(Bloomberg) -- Prime Minister Narendra Modi says his move to revoke Kashmir’s autonomy is about boosting its economy. But observers say it will take more than rhetoric to bring in investments and ensure jobs in the territory that’s lost more than 42,000 lives to conflict over the last three decades.
The state’s economy, dependent mostly on farming, handicrafts and tourism, may take years to recover from Modi’s sudden decision to scrap autonomy, with the cycle of peoples’ protests and the state’s moves to curb them expected to remain the main focus.
“Investment is unlikely to be forthcoming as long as the state is consumed with violence, or the threat of violence,” said Katharine Adeney, director of the University of Nottingham Asia Research Institute. The manner in which the government imposed changes in India’s only Muslim-majority state “will not allow normal political processes to operate in the area for some time,” she said.
The surprise move to scrap autonomy and demote Jammu & Kashmir to a union territory was announced at the end of the Parliament session after imposing movement restrictions, cutting telephone and Internet connectivity, evacuating tourists and Hindu pilgrims, and arresting local political leaders. Even without the threat of escalation of border tensions with rival Pakistan -- which supports separatists in the state, has fought wars with India over Kashmir and has tried to garner international opposition to the move -- the decision is unlikely to reassure investors.
“Everything hangs on what happens over the next year and how people handle it. There will be a lot of anger,” said Laveesh Kumar Bhandari, chief economist at Delhi-based Indicus Foundation. “Kashmir can’t have barbed-wire tourism. And private sector investment can’t come in if law and order remains a concern.”
The pressures of trying to suppress protests may mean more troops in the picturesque valley, where tourist numbers had already fallen by 41.5 percent in the five years since 2012. Although Kashmir’s poverty levels are half the national average, per capita income at $1,333 was lower than the national average of $1,778.
Modi should now focus on delivering welfare programs in the state to win people’s confidence in the hope of bringing in investments, Bhandari said. Yet, Kashmir may test his government’s policy making amid growing signs that the larger Indian economy is slowing with jobless numbers at a 45-year high.
Kashmir received only $390 million in foreign direct investments between April 2000 to March 2019, the lowest among Indian states, according to trade ministry data. Agriculture, a key contributor to its economy, has been steadily declining and industrial growth has been stagnant, contributing to vanishing jobs, slowing income and lackluster expansion of the state’s 1.09 trillion-rupee ($15.3 billion) economy.
One of the most-prominent changes made to Kashmir’s constitutional status has been permission for other Indians to own property in the region. Modi’s Aug. 8 call for investments in Kashmir was answered by India’s richest billionaire Mukesh Ambani, who announced that his Reliance Industries Ltd. would study ways to invest in the three territories of Jammu, Kashmir and Ladakh. The state has also announced a three-day global investor’ summit starting Oct. 12. Still, private investments in the region may be a long way off.
Modi will instead need to focus on public investments in building connectivity and power supply, according to economist Haseeb Drabu, Kashmir’s former finance minister. Lack of private investments in Kashmir are directly related to poor infrastructure in the Himalayan region, according to Drabu, who is pessimistic about the region’s economic outlook.
“The economy of Jammu and Kashmir will improve when there is sustained peace in the valley,” said Drabu. “For now this looks very difficult and far fetched.”
Modi’s statement that the Kashmir decision will help boost development “has been a farce,” according to M. M. Ansari, a former state-appointed interlocutor in Kashmir. The move mainly fulfilled a campaign promise made to his Hindu base that opposed special treatment for the region, he said.
The failure of Modi’s jobs and skills programs for Kashmiri youth and industries announced in during his government’s first term show his government is not able to fulfill his current promises.
“After 70 years, you have put people behind bars. You don’t invite them to talk, you haven’t taken them into confidence,” said Ansari, who was part of the panel that had recommended steps to revive Kashmir’s economy after consulting political and citizens’ groups. “This is one way to take away focus from the government’s poor economic record.”
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