Industrial Policy-2016

Implementation real challenge

BILAL HUSSAIN

The recent Industrial policy-2016 aimed at ten years from now, encompasses many such initiatives that normally should be part of any policy, which should be considered as half job done, however, the challenge that Jammu and Kashmir faces is the implementation of these strategic documents. Most won’t disagree that non-serious approach by the concerned departments and agencies are the main reasons for the failure of these vision papers.

Over the years the state has crafted and drafted many such policies for lots of sectors however, the lack of monitoring and control mechanism on regular basis on ground dashes them to zero. The present industrial policy could go a long way provided the inclusion of monitoring and control mechanism could have been laid down in the strategic document.

What has to be transformed is the way government departments function in the state as the result of which the industrial sector has suffered in Jammu and Kashmir. The state officials at the helm of affairs have to rethink and work on fixing responsibilities in the concerned departments and then expect the desired results according to the new policy.

Another tragic arrangement that mars the industries in the region is the inter-departmental functioning in the Industries and Commerce Department of the state.  The Industries and Commerce Department of Jammu and Kashmir came into existence in the year 1970 with four Directorates, eight Corporations and four training institutes. The Directorates are as Directorate of Industries and Commerce, Directorate of Handicrafts Development Department, Directorate of Handloom Development Department, and Directorate of Geology and Mining.

The Directorate of Industries and Commerce was further bifurcated in the year 2007 into two Directorates i.e One for Jammu Division & other for Kashmir Division. The corporations/Boards are SIDCO, SICOP, J&K Handicrafts (S&E) Corporation, J&K Handloom Development Corporation, J&K Cement Ltd, J&K Minerals ltd., J&K Industries, J&K Khadi & Village Industry Board. Training Institutes are: Craft Development Institute, Indian Institute of Carpet Technology, J&K Entrepreneurship Development Institute, School of Designs. The policy makers have to ensure that the concerned departments work cohesively in order to make the new policy successful on the ground else like other vision documents it will meet the same fate.

Besides non-seriousness, lack of monitoring and control mechanism, improper implementation and missing cohesion among the concerned departments; what astonishes anyone is the manner policy targets are set like: ‘To increase the share of manufacturing, services and trade sector in Gross state Domestic Product’ the document misses to mention by how much percentile? Likewise, to attract an investment of at least Rs 2,000 crore per annum in the industrial sector including services, and creation of 15,000 direct and indirect employment, however, the policy document misses how it will be achieved and why Rs 2,000 crore and 15,000 jobs only or why not settle with lesser number,  what is the basis for such calculations? It will be hard to palpitate but the fact is the policy makers have to learn to be honest and truthful with the figures and should be convinced with what they are talking about, not merely to fill blanks with the magic numbers which then never sees the light of day and fool around the commoners.

Agreed that the state has come a long way for decades now however, still long has to be achieved; I am not being cynical or pessimist, however, over the years I have learnt that the society and the state at large can only be developed when proper foundation are laid in the system and the system is to be followed by one and all. And the leaders have to lead by examples.

Economic Imperialism

BILAL HUSSAIN

Last month Jammu and Kashmir government faced a financial crunch that forced the state government to borrow from open market to meet its day-to-day expenses. It is believed that the government functioning has taken a hit in the state and work on the development front has suffered as the coffers went dry.

The delay in plan allocation, according to officials, forced the state government to borrow Rs 300 crore from the open market through the RBI route at the interest rate of 8.9 percent after approval from the Union Finance Ministry. It has been learnt that the state government had in its budget for 2014-15 projected the plan size of Rs 11,900 crore including Rs 7300 crore main plan, Rs 4000 crore assistance under Centrally Sponsored Schemes and Rs 600 crore assistance under the Prime Minister’s Reconstruction Plan. A report carried in a daily, quoting an official said: “The State’s financial health is in bad shape and the liabilities at the treasuries have piled up to more than Rs 1500 crore.”

The development reminded me of an article I wrote in January, 2011 about how the agreement between Reserve Bank of India and government of Jammu & Kashmir will have long run impact in furthering the state’s dependence on New Delhi. I wrote then: “The other dimension to look at the agreement is that it would push the state towards ‘total dependence’ on New Delhi and is a kind of economic subjugation. The state now would have to frequently go to New Delhi with a begging bowl for petty finances as well.” 

