The Jammu and Kashmir Industrial Policy 2021-30 is the flagship policy with respect to investment and industrial growth in the UT. The New Industrial Development Scheme promises of a higher incentive for investment in remote areas that will help with balanced development while enabling J&K to leverage its land abundance in areas hitherto neglected.
The Policy has a discernible core of investment, growth and employment. Considering the centrality of employment generation, the objectives of the Policy and the choice of industries focused upon are heavily labour-intensive in nature and where the products/services are high in value.
Framing Economic Policies
An appropriate economic policy for any legion has to take into account both the advantages and disadvantages of that region and this is also true for the region of J&K. It has to be borne in mind that given its location and topography, the Union Territory suffers cost disadvantages primarily on account of transportation costs that will have to be reflected in the price of goods produced there.
An appropriate strategy for such high-cost economies which should guide both investors as well as policymakers is to promote/go in for the production of goods and services of niche areas/segments where customers are willing to pay a premium amount which compensates for the disadvantages of high transportation costs.
The Jammu and Kashmir industrial Policy 2021-30 is the flagship policy with respect to investment and industrial growth in the UT. The New Industrial Development Scheme is not just the most attractive of its kind but also learns from the misses of the past. Its promise of a higher incentive for investment in remote areas will help balanced development while enabling J&K.
The Policy is also more discerning in extending financial support as compared to previous policies. Earlier policies were able to draw investment in industry in the erstwhile State due to generous subsidies and tax exemptions. But many of these investments of the past that happened largely due to financial incentives were not linked to J&K’s natural strengths and therefore would not sustain once these financial sops were withdrawn.
The new Policy by focusing on sectors that draw on the region’s strengths attempts to avoid this pitfall. Indeed, where services are concerned and which comprises 53% of the region’s economy, the Policy has an explicit Service Sector Positive List which will be eligible for benefits. They include Tourism, Film Tourism, Healthcare, Education and Skill Development, etc.
While J&K has long been associated with tourism, it has surprisingly never figured among the top ten States/UTs when it came to tourist arrivals either in absolute numbers or as proportion of its population. The current UT Budget by providing support and resources for the development of 75 new destinations, seeks to expand the region’s tourism economy while bringing in more equity in this highly employment-elastic sector.
Smart convergence with other public expenditures such as the culture department which seeks to revive traditional fairs and Sufi festivals, many of them in remote, lesser-known destinations or the J&K tourist village network scheme which incentivises local youth groups to promote rural tourism is expected to further add to this effort.
The Budget’s accent on horticulture addresses both the productivity and the income issues of the sector. The thrust on cold storage capacity expansion, increase in productivity of apple through high-intensity orcharding, and support to high value and low volume agro-products like aromatic and cash crops and vegetables are all budget initiatives.
When taken along with the GI-certification initiative for saffron and other crops which is already underway, the sector holds great promise. If productivity is increased to international standards, it can lead to the quadrupling of the size of this sector and if supplemented by value addition to fruit (currently very low), it can significantly increase growth and employment.
Foreign Trade and Investment
An additional (and unique) strand of its strategy has been to seek leveraging of India’s recent trade agreement— Comprehensive Economic Partnership Agreement (CEPA) with the UAE (another off budget element of transformation) to seek markets, investments and tourists. Given the proximity and familiarity of UAE with J&K, the Gulf Investment strategy seeks to build on these links and potentialities.
The strategy of the Government is so designed to make the above possible. Private investors would be well rewarded if they align their investment strategies accordingly and make their investments in the UT profitable.