, so too might poverty.

Kashmir is the only state in India where real estate prices have gone up over the past few years. For example, a group of Pakistani journalists recently visiting Srinagar were dumbstruck by the rows of palatial mansions along the Airport Road. Having covered the war in Afghanistan, they were expecting to find similar sights of depleted buildings and tattered roads in the state.

Top J&K official, Pervez Dewan says the impact of militancy on the economy has been mixed. "Only two sectors actually hit reverse gear: tourism and industry," he says. Agriculture and horticulture, the mainstays of the economy, actually grew.