The pact has not only resulted in financial dependence of the state but also reduced the Jammu and Kashmir Bank --the state’s iconic financial institution-- to act as an agent of the Reserve Bank of India for conduct of general banking business of the state government. The Jammu and Kashmir Bank Limited [J&K Bank] was incorporated on 1st October, 1938  and commenced its business from 4th July, 1939 in Kashmir. The Bank was the first state owned  bank in India. The bank was constituted as a government company under Companies Act, 1956 and was functioning as ‘bankers to the state government’, according to Dion Global Solutions Limited.

The Reserve Bank of India --Central Bank of India-- entered into a supplementary agreement under Section 21A of the Reserve Bank of India Act, 1934 with the Jammu and Kashmir government to carry banking business of the state government. The agreement came into effect since April 1, 2011. The RBI agreement entitles RBI to be the sole agent for investment of state government’s funds. It is being said that on the recommendation of the state government, the Reserve Bank of India has entered into an agreement with J&K Bank Ltd. Prior to the agreement, the operations were being transacted and managed through J&K Bank.

Earlier, J&K Bank used to act a crucial contributor to the state’s financial stability by way of offering overdrafts against relaxed terms.The state used to borrow an overdraft to the tune of Rs 1500 crore from the J&K Bank to meet various kinds of financial requirements through Ways and Means Account.  The J&K Bank overdraft was often necessitated by the delays in financial assistance from New Delhi. The concerned officials here of the opinion that the process of getting funds from New Delhi is tough.

This was bound to happen as New Delhi used Reserve Bank of India [RBI] to impose economic imperialism. When the state requires urgent financial assistance to avoid economic catastrophe, it usually turns to the RBI. Although this assistance constitutes a crippling debt for the borrower, the RBI also insists on economic reform as a condition to the loan. In effect the RBI will take this opportunity to render the struggling economy of J&K. 

Prioritizing debt repayment, market liberalization and privatization allow corporations and private interests to capitalize on these reforms. The economic consequences for the state of J&K are often dire.  In essence it will involve structural adjustments that the state will have to face in near future.

Un-equal Kashmir

BILAL HUSSAIN


'The rich getting richer, poor getting poorer in Jammu and Kashmir' Associated Chambers of Commerce and Industry of India's (ASSOCHAM) analyzed in its recently published report 'Rural Development in India: State Level Experiences'.

The study has renewed the attention in increase in economic inequalities in the state. The report has used a common yardstick that is the Gini coefficient, which runs from 0 (everyone has the same income) to 1 (one person has all the income).

According to the study between 2004-05 and 2009-10 the inequality (Gini coefficient) in rural India has marginally increased from 0.264 to 0.274. While, Gini coefficients for states indicate that income inequalities have increased in Jammu and Kashmir (J&K) by 7.37 percentage points, Madhya Pradesh including Chathisgarh by 4.96 percentage points and Bihar including Jharkhand by 4.9 percentage points. These are followed by Assam, Tamil Nadu, Punjab, Gujarat, Himachal Pradesh, Kerala and U.P. (incl. Uttarakhand).

However, Gini coefficient values indicate falling inequalities in Odisha by 5.75 percentage points, Maharashtra by 3.85 percentage points, Haryana by 2.36 percentage points, and West Bengal by 2.34 percentage points. Also, Union Territories, Rajasthan, Andhra Pradesh, North eastern States and Karnataka too have seen some fall in the degree of income inequality.



Does it matter?

On analyzing the pattern of Gini coefficient at global level most countries range between 0.25 and 0.6. The Gini coefficient has gone up a lot in some rich countries since the 1980s. For American households it climbed from 0.34 in the mid-1980s to 0.38 in the 2000s. In China it went up even more, from under 0.3 to over 0.4. But this was not universal. For decades, Latin America had the world’s worst income inequality. But Brazil’s Gini coefficient has fallen more than five points since 2000, to 0.55. And as poor countries are on average growing faster than rich ones, inequality in the world as a whole is falling. Going by the above world over statistics, it is something to be looked at state level.

It seem to qualify one of the commonest justifications for being relaxed about inequality: that it is not a big concern if the rich are getting richer so long as the poor are doing well too.

However, inequalities does affect people’s quality of life and their well-being. That leads to a second reason for worrying about inequality: its physiological and physical consequences.



Drawbacks

Gini coefficient suffers from a few disadvantages. The index of unlike sets of persons cannot be averaged to find the Gini coefficient of the total population on the sets. A coefficient for each individual will result in a value of zero. A big state with a diverse economic map like that of J&K will result in a much higher Gini index compared to calculations of each region within that state.

