Article 370 - Jammu & Kashmir Six Years After Abrogation
Aug. 5, 2025

Context:

  • The abrogation of Article 370 on August 5, 2019, and the subsequent transformation of Jammu & Kashmir into a Union Territory (UT) was projected as a move aimed at ensuring national integration, development, and peace.
  • Six years later, a critical review reveals mixed progress across politics, security, economy, and tourism, with persistent structural and governance challenges.

Political Developments - Democratic Revival with Limited Authority:

  • Resumption of electoral politics:
    • National Conference (NC) leads the new elected government, seen as a return to democratic representation.
    • However, key powers (police, services) have been retained by the Lieutenant Governor, curbing the authority of the elected CM.
  • Push for statehood and symbolic politics:
    • First cabinet decision: Resolution for restoration of full statehood.
    • CM Omar Abdullah reaffirmed special status and revived Martyrs’ Day (July 13), stirring tensions with the Centre.

Security - Progress Undone by Pahalgam Attack:

  • Decline in terrorism and militancy: Sharp fall in violence post-2019
    • Only 28 terrorists killed in 2025, down from 67 in 2024.
    • Local militant recruitment dropped from 129 (2019) to 1 (2025).
    • No recent cases of stone-pelting, hartals, or abductions.
  • Pahalgam attack - A grim reminder:
    • 26 civilian deaths in 2025 occurred in a single attack in Pahalgam (April).
    • Exposed gaps in security preparedness in tourism zones.
    • India responded with Operation Sindoor, targeting camps across the border.

Economy - Investment, Revenue Surges:

  • Industrial investments:
    • The Centre launched a new industrial scheme in 2021 promising incentives to attract investments.
    • Proposed investments in J&K now total Rs 1.63 lakh crore, of which more than Rs 50,000 crore is in various stages of operationalisation.
    • Production has begun in 359 industrial units; another 1,424 units are in advanced stages of completion.
    • The government says investment realisation in 2024-25 is 10 times more than the pre-2020 period.
  • Revenue and GDP growth:
    • J&K has seen a sharp uptick in tax revenues: GST collection increased by 12%, excise by 39%, and overall non-tax revenues rose 25% between 2022 and 2024.
    • The state’s GDP doubled from Rs 1.17 lakh crore in 2015-16 to Rs 2.45 lakh crore in 2023-24, and hit Rs 2.63 lakh crore in 2024-25.
  • Power sector reforms:
    • 5.74 lakh smart meters installed; transmission losses cut by 25%.
    • Winter capacity drops to 600–650 MW, requiring central allocations.
    • Rs 10,000 crore invested in power infra; generation to double by Dec 2026.
  • Banking and fiscal health:
    • J&K Bank turned around from Rs 1,139 crore loss (2019-20) to Rs 1,700 crore profit (2023-24).
    • NPAs halved, but fiscal health fragile -
      • The fiscal deficit remains high.
      • 70% of government expenditure depends on central grants.
      • Core sectors like agriculture and industry remain underperforming.

Economic Growth Trends - A Disappointing Performance:

  • Sluggish GSDP growth:
    • Post-2019, J&K’s $30 billion economy has grown at a much slower pace.
    • Both nominal and real GSDP growth have declined significantly.
    • J&K’s share in national GDP has fallen to 0.77%.
  • Decline in tertiary sector growth:
    • Tertiary sector (60% of the economy) growth dropped to 5.8% in 2023-24 from 11% in 2022-23.
    • Income growth from hotels and restaurants plunged from 38% to 13%.
  • Real per capita income gap widens:
    • The growth in real per capita income has also been halved — from 6% to less than 3%.
    • Per capita income dropped to 76% of the national average, from 84% in 2011-12.
    • Highest-ever income gap recorded in 2024.

Employment and Industrial Slowdown:

  • High unemployment despite labour participation:
    • The unemployment rate peaked at 23% in March 2023, remaining at 17% in 2024.
    • In the 15-29 age bracket, the unemployment rate of more than 30% is almost double the national average.
    • It is among the states where high unemployment persists despite increased Worker Population Ratio.
  • Industrial stagnation:
    • Number of factories stagnant since 2016-17.
    • Workers in industry hit a decadal low in 2022-23.

Capital Formation and Investment Reality:

  • Sharp fall in fixed capital formation: Fixed capital peaked in 2016-17, halved by 2022-23. Separation of Ladakh is not a factor in this decline.
  • Investment claims vs reality: Government claims Rs 84,544 crore worth of proposals, but -
    • Only Rs 2,518 crore invested on the ground in 2023.
    • Central surveys show a decline in invested capital since 2017.

Fiscal Health and Rising Debt:

  • Mounting debt levels:
    • Internal debt doubled post-2019.
    • Outstanding liabilities are now about 60% of GSDP (vs national average of less than 30%).
    • Fiscal deficit persists at around 6%, breaching FRBM limits.
  • Revenue growth with borrowing:
    • State revenues increased three times in 8 years.
    • Tax-to-GDP ratio increased from 6.3% to 8.4% post-GST.
    • Still, higher borrowings indicate fiscal distress.

Credit Constraints and Capital Scarcity:

  • Low credit access:
    • Credit-to-GSDP ratio only 38% in 2024.
    • J&K's share in national credit is under 1%.
    • Indicates low capital availability, hindering private sector growth.
  • Risk of a debt trap:
    • Rising credit-deposit ratio driven by consumption, not investment.
    • J&K experiences net resource outflow due to low deposit growth.

Inflation and Wage Dynamics:

  • Persistent inflation: Inflation remained slightly above the national average since 2019.
  • High wages: Daily wage rates (agriculture, construction) 2nd highest in India after Kerala.

Tourism - High Growth Amid Security Fragility:

  • Boom followed by setback:
    • Record 2.11 crore tourists in 2023, with tourism contributing 7% to GDP.
    • 75 new destinations opened; over 2,000 homestays registered.
  • Pahalgam attack's impact:
    • Led to closure of 50 tourist spots, later reopened in phases (16 reopened).
    • Adventure tourism is restricted to areas with strong security presence.
  • Private investment challenges:
    • Only five hotels joined the new industrial scheme.
    • Projects by Radisson and JW Marriott are exceptions.
    • Land availability cited as a key hurdle.

Structural Constraints and Future Outlook:

  • Structural weaknesses worsen:
    • J&K remains a high-cost, import-dependent economy.
    • Export-oriented sectors have not driven growth.
    • Continued reliance on expansionary public expenditure and overleveraged budgets.
  • Lack of transformation:
    • Current economic indicators do not reflect a take-off stage (À la Rostow" - Refers to the development model that suggests that all countries progress through five distinct stages (traditional society, preconditions for takeoff, takeoff, drive to maturity, and age of high mass consumption) of economic development).
    • Long-term, sustainable economic transformation remains elusive.

Conclusion:

  • Six years post-abrogation of Article 370, Jammu & Kashmir presents a complex picture — notable gains in security and investment, but with persistent gaps in political autonomy, fiscal sustainability, and private sector confidence.
  • The Pahalgam attack has refocused attention on fragile peace, reminding stakeholders that security and development must go hand-in-hand for lasting integration and prosperity.
  • Unless structural challenges are addressed and private investment catalysed, the vision of economic integration and prosperity may remain unfulfilled.

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