After Article 370 was repealed in 2019, the Government of India made a significant step toward fostering industrial growth in Jammu and Kashmir by launching the National Central Sector Scheme (NCSS) in April 2021. With a total outlay of Rs 28,400 crores, the scheme was designed to incentivize investments in both the industrial and services sectors units, aiming to attract large-scale projects, create employment, and stimulate economic growth in a region that had long struggled with political instability and underdevelopment. However, the scheme’s promise of industrial revitalization is now under scrutiny due to its failure to meet the overwhelming demand for incentives.
The government had envisaged supporting investments worth Rs 10,000 crores under the NCSS, but the response from investors exceeded all expectations. By August 2024, the committed financial liability for registered units had already reached Rs 16,378 crores, with an additional Rs 54,808 crores in liability from applications still under process. This total estimated liability of Rs 71,186 crores represents a dramatic shortfall compared to the allocated budget, raising questions about the scheme’s sustainability and the government’s capacity to deliver on its promises. For industrial prospects in Jammu and Kashmir, this shortfall is troubling. The region had seen an influx of investment proposals since the launch of the NCSS, with over 7,000 applications submitted through the J&K Single Window Portal, involving a proposed investment of Rs 1,41,962 crores and the potential to create around 5 lakh jobs. These investments were seen as a cornerstone of Jammu and Kashmir’s economic revival, particularly in light of its historical reliance on government spending and agriculture. Industrial diversification was viewed as essential for creating a self-sustaining economy, reducing unemployment, and addressing regional disparities in development. However, the shortage of funds for the NCSS raises concerns about the future of these investment projects. Without the promised incentives, many investors may reconsider their commitment to the region, slowing down industrial growth and jeopardizing the creation of much-needed jobs. Major industry players like ITC, Dabur, Haldiram, and others, who have already invested in creating infrastructure, may face financial losses or delay the operationalization of their units if the incentives fail to materialize. From a policy perspective, the gap between the allocated funds and the demand indicates a lack of foresight in planning and resource allocation. The government’s failure to anticipate the level of interest in the NCSS and to adjust the outlay accordingly suggests weaknesses in its industrial strategy. The industrial landscape in Jammu and Kashmir is unique, given its geopolitical context, historical isolation from mainstream economic development, and the long-standing security concerns that deterred private sector investments. The NCSS was supposed to overcome these challenges by offering substantial financial incentives, but its underfunding could undermine the entire initiative. Moreover, the delay in the Union Government’s decision to enhance the outlay for the NCSS—due in part to the ongoing Assembly elections and the enforcement of the Model Code of Conduct—further exacerbates the situation. Time is a critical factor for businesses, and any prolonged uncertainty can significantly impact investor confidence. The industrial sector thrives on predictability, clear policy frameworks, and timely implementation of government schemes. In the absence of these, investors may either scale back their operations or shift their focus to other regions where the policy environment is more stable and supportive. The broader economic implications of this uncertainty are significant. Jammu and Kashmir’s economy is already vulnerable, with high unemployment rates, limited private sector activity, and a dependence on government jobs and subsidies. The region’s industrial development is seen as a key driver for economic diversification, reducing reliance on traditional sectors like agriculture and tourism, and addressing the deep-rooted issue of youth unemployment. If the investments under the NCSS do not materialize as planned, it could stall the region’s economic recovery and exacerbate existing socio-economic challenges. The industrial sector also plays a vital role in integrating Jammu and Kashmir into the national economic mainstream. Industrial development in the region has the potential to boost trade, attract skilled labour, and foster innovation, contributing to the overall economic progress of the UT. The government’s vision of turning Jammu and Kashmir into an industrial hub could help bridge the development gap between the region and other parts of the country. However, this vision is now at risk due to the financial shortfall under the NCSS. On the positive side, the overwhelming response to the NCSS indicates strong interest from the private sector in investing in Jammu and Kashmir. This reflects a level of confidence in the region’s future potential, which can be attributed to the government’s efforts to improve infrastructure, enhance security, and create a business-friendly environment. The Single Window Portal, introduced to streamline investment processes, has also been a step in the right direction, facilitating ease of doing business and attracting a diverse range of investors. However, for this momentum to continue, the government must act swiftly to address the funding shortfall under the NCSS. Increasing the outlay to Rs 75,000 crores, as requested by the J&K government administration, would be a positive step, ensuring that the scheme remains viable and that investors receive the incentives they were promised. Failure to do so could lead to a loss of investor confidence and derail the industrial development agenda for Jammu and Kashmir.
Conclusively, the NCSS has undoubtedly garnered substantial investment interest in Jammu and Kashmir. However, the current dearth of funds poses grave concerns regarding the future of industrial development in the region. The government must take immediate steps to enhance the outlay for the scheme, ensuring that the region’s industrial potential is fully realized. The stakes are high, not just for the investors involved, but for the broader economic and social fabric of Jammu and Kashmir. Industrial growth holds the key to unlocking new opportunities, creating jobs, and fostering long-term stability in a region that has historically been plagued by economic and political challenges. Addressing the funding shortfall under the NCSS is essential to ensure that Jammu and Kashmir can fully capitalize on its industrial prospects and secure a prosperous future for its people. Enhancing the allocation of incentives under the National Central Sector Scheme (NCSS) is crucial. This will not only reassure existing investors but also encourage new ones to come forward with confidence. The administration should expedite dialogue with the central government to resolve this issue swiftly. Additionally, a transparent and streamlined process for application and registration under the scheme should be maintained, providing clear timelines and guidelines to avoid delays or miscommunication. At the same time, the administration should explore alternative sources of funding or create state-level incentives to bridge the financial gap and maintain momentum in industrial growth. Building investor confidence through regular engagement and addressing their concerns promptly will be key to sustaining the economic revival in J&K. Finally, creating a comprehensive roadmap for industrial development with a long-term vision, addressing infrastructure gaps, and ensuring ease of doing business will lay a solid foundation for the region’s industrial prospects and overall economic stability. By taking these steps, Jammu and Kashmir can bolster its industrial sector and unlock its true economic potential.
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