Lorenz curve may downplay the real inequality amount if richer households are capable of using money more efficiently. States having similar incomes may exhibit similar Gini coefficients even if they have dissimilar distributions of income. This is due to the fact that Lorenz curves may show unlike shapes and still exhibit alike Gini coefficient.

It is sometimes argued that one of the disadvantages of the Gini coefficient is that it is not additive across groups, i.e. the total Gini of a society is not equal to the sum of the Ginis for its sub-groups.



Revelations

The J&K has seen highest rise in the Monthly Per Capita Consumption Expenditure (MPCE) of 20 per cent richest households across the state. There are wide differences in state-level MPCE values. In the year 2010, Kerala, Union Territories, Himachal Pradesh, Punjab and Haryana, in that order, have the highest average MPCE in rural areas. Contrary to this, the rural areas of Madhya Pradesh, Orissa, Uttar Pradesh (including Uttarakhand), and West Bengal have got the lowest MPCE in rural areas. Average Monthly Per Capita Consumption Expenditure across states during 2009-10 for Kerala was Rs 312, for HP it was Rs 276, for J&K it was Rs 217 and for all India average it was Rs 169.

If we consider the change in the average per capita monthly consumption expenditure that took place between 2005 and 2010, Kerala (18.6%), Himachal Pradesh (16.5%), Andhra Pradesh (15.8%), Orissa (15.4%), and Tamil Nadu (15.4%) have performed better than other states.

On the other hand, five states performed worse than the national economy. These are: Karnataka (3.9%), J&K (3.8%), Assam (3.1%), Rajasthan (1.8%), Madhya Pradesh including Chattishgarh (1.5%). Apart from this, two states viz., Haryana (-0.4%), and Bihar (-1.5%) have registered negative growth. Such a skewed performance certainly leads to the aggravation of inter-state economic disparities. Main factors contributing to widening of such disparities are the variation in the state of agriculture sector across states as well as inter state differences in the effectiveness of the government's social safety net programs.

Change in average Monthly Per Capita Consumption Expenditure Across States that witnessed the MPCE of their poorest 20 percent households shrunk. Union Territories -8.0 , Rajasthan -7.1 , Haryana -4.8 , M.P. (incl. Chathisgarh) -4.8 , Karnataka -3.7 , Bihar (incl. Jharkhand) -2.3 , J&K -1.2 , and Pubjab -1.2 are such states. On this front, the Union Territories , Rajasthan , Haryana , M.P, Karnataka, and Bihar have performed worse than J&K.

The change in the MPCE of the richest 20 percent people across states over the five year period between 2004-05 and 2009-10. In this category, J&K scores 22.6 state has seen the highest rise in the MPCE of its richest households. Kerala scores 19.8 and Himachal Pradesh scores 18.8 followed J&K. On the other hand, monthly per capita consumption expenditure of the richest category of rural people in the states of Karnataka -8.9, Haryana -5.9, Maharashtra -4.2 and Rajasthan -2.9 has shrunk. For J&K this is something to be worried for.

Summing up

The greater inequality can happen either because the wealthier are getting wealthier, or the poor are falling behind, or both. Decreasing income inequality in countries help accelerate economic and human development.

The policy makers and politicians should focus on investments in the social sectors, like schools and health facilities, and critical economic infrastructure such as power, irrigation and water management systems, land development, state highways and district and rural roads. Differences in growth across states are caused by differences in management. Some states are better managed and therefore able to create an environment, which generates higher growth. The quality of governance can help stimulate growth. The stern revelations by the study should act as a wake up call for the people who are in power and matter most in the state. The two decade long conflict can no way be accepted as a reason for this outcome rather it is vice-versa: it is because of these inequalities that has pushed people to walls. Along with achieving higher economic growth, more efforts should be made to make it more inclusive.

