By Mohan Guruswamy


New Delhi, 24 November 2004

Mohan Guruswamy who was Economic Adviser to erstwhile Finanace Minister Yashwant Sinha before he fell out, has an economist's vision. He was recently in Kashmir and has sent us this report. He offers a view on the sops given by the PM Manmohan Singh to Kashmiris. No one can deny money makes the Mayor go round and the situation in Kashmir is very much better than it was till a few years ago. With 734 km of the LOC fenced in (OP Deewar by the Army Engineers) and with tourism picking up considerably, even better days are ahead.

India's growth rate needs peace in Kashmir and Manmohan Singh has to balance politics and economy and keep the UPA Government and his job in place for five years, so that Sonia can get a hold of the entire country in the coming years with elections due in three states. 

A Fresh Vision And A New Blueprint?

By Mohan Guruswamy

I visited the valley last week and it seems the more things change the more they are the same?

The Prime Minister addressing an impressive meeting in Srinagar on November 17 announced an “economic revival plan” of Rs.24,000 crores for Jammu and Kashmir. By unwrapping the package as a bold new one the Prime Minister is guilty of some terminological inexactitude. What is new is just Rs.5,800 crores. The other Rs.18,200 crores had been committed several years ago to ongoing power projects of the Central Government’s National Hydroelectric Power Corporation. 

If this Rs.5,800 crores is in addition to what J&K is in any case slated to get, it would no doubt be most welcomed by the entire government apparatus and those who have a parvenu relationship with it –– like contractors. After all it translates into a grant of additional Rs.5,712 per capita. As it is J&K does rather well in terms of central government grants. Between 2002–3 it got Rs.13,188 crores, which is more than three times what India’s most poor and violence prone state Bihar got –– Rs.4047 crores. When you consider that of the Rs.14,085 crores net resource transfer by the Centre, Rs.13,188 was a grant––you will get an idea of the magnitude of dole that J&K gets. Another way to view this is to consider that if an additional grant were to be given to Bihar on this basis, it would amount to Rs.83, 000 crores!

Quite clearly Dr. Manmohan Singh thought this was not enough for he put some icing on the cake by announcing in Jammu that he is ordering the lifting of the freeze on new government employment –– its not that the state does not have enough public employees. In fact it seems to have far too many. By its own admission the J&K government employ’s 3.5 lakh persons giving it a ratio of 34.5 government employees to every thousand persons. To get a better idea of the enormity of the PM’s largesse consider this. The Rajasthan government employs about 6 lakh persons and that state is about five and half times as big as J&K in terms of population.

The underlying problem of Jammu and Kashmir is not economic. The state does quite well in terms of socio-economic development. Its literacy level (64.8%) is almost on par with the national level (65.4%). Its sex ratio (923/1000) too is almost on par with the national average (933/1000). Its birth rate (19.9/1000) is lower than the national average (25.8). Its death rate (5.4/1000) is also lower than the national average (8.5/1000). J&K’s infant mortality rate (45/1000) is also superior to the national average (68/1000). The per capita income of Jammu and Kashmir is recorded at Rs.12, 399 and is much lower than the national average of Rs.16, 707. But it is much better than, say Bihar’s Rs.5,108 and Orissa’s Rs.8,547. For the 10th Five Year Plan, J&K got a per capita allocation of Rs.14,399 whereas Bihar and Orissa got Rs.2,536 and Rs.5,177 respectively. The national per capita expenditure during the 10th Plan period was only Rs.5,668. It can thus be nobody’s case that J&K does not get enough.

This is not all. In 2002–3 J&K raised a mere Rs.936 crores by way of taxes when its total non-tax revenue was Rs.4,745 crores. India’s poorest and most backward state, Bihar collected Rs.2,814 crores by way of taxes and had a total non-tax revenue of just Rs.2062 crores. Quite clearly the nation's munificence is lavished upon J&K. It seems to miss most people who matter, even those at the helm in Bihar, that the valence of public disorder when measured in terms of violent deaths is no less in Bihar than in J&K. If disorder and violence is the basis for allocation of Central Government funds, then Bihar clearly has as good a case as J&K?


Its not that all the money has gone down the tubes in J&K. In the last ten years its poverty level has dropped from 25.17% to a mere 3.48%. The poverty level in India still hovers around 26%. Whatever be the reasons for this, good government is most certainly not one of them! The proof is there for all to easily see and perceive. There are hardly any public works contributing to the common good and higher productivity to show. Roads are in a terrible condition. The power situation is miserable. There is no public sanitation worth the name and all the sewage seems to flow into the Dal Lake and thence carried into Pakistan by the Jhelum.

The J&K government’s books have not been audited for over a decade and no one really knows what was spent, where and who got what? Talk to even the most ardent pro-India Kashmiri, and there are some, and he will tell you that the politicians and bureaucrats have stolen most of the money. Lending credence to this is the amazing explosion of new construction in evidence all over the Kashmir Valley. It is believed that every second house belongs to a government employee or one connected with it. Relate this to the low poverty level in the state and it would seem that trickle-down economics works! It also underlines John Galbraith’s description of trickle-down economics ––  that it is akin to feeding racehorses high-quality oats so that the sparrows can eat the dung!

The only effective antidote to an insurgency is the restoration of good government and order. In J&K you have neither. The forces meant to impose order are themselves often quite disorderly. The Indian Army and the various para-military forces work independently of each other and often at cross-purposes. Worse still they work independent of the popularly elected government of J&K. We must wonder if powerlessness makes the state government purposeless as well?

Speaking at Srinagar the Prime Minister said: “The time has come to put forward a new blueprint, a fresh vision for Kashmir and for the Kashmiri people, free from war, want and exploitation.” Instead of a fresh vision and a new blueprint, we have this Prime Minister also doing what all previous Prime Ministers have done –– put more good money into the hands of those who cannot deliver the goods. One of his flunkies has even planted a line in a leading newspaper that, “The Prime Minister is of the view that while Kashmir’s political problem will take some time to solve, massive investment to develop the state’s infrastructure can deprive militancy of its popular base.”

The threat of secessionist violence has become an integral part of our political process. In Punjab successive Chief Minister’s have been extracting higher procurement prices and quotas each year by implying that otherwise things may go out of hand. Ditto for water that Punjab is obliged to supply to neighboring states. We seem to have no answer to this other than more handouts. But we also know handouts don’t work. We have seen it not working in the Naga Hills region, which has remained one of our poorest regions despite having long had the highest per capita “development” expenditure in India. On the other hand the abundant availability of state funds is only an easy source of funding for the insurgents and terrorists. We kid ourselves believing that only Pakistan’s ISI funds insurgencies in India. The ISI’s Kashmir budget is but a mere fraction of what goes into sustaining the insurgency in the state. Do the Naxalites who now dominate large swathes of territory in Bihar, Jharkhand, Chattisgarh, MP. Maharashtra, Orissa and AP get ISI funds? Like all our other insurgents they too milk the system for it.

When Dr. Manmohan Singh first became Prime Minister, he spoke of the need to revitalize public administration and promised to focus on improving governance. Instead he is traveling on the route charted out by Narasimha Rao, Deve Gowda, Gujral and Vajpayee. Is it possible that he knows no other way?

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