Dr Andreas Peter
Jammu and Kashmir’s economic trajectory is undergoing a significant transformation, driven by structural shifts, sectoral diversification, and an emphasis on resilience. The projected Gross State Domestic Product (GSDP) growth rate of 7.06% for 2024-25 signals a promising phase, yet the true test lies in ensuring this progress translates into inclusive development. Sustainable growth necessitates an alignment between policy frameworks and global economic trends, fostering technological adoption, and strengthening human capital to build a self-reliant and globally competitive economy. Over the next few years, positioning the region as an emerging economic hub will require balancing traditional strengths with modern economic imperatives.
A critical aspect of this transition is fiscal consolidation. During the first nine months of FY25, total revenue realization reached Rs 15,737.80 crore, covering 77% of the previous fiscal year’s revenue. The tax revenue component, notably Goods and Services Tax (GST) collections, amounted to Rs 10,624.09 crore, reflecting improved compliance and an expanding economic base. Non-tax revenue sources, particularly power tariffs and service sector contributions, witnessed notable growth. Power tariffs alone contributed 67% to non-tax revenues, a sharp increase from 56% in the previous year. These figures indicate a gradual move toward financial self-sufficiency, reducing excessive reliance on external grants. Digital taxation reforms, efficient fiscal policies, and stringent monitoring mechanisms have significantly improved revenue collection, ensuring adequate fiscal space for critical infrastructure and social welfare initiatives.
Employment generation remains a vital pillar of economic stability, with recent trends suggesting positive momentum. The unemployment rate in Jammu and Kashmir declined from 6.7% in 2019-20 to 6.1% in 2023-24, driven by industrial expansion, skill development programs, and government-backed self-employment schemes. More than 40,778 new business units have been established under various initiatives, creating employment opportunities for nearly 1.16 lakh individuals. Formalization of the workforce is evident in the registration of over 35.28 lakh unorganized sector workers under the e-SHRAM portal, ensuring access to social security benefits and financial inclusion. The rising labour force participation rate and improved worker population ratios suggest that employment trends are aligning with economic expansion. However, ensuring that job opportunities are sustainable, offer fair wages, and provide long-term security remains a challenge.
The industrial sector is emerging as a key driver of economic transformation, contributing 18.3% to the Gross State Value Added (GSVA). This represents a shift away from the region’s traditional reliance on agriculture and government-led economic activities. Policy measures designed to attract private investments, streamline business regulations, and expand industrial infrastructure have been instrumental in this transition. The development of dedicated industrial zones, integrated logistics centers, and strategic economic clusters is enabling the growth of manufacturing units, particularly in sectors like pharmaceuticals, food processing, and textiles. The New Industrial Development Scheme (NIDS) has garnered investment proposals surpassing ?30,000 crore, with the potential to create over 2.5 lakh jobs in the coming years. These efforts are essential in building a robust industrial foundation and ensuring long-term economic sustainability for the region.
Despite this industrial growth, agriculture remains a cornerstone of Jammu and Kashmir’s economy, providing employment to a significant portion of the workforce and ensuring food security. The sector has witnessed substantial progress, particularly with the implementation of the Rs 5,013 crore Holistic Agriculture Development Plan (HADP). This initiative aims to modernize farming techniques, boost productivity, and diversify crop production, with projected contributions of Rs 28,000 crore to the GSDP and the creation of nearly 2.88 lakh jobs. Food crop production has increased by 7.12% in recent years, and self-sufficiency in vegetable production is improving. High-value horticulture and floriculture, including Kashmiri saffron, apples, walnuts, and cut flowers, present significant export opportunities. The region accounts for over 70% of India’s total apple production, making it a key contributor to agricultural revenues. The adoption of technology-driven farming practices, organic cultivation, and high-yield crop varieties is expected to further enhance sectoral productivity and profitability.
Inflation remains a concern despite being relatively moderate. The Consumer Price Index (CPI) inflation rate increased from 4.3% in 2023 to 4.5% in 2024, slightly below the national average of 5%. However, rising food and fuel prices pose risks to disposable incomes and consumption patterns. Effective supply chain management, targeted policy interventions in essential commodity pricing, and enhanced agricultural output will be critical in mitigating inflationary pressures. Capital expenditure trends indicate a strong focus on long-term economic growth, with spending reaching Rs 11,538 crore in the first nine months of FY25. This investment is directed toward infrastructure development, power generation, and road connectivity, creating a multiplier effect on economic activity and fostering sustainable growth.