Oil price rise to impact aam admi

Petrol to be costlier by Rs 4/litre, kerosene Rs 6/litre, LPG Rs 100/cylinder

BILAL HUSSAIN

SRINAGAR: While draining the state economy of several crores of rupees, the proposed hike in petrol and diesel prices by the centre would curtail the purchasing power of an aam admi, say the Valley economists.
J&K meets all its petrol and diesel needs by import from outside. With the burgeoning increase in the number of vehicles, the import has witnessed tremendous rise over past some years.
Noted economist of Kashmir Prof Nissar Ali said told Kashmir Times that the incase the recommendation are accepted and implemented then it would two way drain Jammu and Kashmir’s economy one at macro economy level by draining state’s economy and second by affecting the purchasing power of the consumers. According to him the oil hike would raise the inflation rate through oil inflation. “It will further aggravate the commodities price rise.”
Given this huge quantum of import into the state, economist believe even a nominal increase in the price drains the state of crores of rupees.
Echoing similar views one of the state’s business champ says the hike would have an impact on the aam admi. "The price rise of LPG would have a direct impact on the purchasing power of common people," said president Kashmir Chamber of Commerce and Industries, Nazir Ahmad Dar.
According to the Dar, J&K is a consumer state and most of the commodities are imported from outside. "As diesel prices increase it would shoot up commodity prices," he said, adding that the price hike could also make the raw material for local Industry dearer.
"The price hike would add to transportation costs that in turn would shoot up the price of commodities including vegetable coming to Kashmir from outside.”
The Kirit Parikh panel submitted its much-awaited report on fuel pricing to the oil ministry today. The report has suggested, among other things, complete deregulation of petrol and diesel prices.
After the report was presented, oil secretary, S Sundaresh has said that the Prime Minister Manmohan Singh wants the Parikh report to be passed soon. Oil Minister Murli Deora has said that the Parikh report would be put before the cabinet for discussion in a week.
Recommendations: The report made recommendations on 4 major fuel groups: petrol, diesel, kerosene and LPG.
On petrol: Complete deregulation of prices.
On kerosene: Kerosene subsidy should continue. Must issue smart cards for subsidised kerosene distribution. Need to rationalise kerosene supply under PDS as currently 35% of PDS kerosene is used to adulterate diesel. In favour of linking kerosene price hike to rural income. In favour of Rs 6/l hike in kerosene.
On diesel: Should link diesel price hike to per capita income.
On LPG: LPG burden subsidy currently very high at Rs 287/ cylinder. In favour of Rs 100/ cylinder hike in LPG. In favour of fixed govt subsidy sharing for cooking fuel revenue loss. The report aims to make the domestic oil industry competitive. Currently the under-recoveries of public sector oil marketing companies are seen at Rs 40,000 crore in FY10. Parekh said that the current fuel price policy was not sustainable and the report has sought ONGC's opinion on revenue sharing.
The estimated under-recoveries in the last three quarters is Rs 29,000 crore, out of which upstream companies - ONGC and Oil India Ltd - have contributed Rs 8,000 crore towards losses from petrol and diesel. The government has so far promised only Rs 12,000 crore as cash for under-recoveries from kerosene and LPG, but this leaves a shortfall of Rs 9,000 crore for the period April to December 2009.
The total estimated under-recoveries for this fiscal is Rs 43,000 crore, at a global oil price of USD 73 per barrel.
People here also fear that the fresh oil price hike could lead to fare hike. "The fresh diesel price hike would increase the transportation cost and the worst hit by the move would be the commoner," said Tahir Yousf Rather, a local.

Economic Unification will fetch Rs 12000 Crores

Separatists demand JK's inclusion in SAARC, duty-free access to Indo-Pak markets
Bilal Hussain
Srinagar: The debate on economic unification of the divided parts of Jammu and Kashmir is gaining momentum with the separatists seeking inclusion of the 'united J&K' in the seven-member South Asian economic bloc, SAARC. There are also voices favoring the conversion of LoC into a 'line of commerce' through an open market formula in which two parts of Kashmir will have a duty-free access to both Indian as well as Pakistani markets.

