J&K’s local economy and its social impact

This article is authored by Mehdi Hussain, research associate, Indian Council of World Affairs, New Delhi.

J&K’s (J&K)’s economy is shaped by its unique geopolitical location and intricate socio-cultural composition, and it continues to be impacted by underdevelopment, conflict, and militancy. In this context, government interventions are crucial to integrating the Union Territory more closely into national growth frameworks.

Kashmir (PTI)

Following the constitutional changes of 2019, J&K’s’s economy recorded a 7.53% compound annual growth rate (CAGR) in GSDP at current prices from 2018–19 to 2023–24, rising from approximately $23 billion to over $27 billion. The 2025–26 Budget, presented by chief minister and finance minister Omar Abdullah, projects a GSDP growth of 9.5% and focuses on scaling up capital expenditure, infrastructure expansion, and employment generation. It is the first budget of an elected government in the post-2019 abrogation of Article 370. Key investment areas include the power sector, particularly in reducing aggregate technical and commercial (AT&C) losses, agriculture to enhance productivity and market reach, and tourism through eco-tourism development and revised master plans. Industrial development is strongly supported, with ₹602.85 crore allocated for strengthening infrastructure. The government is establishing 46 new industrial estates.

The region’s economy is dominated by traditional sectors such as agriculture and allied activities, tourism, handicrafts, and cottage industries. About 70% of the population is engaged in agriculture, and the region is the leading producer of apples, walnuts, and cherries in India, as well as the largest global producer of saffron. However, the sector faces infrastructural bottlenecks, particularly in cold-chain logistics, agro-processing, and market connectivity. Programmes like the High-Density Plantation initiative and targeted government loans are designed to address these constraints and improve agricultural productivity.

Tourism is vital to J&K’s economy and cultural identity. In 2024, the Union Territory (UT) witnessed a record 2.4 crore tourist arrivals. The Gulmarg Gondola alone drew 7.68 lakh visitors, and the 2024 Kashmir Marathon, with participation from 1,800 international runners, placed J&K prominently on the global tourism map. Offbeat destinations such as Shiv Khori, Mansar-Surinsar, Patnitop, Doodhpathri, and Lolab are gaining popularity, while the revival of border tourism in regions like Gurez, Keran, Karnah, and Suchetgarh is expanding the tourism footprint and contributing to local economic development. The government is currently formulating master plans for major tourist hubs such as Gulmarg, Pahalgam, and Sonamarg, simultaneously improving amenities in emerging destinations. The Homestay Policy is being actively pursued to increase quality accommodation options and create employment. At the same time, the initiative (Sustainable Promotion of Emerging Alternative Destinations (SPREAD), backed by the Government of India, supports sustainable tourism growth. With ₹390 crore allocated to the tourism sector in 2025–26, the government aims to increase tourism’s share in the GSDP from 7% to at least 15% over the next 4–5 years, further cementing the UT’s status as a premier global destination.

Employment generation and entrepreneurship are central to the government’s economic strategy. Initiatives like Mission Youth and Mission YUVA aim to establish over 1.3 lakh new enterprises and create more than 4.2 lakh jobs over five years. According to the J&K’s Industrial Policy 2021-2030, about 25,000 MSMEs are operational in the UT, contributing almost 60 per cent of the total investment and 90 per cent of total employment in the industrial sector in the UT. A proposed J&K Skill and Entrepreneurship University will train youth across industries, including crafts, tourism, renewable energy, and technology. Skill development schemes such as PM Vishwakarma and PMKVY 4.0 are designed to empower rural populations, women, and first-generation entrepreneurs. The handicrafts and cottage industries of J&K’s, renowned for pashmina shawls, carpets, and wood carvings, remain a traditional economic backbone, supporting over four lakh artisans. These industries are bolstered through Geographical Indication (GI) tagging, QR-based certification, and digital marketing. Thirteen traditional crafts are in advanced stages of GI registration, with seven more planned for the current year. These initiatives are central to promoting Brand J&K. Srinagar’s designation as a World Crafts City, and its inclusion in UNESCO’s Creative City Network enhance global recognition of the region’s cultural and economic legacy.

Nonetheless, challenges persist. Economic gains from tourism and development initiatives tend to be concentrated in more secure areas, leaving regions with ongoing security concerns relatively unattractive. Pilgrimage sites like Vaishno Devi and Amarnath, natural attractions such as Gulmarg and Dal Lake, and the region’s rich cultural heritage remain essential sources of income. However, they remain vulnerable to political instability and security-related disruptions. While the government has launched numerous initiatives post-Article 370 to strengthen the economy and promote tourism, the benefits have yet to reach all, underscoring the need for more inclusive and balanced development strategies.

Socially, the Budget emphasises inclusive development by enhancing education systems, expanding digital healthcare initiatives like the SEHAT app, and advancing rural employment and skill development schemes. A significant focus is directed toward empowering youth and women through dedicated programmes that foster entrepreneurship and self-reliance. The Economic Survey 2024-2025 reports that the unemployment rate has declined to 6.1% in 2023-2024 from 6.7% in 2019-20. According to a study, despite the economic growth, districts such as Kupwara, Ganderbal, Bandipora, and Kulgam lag behind in terms of social infrastructure and services. Disparity in health infrastructure is more stark in areas of less urbanisation compared to those resource-rich and urbanised districts.

To reduce regional disparities and promote equitable growth, the 2025-2026 Budget also prioritises social protection, improved service delivery, and infrastructure development in remote and underserved areas, ensuring that the benefits of growth are widely and fairly distributed. The government’s targeted initiatives from skill development and entrepreneurship schemes to expanded food coverage and healthcare reforms reflect a commitment to inclusive growth. However, sustained focus on bridging regional inequalities, strengthening institutional delivery, and empowering vulnerable populations is essential for realising a more balanced and resilient socio-economic landscape in the UT.

This article is authored by Mehdi Hussain, research associate, Indian Council of World Affairs, New Delhi.