Demystifying Kashmir's Economic Growth - I

Demystifying Kashmir's Economic Growth - I

August 19, 2009

By: Arjimand Hussain

The exchange of words between Finance Minster, Abdul Rahim Rather, and Muzaffar Hussain Baig in the Assembly on Tuesday was interesting. Both the gentlemen gave some exciting insights to and analyses of our State finances.

Surely, all statistics are generally like lamp posts: they are good to lean on, but they don’t shed much light. J&K’s finances are no exception. Its analyses and statistical conclusions are normally bizarrely divergent and contradictory.

The first thing that needs to be done is to see our finances from a purely analytical and factual point of view. Partisan view points could be misleading. Remember the ‘zero-deficit’ budgets of the PDP-Congress government? Recall Mr. Rather’s comments then.

The debate on J&K’s Gross State Domestic Product (GSDP) and economic growth needs to go back to the basics – our official statistics. There is a systemic fault, which intrinsically develops a gap between statistical indicators and the real issues on the ground. The fact is that no figures, whether provided by Mr. Baig or Mr. Rather, are close to facts. An objective analysis proves both are partly wrong. And both are partly right.

Mr. Rather said that in 2001-02, our GSDP was Rs 180,39.35 crore on current prices. In 2007, it touched Rs 31,079 crore, marking a growth by 10.89 per cent. While at constant prices this growth was only 5.6 per cent for the same period. This in Mr. Rather’s opinion was unimpressive and happened during the PDP-Congress rule.
He went on to compare the same figures for the period of the NC rule between 1996 and 2001. According to him, the annual growth rate at current prices from 1996-97 to 2001-02 was 16.28 per cent and at constant prices for the same period was around 20.93 per cent. He also said that the Net State Domestic Product rose by 5.54 per cent per annum from 2001-02 compared to 20.74 per cent per annum from 1996-97.
In Mr. Rather’s view, Mr. Baig had wrongly compared GSDP at constant prices in 2003-04 to GSDP at current prices in 2007-08.
But how do the party performances come to play in all this?

Commonly GDP, or in our case the GSDP, is measured by what is called the ‘expenditure method’. Apart from consumption and investment, what adds up to the GSDP in the government spending and exports, minus imports.

On investment, the term ‘gross’ means that depreciation of the capital stock is not included. While as the ‘net’ SDP includes depreciation. In J&K’s system, it is highly unlikely that our official statistics are able to reflect the actual level of depreciation. Our systems are simply not tuned at all to measure depreciation across the economy. So how do we reach to ‘gross’ estimations?

Then there is the issue of our consumption and its relation to imports. Then there are our exports, the vast unregistered economic activities and the question of our purchasing parity. There are many unanswered questions.

(To be continued)