Sajjad covers a wide canvass of economic ills in the valley and hopes for a miracle
(Mr. Sajjad Bazaz, 44, was born in Srinagar. He attended the Khalsa high school and the Sri Pratap College in Srinagar. He received his bachelor’s degree in Media and his master’s degree in Mass Communication and Journalism from the University of Kashmir. Mr. Bazaz has over two decades of experience in journalism (both print & electronic), and he is author of the book “Bankwatch” which is about a financial scenario with particular reference to the J&K state. He is currently incharge of corporate communications department in a leaduing financial instution in J&K. Mr. Bazaz likes to spend leisure time watching movies and enjoying company of his friends.)
J&K Development: There are impediments in the way
J&K State is full of challenges on all fronts. Be it political or physical environment or its vulnerable economy. The state has been witnessing conflict and civil strife in one way or the other after tremendous fall out of events since 1947. Dented governance, weakened management systems, low growth, unemployment menace, poverty etc. have been order of the day. This all has pushed the state in grip of a low economic activity, low employment and low-income generation.
During the past six decades the state’s connectivity has always remained weak. In fact, the state suffers on two counts as far as connectivity is concerned. Firstly, the State faces tremendous road connectivity problem with rest of India. We have just one highway which has been operational most of the time due to ad hoc measures. Secondly, the problems also persist within the State with huge disparity in the road density across districts.
After opening up of Muzaffarbad Road, the road connectivity has assumed more significance and needs a strong road infrastructure in our State, particularly in rural areas. As on date it is inadequate in comparison to number of vehicles plying in the State, which was recorded almost 6 lakhs as on March 2007. If figures are to be believed, on an average the number of vehicles per 100 kms of all roads in J&K is over 1500. The number of vehicles per lakh of population is stated to be almost 5000 vehicles.
There is a huge disparity in the road density across districts in the State and is particularly in rural roads sectors. There is need to develop a strong network of rural roads for an integrated development of physical infrastructure within tehsils or districts so that strong forward and backward linkages are established.
Developed rural infrastructure has far-reaching implications for poverty reduction by improving income-generating opportunities. It also raises agricultural production.
Let’s take industries sector. Despite huge potential for this sector, the state is today known as one of the weakest states on this front. Its contribution to the state’s economy is just 6%. Heavy and large scale industries segment does nowhere exist in the State. Whatever little we have on this front is precisely small scale and cottage industries. Even in these segments we don’t have much success story. Whatever we own today in industries sector is a large chunk of sick units.
Sickness has been rampant in such units in the state and lack of proper finance has been observed as one of the major impediments in running these units successfully. In other words finance is a critical requirement for development of this sector. Even as banks and financial institutions have been ensuring availability of finance to this sector, the growth has been dismal.
Today, almost all of the financial institutions in the state are burdened with bad loans, technically known as non-performing assets, which have marred their ability to extend fresh loans to new ventures. Not only this, the blockade of money has prevented these institutions to think about the rehabilitate of the existing units.
There is a notion that most of the financial institutions in the state were working well till 1989, which means that there were no bad loans. But the fact is different. Technically speaking the classification of assets (loans) was not prudent during that period. Bad loans were very much there, but the system of reporting the bad was not efficient. But after financial sector reforms in 90s, the number of bad loans involving huge amount of money surfaced and financial intuitions were forced to report bad loans in their balance sheets.
A case in point is the J&K State Financial Corporation (JKFSC) which was one of the leading financial institutions for term lending to industries sector. According to the report of the Task Force on Development of J&K, JKFSC was earning cash profits till 1989. “However, the viability of JKFSC was severely dented by militancy in the valley. Most small scale units, particularly in the valley, were closed down. As tourist flow dried up, hotels and houseboats as well as transport operators became sick ventures. These units defaulted on their loan repayments which in turn eroded the financial viability of JKFSC,” says the report, which is also known as Rangarajan Report.
The Report attributing failure of JKSFC to militancy is not wholly true. Even as we cannot deny that 18-year-old turmoil has caused tremendous damage to the state’s economy, it is also a fact that failure of financial institutions like JKSFC, having hundreds of crores of rupees blocked in bad assets, is due to bad loaning in pre-militancy era where norms were thrown to wind. What happened is that the borrowers took cover of the turmoil and most of them falsely reported their business failure.
Between 1990 and 1997 the non performing assets portfolio of JKFSC increased by a whopping 645%.
The state is confronted with another most complex development challenge of creating employment opportunities. We have to consider the fact that the bulk of new employment opportunities will have to come from industry. Even as improvement on agricultural productivity is also needed, but its promise on the employment front has been limited due to adverse ratio of agricultural land to the total geographical area. However, services sector too can provide a support in creating job opportunities in the state.
However, the systems and processes that work for the rest of the country are not necessarily optimal for J&K. The content and process of development of J&K has to be designed keeping in view the state’s unique position as far as its historical, institutional and political factors are concerned.
Above all, we must not forget the fact that J&K possesses most vulnerable political environment. Before any developmental programme is set in motion, it is of utmost importance that its vulnerability on political front is taken into account. Ideas of having Special Industrial Zones, luring private sector investment in reshaping the state’s economy etc. sound good, but what this geographically remote location desperately needs a think tank which can carve out a track where there is peace, prosperity and profits for all.