Of beggar state and begging bowl J&K economy is driven not by the grants of the Centre but by the grind of its small enterprises BACK TO BASICS HASEEB A DRABU SmallerDefaultLarger The prospective Prime Minister of India and the incumbent Chief Minister of J&K publicly agree on at least one aspect of J&K; that it is a beggar state. While Narendra Modi called it so, Omar Abdullah has often expressed helplessness in having to go with a “begging bowl” to even pay for the official salaries. And of course, it is not just a “factual” comment; it is an ideologically loaded statement which goes on to become the basis of negating the political aspirations of autonomy, not to speak of Azadi. The rhetorical argument being that if the state can’t even pay for its own salaries, how can the state sustain, let alone survive as an autonomous state. From this it axiomatically follows that J&K is a dependent economy. It is dependent on the Centre for everything from salaries to subsidized rice! Notwithstanding the larger question of economic base of the political autonomy, how correct is the view that is subscribed to by the two political adversaries? To start with, this erroneous perception is caused by a rather basic but serious conceptual error: treating the “state government” as synonymous with the “state economy”. It will help a great deal in understanding the issue if this simple distinction between the government and the economy is recognized. The state government -- administrative departments, departmental undertakings and public enterprises – generically referred to as the public sector, is a sub set of the economy of J&K. Even if some sectors and sphere of economic activity are dominated by the government, this distinction cannot be blurred. There is no denying the fact that state government’s finances are a mess. Despite a higher tax/GDP ratio than most states including Gujarat, it still needs exceptional grants to fill its non-plan gap. But this can in no way be construed to mean that the state or the economy is dependent. While the state government is “dependent” on the Union for financial resources, the economy is not. The J&K economy is an export oriented trade led, services and craft economy servicing external markets. These markets, which are “Indian markets” as of now, can be regional and global under an alternative dispensation. The dependence on external markets is not of a parasitical kind; but of a bilateral trading variety. If anything, being a primary commodity exporter, the “resource outflows” from J&K economy to the rest of the country are much more than the “financial inflows” to the Government of J&K. This is because the adverse terms of trade between J&K and the rest of the India. The terms of trade are adverse because the prices of J&K’s imports have risen much faster than the prices of its exports. Apart from the cartelization in the national markets, this is caused by the fact that the elasticity of demand for J&K’s exports is very high while that of its imports is inelastic. Despite a massive resource drain through this route, the income generating capability of the economy is obvious from the fact that the so called “beggar state” has one of the lowest incidence of poverty. In J&K just about 10 per cent of the population is below the poverty line, compared to the national average is 22 per cent. The percentage of people living below the poverty line in the “model” state of Gujarat is over 16 per cent! In case these statistics are used to buttress the claim this is because of the largesse of the Government of India, it is important to point out that the low poverty ratio is a consequence of the most radical land reforms initiated by Sheikh Abdullah. The manner in which his government restructured the land and the credit markets through the Big Landed Estates Abolition Act, 1950 resulted in rural transformation and poverty alleviation. This along with the moratorium and waiver of debts of peasants carried out by the he Debt Conciliation Boards reduced their debt burden to one fourth. The eff
Posted on: Thu, 05 Dec 2013 04:03:16 +0000
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