Packages of Deceit - They do not help economy, they reinforce dependency

Arjimand looks at the latest pre-election "bonanza" from New Delhi and recalls similar gimmicks from the past

(Mr. Arjimand Hussain Talib, 33, is from Srinagar and matriculated from Tyndale Biscoe Memorial School in 1991. He subsequently graduated with a Bachelor's degree in Engineering from Bangalore University. He is also an alumni of the International Academy for Leadership, Gummerbach, Germany. Arjimand writes regular weekly columns for the Greater Kashmir and The Kashmir Times since 2000 on diverse issues of political economy, development, environment and social change and has over 450 published articles to his credit. Arjimand is currently working as Project Manager for Action Aid International (India) in the Kashmir region and is a member of its International Emergencies and Conflict Team (IECT). His forthcoming books: " Kashmir: Towards a New Political Economy", and "Water: Spark for another Indo-Pak War?" are scheduled for release in 2008.)


When India’s former Prime Minister - A. B. Vajpayee – announced a Rs. 6,165 crore “package” (Sic.) for J&K in 2002, there were angry voices all around India’s press saying that there was no need to “swell Kashmir with money.” When the current Premier, Manmohan Singh, unveiled a Rs. 24,000 crore “package” for J&K in 2004, again there was hullabaloo all over India. From independent analysts to opposition politicians the point of bewilderment was the same – “it was too much of money for Kashmiris who don’t pay taxes, were thriving at Indian tax payers’ money and were ever-complaining.”

This week when Kashmir’s premier trade and commerce bodies – FCIK and KCCI – came out publicly to decree these “packages” as eye wash and of little help to J&K’s economy, I think it was little late. Although four years is a long time to call spade a spade but nevertheless the fact that Kashmir’s civil society has read through the finer print of such gimmicks is reassuring.

At the time of announcement of Rs. 24,000 crore “package” by Manmohan Singh I remember this column had termed the “package” deceitful and misleading (Algebra of Kashmir Packages, Greater Kashmir, Nov. 2004) and had analyzed its components as of little economic consequence. Four years down the line, I think we are in the same situation. Let us take a look.

Today both common Kashmiris and pro-Indian politicians are asking the question what has these so-called “packages” given to J&K? Have they enhanced the State’s capacity to mobilize greater resources? Have they provided jobs? Have they provided a fillip to the economy to initiate a cycle of growth, jobs and revenue generation?

Prior to the announcement of Mr. Singh’s “package”, J&K government had made a fervent plea to New Delhi to include hand-over of the Salal Hydro Power Project to the State and construction of an alternate Srinagar-Jammu highway. Both were turned down. Although Mr. Singh announced “lifting of ban” on government recruitment the fact is that no new jobs were being created. It is simply that the vacant jobs were being filled up. Let us do not forget that the commitments made by J&K government in the Memorandum of Understanding (MoU) with Government of India remain in place even today.

Between 1998 and 2004, about 21,000 job vacancies have been created in the government sector because of retirements. During 2002-03 alone, 4199 government employees retired from service. Official figures reveal that the number of vacant posts stood at 14233 during 2001-02, which saw a reduction of Rs 6773.10 lakhs in the salary bill. During 2002-03 the number of vacant posts stood at 14525 with a corresponding decrease of Rs 11668.40 lakh in salary bill. So what was new in Mr. Singh’s offer?

The 2004 “package” also envisaged creation of 24,000 new jobs. So what were they? They were 14000 caretaker jobs of Anganwadi (ICDS) centres, 5000 jobs in CRPF and 5000 in India Reserve Battalion (IRB). Let us do not forget that the “package” provided for financial assistance for only one year for these jobs and from the second year it was the State government that has been paying for all these jobs.

When it comes to the money part of it, economics is very simple. A huge chunk of the Rs 24,000 crore - totaling Rs 18000 crore - was actually meant to be spent by the Government of India through National Hydro Power Corporation (NHPC) to “improve transmission and distribution (T&D) systems in the State. Out of the Rs 18000 crore a big chunk was spent on the construction of Uri II and Kishenganga Power Projects – both in the central sector. Since the existing transmission network was not sufficient to effectively network this new system with India’s Northern Grid, most of the money is actually being spent on upgradation of the transmission system of the Northern Grid. So what did J&K State get?

Let us now have a look at the Rs. 6165 crore “package” announced by India’s former Prime Minister – Mr. Vajpayee. His “package” included the 287-km Udhampur-Srinagar-Baramullah rail line at a cost of Rs 3500 crore. It also included the Nimu Zangal-Padam-Darcha Road linking to Manali-Sarchu Road at a cost of Rs.195 crore. Remember the project was to be executed by the Border Roads Organisation (Ministry of Defence) and Ministry of Surface Transport for defence purposes.

The basic problem with these packages is that they do not help create a decent industrial and services base in J&K which could raise jobs and also government’s tax revenues. Some people in India generally talk of the illusion of enhanced purchasing power in J&K. Purchasing power and average incomes taken as sole indicators of State Domestic Product (SDP) are misleading. Greater purchasing power in J&K is fundamentally because of horticulture, agriculture and our handicrafts exports.

Severe shortage of electricity has crumbled all the potential growth engines of the State.

When we talk of these two packages, it is possible that they would have circulated some fraction of money locally for a certain period of time. But let us do not forget that J&K is today almost a 95 per cent import-based economy which pumps back whatever money is pumped in here. Some people had earlier argued that more capital purchases under these projects would help the State government enhance its revenues. But this is again misleading. Since contracts for any such ventures mostly go to firms and individuals outside the State, our State tax net falls short. The refusal of payment of toll tax by Government of India undertakings and other civilian and military establishments on all taxable goods to J&K government on entry into the State is generally not considered. Let us keep in mind that these Government of India entities do not recognize J&K Sales Tax Act, 1960. J&K State makes losses of over Rs 3000 crore every year on account of toll aversion by the central undertakings.

The reason that these packages do not help sustainable development is that they do not address our basics – power, other basic infrastructure, road connectivity with outside markets, local industrial base and tax raising through greater jobs and local production. The infrastructure that is being built mainly serves to reinforce defense and geo-strategic purposes.

Historically, a growth-oriented economic development model has never been seriously encouraged in Jammu & Kashmir. While J&K’s economy was dependent on New Delhi’s financial resources to the extent of 47 % in 1973-74, the dependence has increased to 86 % in 2001-02. It is basically an economic system of regression.