Jammu and Kashmir’s economic expansion is reflected in its increasing share of the national economy. The region now contributes 0.8% to India’s total GDP, closely aligning with its 0.98% share of the national population. The per capita Net State Domestic Product (NSDP) is projected to reach Rs 1,54,703 in 2024-25, signalling a faster income growth rate compared to neighboring states such as Punjab, Delhi, and Himachal Pradesh. This rise in per capita income suggests improving living standards and growing consumer demand, which could further stimulate local industries and the service sector.
Financial sector stability is another encouraging development, as evidenced by a decline in the gross non-performing asset (GNPA) ratio from 5.71% in December 2022 to 4.13% in March 2024. This improvement reflects stronger banking sector oversight and improved credit discipline. Credit expansion, particularly toward micro, small, and medium enterprises (MSMEs), has facilitated entrepreneurship and business growth. However, equitable access to credit for startups, women entrepreneurs, and rural enterprises remains a challenge. Strengthening financial inclusion, promoting digital transactions, and expanding credit guarantees for small businesses will be critical to sustaining economic growth.
Several structural challenges must be addressed to ensure that Jammu and Kashmir’s economic growth is both sustained and inclusive. Enhancing the ease of doing business, minimizing bureaucratic hurdles, and expanding digital infrastructure are crucial to attracting long-term investments. Human capital development through skill training, higher education, and technological innovation will play a vital role in equipping the workforce with the necessary capabilities for a modern economy. Additionally, integrating global best practices in governance, industry, and agriculture will help maintain competitiveness in an evolving economic landscape.While the region has made significant strides in revenue generation, industrial expansion, and agricultural productivity, structural weaknesses persist. The manufacturing sector, contributing only 18.3% to GSVA, remains below the national average of 25.9%, indicating that industrialization is still at a nascent stage and heavily dependent on government incentives rather than organic private sector growth. Similarly, although agriculture employs nearly 42% of the workforce, productivity gains remain inconsistent, and farmers face challenges in accessing modern technology and robust market linkages. The Holistic Agriculture Development Plan (HADP), aimed at boosting agricultural output, has seen only 30% of its allocated funds effectively utilized, raising concerns about implementation efficiency.
Inflationary trends, though moderate, mask the reality of food inflation surpassing 6%, disproportionately affecting lower-income households. Employment trends also present a mixed picture. While the unemployment rate has declined to 6.1%, underemployment remains prevalent, with over 65% of new jobs generated under government-backed schemes rather than private enterprise. This raises concerns about the quality and long-term sustainability of employment opportunities. Financial sector vulnerabilities persist, with MSMEs struggling to secure financing despite improvements in banking performance. Although the GNPA ratio has improved, rural enterprises and start-ups continue to face stringent lending norms, limiting their growth potential.
To address these challenges, policymakers must shift their focus from short-term fiscal stability to long-term structural reforms. Strengthening skill development initiatives, ensuring timely disbursal of industrial incentives, expanding credit access for small businesses, and integrating technology into agriculture are essential steps. Without these interventions, projected growth risks becoming a statistical illusion rather than a transformative reality. By leveraging technology, fostering entrepreneurship, and investing in human capital, Jammu and Kashmir can position itself as a self-reliant and globally competitive economic hub. Achieving this vision requires sustained commitment, strategic policy interventions, and an unwavering focus on inclusive development to build a prosperous and resilient future.
Finally,Jammu and Kashmir’s economy presents immense potential, but addressing its challenges requires a strategic and inclusive approach. Focus on diversifying the industrial sector beyond traditional industries like handicrafts and tourism by incentivizing high-value manufacturing, pharmaceuticals, and food processing. In agriculture, prioritize high-yield and export-oriented crops, modernize farming techniques, and strengthen market linkages to enhance productivity and farmer incomes. Tackle underemployment and skill gaps by expanding skill development programs aligned with industry needs and promoting entrepreneurship through accessible credit and mentorship. Address inflationary pressures by improving supply chain efficiency and storage infrastructure, particularly for essential commodities. Ensure equitable infrastructure development by prioritizing rural and remote areas to bridge regional disparities. Empower marginalized communities, including tribal groups, by enhancing access to economic opportunities and social welfare programs. Revitalize the tourism sector by investing in infrastructure, promoting sustainable practices, and diversifying offerings to include adventure, sports tourism and eco-tourism. Support emerging sectors like IT, renewable energy, film industry and handicrafts through targeted investments, policy incentives, and modernization initiatives. By adopting these measures, policymakers can foster balanced, inclusive, and sustainable economic growth, ensuring that Jammu and Kashmir realizes its full potential as a thriving economic hub.
(The author is a former JKAS Officer)
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