Recession blues: unrest ahead

Global Recession has not spared Kashmir in spite of its isolation, but experts say the real impact is still in offing. Some two to four lakh livelihoods are endangered, which if lost, can lead to political unrest. Shahnawaz Khan reports.

The impact of recession in Kashmir has so far been limited, mainly to export sector. The insulation of the isolated Kashmir economy has acted as a buffer that has diluted the shocks. However, two major exports, walnut and carpets were badly hit.

Walnut exports have shrunk from Rs 150 crore in 2007 to Rs 20 crore in 2008.  About one third of the export potential of Kashmir carpets was realised in 2008, while the rest is pending in the export warehouses across the globe.  In 2007, the carpet exports were estimated to be Rs 1500 crore. The slump has strained most of the big business houses. Many local industries in Jammu have already shut.

Now, experts say, the recession has so far only knocked the door. It is in no mood to return and is instead coming in to stay, making its impact a household affair. “So far we have been talking of impact on exports and other things, which seemed limited, but the fact is that we are heading towards a livelihood problem in a big way. We can have some two lakh livelihoods lost only in the handicraft carpet sector alone,” says noted economist Haseeb Drabu, the chairman and chief executive officer of J&K Bank.

As exporters face blockage of their capital with disappearing sales, the impact is passing on to craftsman. While exporters can hold their stock for better times, the craftsman face immediate problem.“For exporters it means raised inventory cost, which translates into drop in profits, but for craftsman it is lost wages as exporters won’t procure more carpets for now,” says Drabu.

A 6X4 carpet involves around 140 man days of labour. By simple mathematics, loss of sales of one such carpet means loss of 140 labour days. With an estimated two lakh people in the carpet sector potentially losing their livelihood, the problem will not only add to unemployment, but can have political ramifications as well. A large section of the affected people would comprise of the youth, and Drabu says the political ramifications should not be underestimated.

“For the first time the civil strife in J&K will be driven by economic considerations. So far it was driven by political considerations,” says Drabu.

The 2008 land transfer agitation was driven by youth.  With lost livelihood, youth can easily hit the roads leading to political unrest. The problem stirred by the recession may camouflage itself as political.

Apart from the unorganized handicraft sector, the services and tourism sectors also face direct threats.Tourism sector has been hit globally, and Kashmir has not been spared either. “Tourist arrivals in the last two months have been very low as compared to the tourist arrival during the two months in the previous year. It is not even five per cent of the last year’s arrival,” says Shakeel Qalandar, President Federation Chamber of Industries and Commerce.

Slump in one sector affects others sectors too. The recession which began in the US housing finance sector has so far swallowed billions of jobs globally, including four banking giants in the US itself. Jobs have been cut aggressively across all sectors. Recently multinational companies have been making forays into Kashmir, building promises of alternative employment avenues in the state. A number of youth are currently engaged in the services sector fed by small and big companies. Earlier this year, the Essar Group promised a BPO in Srinagar.

Recession can turn the clock back anytime, leaving more and more youth jobless, thus adding to the potential unrest. New ventures may be halted before they take off. “Last year the persistent bandhs affected the business and livelihood of people, but once people lose their livelihood to recession, there won’t be any deterrent to bandhs,” says Drabu.

Most of the Industry is asking for intervention from the government and banks. Dr Mubeen Shah, Chairman of the Kashmir Chamber of Commerce and Industry, says they have made some suggestions to the government about aiding the affected exports.Shah says that the government and banks can come together to help tackle the crisis.  “The banks have to create a product called Stock Inventory Financing. Once stock inventory is created with all the people involved – the craftsman, the trader, the exporter – then first they need to be financed, then their stock retaining capacity be increased by stock inventory financing,” says Shah, adding that the banks should bring down interest rates.

The government on in its part will not be immune to the problem either. The slump will force the government to cut on taxes, and in effect cut on public spending. Drabu acknowledges the responsibility of the bank in collaboration with the government.

“We (J&K Bank) have made initiatives to tackle the problem. We understand that the stock retaining capacities have to be increased and government and the bank have to find means to assist the affected people,” says Drabu.

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