The tourism sector counted as one of the prominent areas also witnessing a downtrend in J&K.

When Union Home minister Amit Shah, while proposing abrogation of Article 370 for Jammu and Kashmir in the Rajya Sabha on Monday, said that it impedes economic development and aids corruption in the state, it was not without reason.

Data shows that despite J&K receiving 10 per cent of tax payers' money for one per cent of India's population in the last 70 years of autonomy, its economy has remained fragile, to say the least. Terrorism and debt both flourished even after substantial financial assistance from the Centre.

The finance commission, the apex agency which decides how funds are to be distributed among states, has always favoured J&K more than any other special category state. There are 10 states with special status in India.

In 1955, the third finance commission had insisted on applying uniform standards to all states, including J&K.



However, during the five-year plan of 1957-58 to 1961-62, J&K received the highest per capita grant-in-aid of Rs 41.7, which was almost seven times the average of all the states that was only Rs 6.

The per capita central assistance for J&K was not only the highest but was more than double the average of the rest of the Indian states. J&K was then proposed to get Rs 117 per head of its population against an average of Rs 57 for the remaining states.

India's most populous state of Uttar Pradesh, which makes up about 13 per cent of the country's population, received only 8.2 per cent of central grants from 2000 to 2016. J&K, on the other hand, with only one per cent of India's population, reportedly received 10 per cent (Rs 1.14 lakh crore) of the total central funds in the same 16-year period.

Data, however, shows that successive state governments have failed to utilise the massive central funds for development and allegedly diverted them to other means.

Neighbouring Himachal Pradesh is similar to J&K in almost every aspect except militancy. Both have received almost similar special packages under Article 370, but Himachal Pradesh is much ahead compared to J&K in terms of economic growth.

Around two-thirds of J&K's finances are met from central grants, which have not been utilised properly. The state has failed to use the money for rural employment, drinking water, healthcare and other social sectors. For instance, from 2007 to 2011, the state could utilise only 62 per cent of central grants for MGNREGA.

In 2010, the special interlocutor deputed to J&K observed in his report, "The central plan assistance is stepped up at the rate of 10 per cent per year which is inadequate to neutralise the rise in prices. At the same time, the plan outlay has not been fully utilised in any of the years examined by us. This may be construed to mean that investments in real terms or at constant prices have not appreciably increased."

Similarly, under the Prime Minister's reconstruction plan for J&K, over Rs 32,000 crore have been approved since 2004, but till 2011, only about one-third of the amount was utilised.

Despite directions from the finance commission to release all assistance, including centrally-sponsored schemes, to the J&K government and not to implementing agencies, the Centre continued to release funds to the implementing agencies directly.

Significant direct transfers made during 2016-17 were under Swadesh Darshan Scheme for integrated development of theme-based tourist circuits (Rs 118.63 crore) and central assistance for Pakal Dul HEP Chenab Valley (Rs 200 crore).

J&K is not able to generate enough money, either tax or non-tax, to run its government. About one-third of the revenue comes from the central government as 'grant in aid'.

The average loan and deposit ratio for the state has also declined, which shows that the investment environment is not promising for trade and industry.

Speaking about economic backwardness in J&K, Amit Shah had said, "Article 370 impedes people from outside the state to do business there. Absence of economic competition has prevented development, and corruption flourished. Land prices are at rock bottom because no one can buy land there. No industry, including tourism, is allowed to grow there. People remain poor in perpetuity despite presence of abundant economic opportunities for the local populace. Rampant corruption is present, thus preventing external investment in the state."

The tourism sector counted as one of the prominent areas also witnessing a downtrend in J&K. According to the state economic survey 2017, tourism accounts for around 6.98 per cent of the state's GDP. J&K is not among the top 10 domestic destinations in the country based on the number of tourist arrivals.

Since 1989, multiple terror outfits in J&K launched massive violence for an independent Kashmir or for unification with Pakistan. The unrest period concealed the process of utilisation of funds provided by the Centre.

The per capita gross income of J&K grew from Rs 8,644 in 2000-01 to Rs 9,553 in 2004-05. The all-India figures were Rs 18,113 and Rs 21,806. Thus the gap between J&K and all-India widened.

J&K's claim for special treatment in matter of central assistance has till now been conceded by the Centre - perhaps more for political than economic reasons.

Now that the special Constitutional status for J&K has been revoked and the state split into two Union territories of J&K and Ladakh, it will hopefully open doors for investments like other Indian states.