Kashmir’s economic conundrum during Covid-19

A lockdown in Kashmir is almost a normal feature for those who live there

India’s 2020-21 budget, presented by Nirmala Sitaraman, allots a whooping sum of $66.9 billion to the Indian ministry of defence. Though there are a number of divisions and sub-divisions under which this amount will be spent, the major chunk goes to the army. In Kashmir there is roughly one army personnel for every seven citizens, making it the world’s most militarised zone. The region of Jammu and Kashmir, which counts for one percent of India’s population, has been receiving 10% of the funds from the centre. But this money is not spent on developmental projects and is instead used to maintain a military presence in the area. Jammu and Kashmir has been under a state lockdown since August 2019 following the abrogation of Article 370. As a result, the economy of the region has suffered. This was immediately followed by a harsh winter and the closure of the national highway. There was hope that once spring and summer arrived the economy could start to recover from its low-level equilibrium trap, however, those hopes have been dashed following the Covid-19 lockdown.

The sectors classified as being the worst hit during the 2019 lockdown continue to be the cumulative sufferers following the Covid-19 outbreak. The tourism sector, which happens to be the backbone of the region’s economy, has had to come to a complete halt. As a result, 30,000 jobs have been lost in the hotel and restaurant sector alone in 2019. At a time when the the tourism sector was looking to regain its footing, the pandemic has hit the area and is expected to expedite the closures of several businesses. The handicraft sector also provides jobs to more than 50,000 artisans who lost their livelihood during the lockdown imposed in August last year. Additionally, the transport, e-commerce and the information and technology sectors have also been badly hit over the past few months. Those losses are bound to be exacerbated now due to coronavirus.

The announced 21 day long lockdown, which has now been extended, could wreak havoc for Kashmir’s already conflict ridden economy. Strawberries, one of the first horticulture crops of the season in Kashmir, will be ready for plucking by the end of April. This will be followed by more than 11,000 tonnes of cherry and various other yields. But if the lockdown continues and the supply channels remain blocked, these farmers will incur huge losses.

However, a lockdown in Kashmir is almost a normal feature for those who live here. As a result, the people are now forming committees and help groups in order to ensure that no one in the neighbourhood goes to bed hungry during this crisis. People are remaining indoors, trying to assist one another in whatever way they can, and staying calm even as the number of Covid-19 cases in the valley continues to rise. Fortunately, food and rations are being distributed by the government to peoples’ door-steps, which seems like a luxury when compared to the past. The main issue in the region is not the impact of this pandemic alone but the cumulative effect of the past crisis added to this one. An economy exposed to recurring shocks is bound to become fragile and the fact that transfer payments are now facing delays is only adding to the crisis.

If the lockdown continues deep into summer, the incipient Covid-19 crisis will evolve into a structural crisis for Kashmir’s economy. Since the production base in Kashmir is mostly informal, even if production manages to take place, goods can’t be sold in the open market, therefore hurting the masses even further. All business activities in the region are caught in this low level equilibrium trap. A lot of money is locked down in inventories and assets that can neither be monetarised nor liquidated. The recovery process for the services sector will also be a long and arduous one.

The scope for things like “work from home” is limited since, given the blanket ban on communications put in place on August 5, 2019, 4G internet services remain closed in the region. Similarly, the education sector has also once again gone into limbo. While the rest of the country, and the world, switches to online classes, students in Kashmir struggle to download even a simple PDF file. At the same time, the fledgling IT sector is also incurring insurmountable losses.

Currently, India is spending just 1% of its GDP on fighting a pandemic which is becoming a growing threat in the country. Economic experts like Abhijit Banerjee and Esther Duflo have pointed out that these measures are simply not enough. The government needs to mitigate not only the impending health crisis but also needs to attend to the financial concerns of the poorer sections of society whose daily income has come to a standstill due to the lockdown. After the lives of the masses what matters most for them is their livelihood. Given the persistent shocks faced by Kashmir’s economy, it is mandatory that the government puts into practice long term policy interventions in order to save the region’s economy from entirely collapsing.