J&K violence dents economy, over 5% dip in credit growth in 9 Valley districts

An economic expert in Srinagar said that the unrest since the middle of 2016 appears to have had a bigger impact as it followed the 2014 floods, which made a severe dent on the state’s economy.

Written by Sandeep Singh | New Delhi | Updated: July 31, 2017 9:05 am
kashmir violence, kashmir tensions, kashmir clashes, kashmir separatists, kashmir militants, kashmir stone pelting, kashmir economy, indian army, india news J&K credit growth fell from 14% in March 2016 to 5% in March 2017 due to the continuing unrest. Express archive

THE UNREST in J&K over the last year severely dented economic activity and credit growth across nine districts in the Valley, which were affected the most by the turmoil, according to data available with Reserve Bank of India. RBI data show that credit growth across these districts, including Srinagar, fell below 5 per cent for the quarter ended March 2017. While the year-on-year credit growth in Srinagar stood at 8.37 per cent in the quarter ended March 2016, it fell to 0.34 per cent in the quarter ended March 2017, which was lowest among the 22 districts in the state. In Shopian, it fell from 10.25 per cent to 1.15 per cent in the same period and in Anantnag, from a high of
20.6 per cent to 7.35 per cent (see box, page 2).

The story is similar across Samba, Baramulla, Bandipore, Kulgam, Ganderbal, Badgam and Pulwama. An economic expert in Srinagar said that the unrest since the middle of 2016 appears to have had a bigger impact as it followed the 2014 floods, which made a severe dent on the state’s economy. “Almost everything has come to a standstill over the last one year. Historically, tourism-oriented sectors, such as hotels, transportation, handicraft and horticulture, have been the major sectors driving credit growth. But with decline in tourism over the last one year, all these sectors have suffered,” said the expert.

Bankers say that biggest decline in economic activity on account of the unrest has been in districts such as Srinagar, Shopian, Anantnag, Pulwama and Kulgam. RBI data shows that while other districts got impacted, their growth rates were relatively better and stood between 6 per cent and 20 per cent. For the state as a whole, the credit growth declined from 14.1 per cent in the quarter ended March 2016 to 5.05 per cent in March 2017. A senior banker with a leading bank in J&K said that while credit off-take has fallen on account of weak sentiment and lack of confidence among customers and banks, the region has also witnessed a rise in bank NPAs over the last three years as the revenue flow for many borrowers dried up.

“The period between 2010 and 2014 was peaceful and witnessed a lot of investment activity, especially in the hotel and transportation industry, as tourism grew. However, with a sharp decline in business activity over the last three years (since the 2014 floods), a lot of loans given by banks to the hotel and travel industry turned into NPAs. If on one hand, businessmen saw a sharp decline in business and revenue, the other impact has been the rise in unemployment,” the banker said. The banker said that unless there is 5-6 months of peace, consumer sentiment and banks’ “comfort to lend” won’t improve.

“During periods of unrest and turmoil, there is a shift in priorities and we are witnessing deferment in consumption-related decisions, too. If someone was planning to buy a car, he has postponed it and is instead hoarding foodgrain for 8-10 months. I think a revival in credit off-take will only be visible if peace is restored for a period of 5-6 months,” he said, adding that banks are practicing significant caution now while lending.

Credit growth is an important determinant of economic activity within an area as high growth shows that individuals have a higher propensity to borrow and spend, and reflects the tendency of businesses to borrow and invest. While the gross bank credit growth in the economy has been on a decline and hit 3.5 per cent in May 2017, the personal loan segment, which reflects consumption-led credit demand, grew at 13.7 per cent.

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  1. L
    Logic Induction
    Jul 31, 2017 at 6:15 pm
    Violence. These are the actions of people who are "unable" to think, negotiate and win the game !
    1. S
      Jul 31, 2017 at 3:56 pm
      Why would people take loans from banks when they can loot it?
      1. S
        Jul 31, 2017 at 2:39 pm
        Stone pelting does not need credit, it runs on havala or illehal diversion of Haj subsidy.
        1. R
          Jul 31, 2017 at 12:54 pm
          Violence originated with the archenemy of both God and man—Satan the Devil, whom Jesus Christ called “a murderer.” (John 8:44) Moreover, because “the whole world is lying in the power of the wicked one,” his traits are reflected in popular at udes toward violence, including the world’s infatuation with media violence. (1 John 5:19) To please God, we must cultivate a hatred for violence and a love for what God loves. Is that possible? “Jehovah . . . hates anyone who loves violence.”—Psalm 11:5. Put away “wrath, anger, badness, abusive speech, and obscene talk.” It also says: “Strip off the old personality with its practices, and clothe yourselves with the new personality.” (Colossians 3:8-10) Is God asking too much of us? No. People can change. How? The first step is gaining an accurate knowledge of God. (Colossians 3:10) When a person with a receptive heart learns about our Creator’s appealing qualities and standards, he is drawn to God in love and wants to please him.
          1. D
            Jul 31, 2017 at 12:31 pm
            I am not sure what it means but as per RBI, India's loan growth for the whole year was 5.1 as against 10.3 last year. So, it is not only J K. Right?
            1. R
              Jul 31, 2017 at 7:48 am
              PDP-BJP coalition has destroyed Kashmir with their Machiavellian politics.They have turned Kashmir into a war zone.There is no one anywhere who feels safe physically,economically and psychologically.Both play destructive games of politics in Kashmir thereby turning it into a hell.
              1. S
                Jul 31, 2017 at 6:54 pm
                Then why don't you vacate and go to Pakistan ? You are unworthy of calling Kashmir your land as you have not taken care of it So it is better that all of you can go to whereever else you want - provided they accept you
              2. Y
                yash sehgal
                Jul 31, 2017 at 7:20 am
                This was to happen due to stone pelting n bandhs every day. Center must not give any taxpayers money to compensate (pamper) them.
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