J&K’s Industrial Sector: A History of Missed Opportunities
Dr Noour Ali Zehgeer
Jammu and Kashmir’s industrial sector has struggled to keep pace with the rest of India. The late 1960s saw an initial push toward public sector enterprises, but the strategy failed to establish a sustainable industrial base. In 1975, a shift toward private entrepreneurship, backed by institutions such as SIDCO and SICOP, led to a significant increase in the number of industries—from 5,000 in 1975 to 34,000 by 1989.
However, the political unrest that began in 1989 derailed this progress. Over the next three decades, industrial activity in J&K suffered massive setbacks, with over 2,500 productive days lost. Various government policies introduced in 1995, 1998, and 2004 aimed at reviving the sector, but they largely remained ineffective due to bureaucratic inefficiencies and the persistent instability in the region.
Even Prime Minister Atal Bihari Vajpayee’s 2002 Central Industrial Scheme fell short of expectations. Local entrepreneurs, struggling to recover from years of economic disruption, found the scheme impractical. The requirement to expand businesses before qualifying for incentives was widely criticized. One entrepreneur famously compared it to asking a mother to abandon her ailing child in favor of having another. Despite minor policy adjustments, over 95% of the scheme’s benefits were concentrated in just two districts of Jammu, leaving the rest of J&K marginalized.
The Chaos of Overlapping Industrial Policies:
Jammu and Kashmir currently operates under three competing industrial policies:
- The 2016-2026 Industrial Policy
- The 2021-2030 Industrial Policy
- The New Central Sector Scheme (NCSS) 2021-2037
Rather than streamlining industrial growth, these overlapping policies have created confusion among entrepreneurs, leaving them trapped in bureaucratic red tape. Promised incentives have either been withdrawn or remain inaccessible due to “funding shortages.”
Take the NCSS-2021, for example. It was expected to provide ₹28,400 crores in industrial incentives. Yet, in four years, only ₹100 crores have been disbursed, and the scheme is now reportedly “exhausted.” The explanation? A majority of the funds are locked up for businesses that have merely expressed interest, while those that have actually started production are denied benefits due to technicalities.
In other words, if you have already invested in setting up a factory and begun production, you may receive nothing. But if you have only submitted a form stating your intent to establish a unit, you are prioritized. This flawed logic perfectly encapsulates the inefficiency of J&K’s industrial policies.
The Neglect of Local Entrepreneurs:
J&K’s manufacturing sector is facing an existential crisis, primarily due to flawed government procurement policies. Over the past five years, more than 90% of government purchases have been made from outside the Union Territory, severely affecting local manufacturers. Even worse, local Micro, Small, and Medium Enterprises (MSMEs) face chronic payment delays, forcing many to shut down.
Meanwhile, banks in the region are more focused on recovering bad loans than supporting industrial revival. National collateral-free loan schemes exist, but their implementation in J&K has been minimal. Adding to the problem, J&K’s lead bank was penalized by the RBI for failing to meet priority-sector lending targets. This resulted in ₹8,372 crores being parked in the Rural Infrastructure Development Fund (RIDF) at low interest rates—money that could have generated ₹33,000 crores in business, ₹3,000 crores in GST, ₹600 crores in bank profits, and created over 100,000 jobs. But in the absence of clear policies and strong leadership, this potential remains untapped.
The Jammu-Kashmir Divide In Industrial Land Distribution:
Jammu has a significantly larger share of industrial plots compared to Kashmir, raising concerns over regional imbalances. While expanding industrial estates across all districts is essential, the current allocation disproportionately benefits Jammu. Addressing this imbalance should be a key priority for the administration.
Additionally, J&K’s globally renowned handicrafts sector—famous for Pashmina, carpets, and papier-mâché—remains underutilized. Instead of investing in craft clusters and expanding global market reach, the government’s engagement has largely been limited to symbolic gestures. A serious policy shift in this sector could create thousands of jobs while preserving the region’s rich cultural heritage.
Bureaucratic Hurdles: The Battle Between Promotion and Regulation
One of the biggest roadblocks to industrial development in J&K is the persistent confusion between regulatory and promotional roles. Officials who are transferred from regulatory departments to industrial promotion bodies often continue operating as regulators, leading to excessive red tape. Files move back and forth between District Industries Centres (DICs) and the Directorate for months, sometimes years, without any progress.
Stamp duty exemptions, meant to encourage investment, are inconsistently applied—while some districts offer exemptions, others charge investors. Moreover, stakeholder participation in decision-making bodies has been steadily reduced, leaving industrialists with little say in policies that directly affect them.
The Way Forward:
The government must focus on real reforms rather than temporary fixes. Some key areas for urgent action include:
- A Unified Industrial Policy – Replace the overlapping policies with a single, well-defined roadmap for industrial growth.
- An Industrial Advisory Board – Include actual entrepreneurs in policy discussions to ensure decisions reflect real industry needs.
- MSME Revival Fund – Address delayed payments and provide targeted financial support to struggling small businesses.
- Local Procurement Policy – Mandate that a significant percentage of government purchases come from J&K-based manufacturers.
- Skill Development Initiatives – Train local youth in modern industrial skills to create a workforce aligned with industry needs.
- Reviving Sick Units – Instead of writing them off, introduce structured rehabilitation plans to restore productivity.
- Balanced Land Distribution – Ensure fair allocation of industrial land to promote equitable regional development.
While investing in emerging technologies like AI and digital platforms is important, the immediate focus should be on fixing existing structural issues. Unlocking the potential of J&K’s 40,000 industrial manufacturing units—with a locked-up investment of ₹40,000 crores and the capacity to generate 300,000 jobs—must be the priority.