Experts here believe the perpetual blockade of the traditional routes across the Line of Control (LoC), which divides J&K between India and Pakistan, has an estimated annual trade potential of whopping Rs 12000 Crore.
Islamic Students League leader Shakeel Bakhshi believes that this huge loss could be made good if the 'J&K Union' was included in SAARC. "The economic union would bring fruits only if J&K would get the SAARC membership of South Asian Association for Regional Cooperation (SAARC). By this we would be able to get patents for our indigenous products," Bakhshi told Rising Kashmir.The economic unification, he added, is the extension of South Asian Free Trade Area (SAFTA) leading towards a customs union, common market and economic union.
Kashmir University's noted Dean of Social sciences, Professor Nisar Ali, said the economic union of the divided parts of Jammu and Kashmir humanitarian, social and economic dimensions."The line of control besides being a physical blockade has proved to be the economic barrier between two parts of J&K," added Professor Ali who has also carried out a research regarding the economic prospects of throwing the LoC open for trade and communications. "Economic unification would mean duty free movement of goods, labor and services across LoC. A variety of products including handicrafts could be traded across LoC," he said adding that the blockade of trade routes has not allowed the fullest exploitation of economic resources on either side of the dividing line.
Peoples Conference Chairman Sajjad Lone who had drawn flak from BJP for his 'Muslim Kashmir' demand, which he aired past year, told Rising Kashmir that carving out a single economic union out of two separate sub-entities, which have distinct political and geographical status, was possible. According to him a single economic entity would mean free flow of capital, trade, services and labor. Economic operations across the LoC and the removal of barriers to movement are perhaps the most profound visible indicators of change psychological unification.
Citing his economic model that he has included in his Achievable Nationhood Sajjad said, "Goods of J&K economic union would have duty-free access into India and Pakistan. This means that the J & K economic union would be able to service both the Indian and the Pakistani markets. Apart from that compared to the existing situation two parts of J&K would be able to service each other's markets. The synergistic size of the market is 1+1=4. The base union of two parts of J&K would be able to service four markets India, Pakistan, J&K (India) and J&K (Pakistan)."
International Business expert, department of commerce Kashmir University, Mohammad Shafi said, "The J&K would become economic hub for both countries. This will usher in an era of economic progress."According to him the trade across LoC would mean exchange of goods and services. "Forwarding agents, exporters, transporters, growers in short every body would get financially benefited," he added. Trade can take place between two parties when comparative advantage of goods and services are there then only we can exchange them. "We have comparative advantage in handicrafts likewise they would have advantage in some other sectors which we can trade," he said adding that the proximity of market was an added advantage that should be utilized.
But Sajjad Lone feels that such trade cooperation had been a norm between contiguous markets but was abandoned post World War II. "General Agreement on Trade and Tariff (GATT) was seen as an instrument of promoting world peace. This helped to bring countries like Germany back to the world economic system," he pointed out.
Sajjad quoted the example of the European Union where, he believes, centuries old political rivalries could not deter the nations to exploit the benefits of economics. "This,", he says, " facilitated the moves that brought these states together in pursuit of economic objectives with spill over effects spreading to other sectors at a very fast pace."

JK gets rank 11 in EFI

JK gets rank 11 in EFI

BILAL HUSSAIN
Srinagar, June 19: J&K has secured rank 11 in 2007 in the economic freedom index, a study conducted by Fraser Institute – Economic Research Institute based in Canada.
According to the EFI which was released at a seminar here today the J&K has secured rank 11 in 2007 in its index wherein it has studied 20 odd states in India.
The EFI measures the degree of economic freedom in five major areas: size of government, legal structure, access to spend money, freedom of international trade, and regulation of credit, labor, and business.
While making the index for the J&K only three parameter have been taken into account viz. the size of government, legal structure and regulation of credit, labor and business.
To mention the state in 2004 had secured 10th rank, in 2005 14th and in 2006 13th .
Economic Advisory to J&K government and CEO JK Bank, Dr Haseeb Drabu on the occasion said the constructions of the index are fine but the most important aspect of it is the implementation part. He said the regulation is not meant for curbing economic liberalization but it is more about bringing discipline in the markets.
These days much of the talk is going on curbing the foreign capital inflow in the Indian markets. Dr Drabu suggested a measure for stabilizing the Indian markets. “If foreigners are flooding Indian markets with huge capital inflow we should reciprocate back by flooding their labor market,” he said.
Deputy Chief Minister, Muzaffar Hussain Baigh said the common masses don’t understand high definitions of economics but what they are worried and concerned about is its implementation part, which directly affects them. “Articulation of the economic polices on the ground has to be done in a manner to benefit public at large,” he said.
Executive Programmer, Subodh Kumar, told Greater Kashmir that there is a project on economic freedom network in 141 countries. The project started way back in 2004 and has started working on the index.
Vice Chancellor Islamic University of Science and Technology, Siddiq Wahid said these kinds of seminars sensitize state administration, politicians, and academicians to discourse on economic freedom and political economy.
During the past decade, the concept of economic freedom has attracted attention of economists around the world. Researchers for examining the effects of economic freedom on economic performance and human development have extensively used the economic freedom of world index. So far significant a number of economic papers have been accumulated.
The seminar was organized by the Islamic University of Science and Technology and supported by the Friedrich Naumen Stiftung, an international developmental organization.