Six Years After Article 370: Promise vs Reality

Six Years After Article 370: Promise vs Reality

Syllabus:

GS Paper – 2 :

Indian Constitution, Government Policies & Interventions Federalism, Parliament

Why in the News ?

August 5, 2025, marks six years since the decision to abrogate article 370 and the bifurcation of Jammu and Kashmir (J&K) into two Union Territories. To fully understand the implications, it’s crucial to have article 370 explained in context. The kashmir article 370 abrogation on 5 august 2019 was a landmark moment that reshaped the kashmir special status. While the Centre claims improved governance, economic activity, and security, recent data and events—especially the Pahalgam terror attack—raise questions on whether the goals of peace, prosperity, and integration have truly been achieved in the current situation in kashmir.

Macroeconomic Performance Post-Abrogation

• GDP Slowdown: Real GSDP growth fell from 6.91% to 3.97% post-2019, while India’s national average is 8.24%. J&K’s share in national GDP declined to 0.77% in 2024.
• Income Decline: Per capita income growth halved—from 6.02% to 2.93% in real terms. J&K’s per capita income is now just 76% of the national average, down from 84%.
• Inflation Pressure: Average inflation rose from 5.41% to 5.87%, slightly above the national average due to import dependence and high wage structure.
• Unemployment Crisis: General unemployment rose to 17% in 2024, with youth unemployment over 30%, twice the national average.
• Credit Deficit: Credit-to-GSDP ratio is just 33%, far below states like Maharashtra (99%), reflecting capital shortage and weak credit flows.

These economic indicators paint a concerning picture of J&K’s financial health post-abrogation.

• Abrogation Date: On August 5, 2019, the Government of India revoked Article 370 through a Presidential Order and Parliament resolution. This action effectively ended the kashmir special status that had been in place for decades.
• Reorganisation: The Jammu and Kashmir Reorganisation Act, 2019, bifurcated the state into two Union Territories—J&K with a legislature, and Ladakh without one.
• Stated Objectives: The move aimed to integrate J&K with the Indian Union, promote economic development, and eliminate separatism and militancy.
• Immediate Impact: A communication blackout was implemented, political leaders detained, and security heightened across the Valley.
• Legal Validation: The Supreme Court upheld the abrogation in 2023, declaring it constitutionally valid. This decision reinforced the government’s stance on article 370 a and its abrogation.
• Criticism: Critics argue it undermined federalism, worsened trust deficit, and led to economic stagnation in the region.

Investment Claims vs Reality

• Capital Collapse: Fixed capital formation halved between 2016-17 and 2022-23. Industrial stagnation persists despite policy push for industrial development.
• On-Ground Investment: Of the ₹84,544 crore investment proposals in 2023, only ₹2,518 crore materialised. Capital investment declined in absolute terms over 5 years, impacting overall infrastructure development.
• Credit-Deposit Imbalance: J&K’s credit-deposit ratio improved, but likely due to increased consumption borrowing, not industrial credit. Credit growth remains a concern for economic expansion.
• Debt Worsens: Internal debt doubled in 5 years; outstanding liabilities are now ~60% of GSDP, nearly double the all-India average.
• Tax Revenue Gains: J&K’s tax-to-GDP ratio rose from 6.3% to 8.4%, largely due to GST implementation, but fiscal deficit remains above FRBM limits.

Security Situation and Political Landscape

• Terror Decline, But Fragile: Annual militant deaths down (28 in 2025 vs 67 in 2024), but the Pahalgam attack exposed lingering vulnerabilities in the situation in kashmir.
• Stone Pelting Down: Traditional markers of unrest—hartals, stone pelting incidents, abductions—have nearly vanished.
• Local Recruitment Falls: From 129 in 2019 to just 1 in 2025, suggesting better youth engagement in peaceful avenues.
• Operation Sindoor: In response to the Pahalgam attack, India conducted a cross-border counter-terror operation. The National Investigation Agency played a crucial role in the subsequent investigation.
• Tourism as Strategy: 2.11 crore tourists in 2023; tourism now 7% of GSDP, but private investment remains sluggish post-attack. The Vaishno Devi shrine continues to be a major pilgrimage attraction, contributing significantly to the tourism sector.

Governance, Federalism and Political Space

• Democracy Restored, but Diluted: An elected government exists, but key powers (police, services) rest with the LG, reflecting the new union territory status of J&K.
• Push for Statehood: The first Cabinet resolution post-elections demanded restoration of statehood.
• Ideological Dilemma: NC and PDP remain committed to Article 370, but also operate within the new constitutional setup.
• Centre-State Frictions: The July 13 Martyrs’ Day issue symbolised the persistent tension between Union and UT administration.
• Administrative Investments: ₹10,000 crore spent on power transmission reforms; smart meters and T&D loss reduction underway.
• Legal Reforms: The replacement of the Ranbir Penal Code with the Indian Penal Code has been a significant step towards legal uniformity across India.

Challenges

• Low Capital Formation: Industrial stagnation and factory numbers remain at 2016-17 levels. Drop in fixed investment erodes growth potential.
• Youth Unemployment: Over 30% of youth remain unemployed, undermining peace dividends.
• Debt Trap Risk: Rising consumption borrowing without productive investment risks long-term fiscal stress.
• Private Investment Barriers: Despite schemes, land scarcity, security concerns, and infrastructure gaps deter investors.
• Security Gaps in New Tourist Zones: Pahalgam attack revealed lapses in risk assessment in newly opened high-altitude areas.
• Economic Diversification: The decline in handicraft exports highlights the need for economic diversification and support for traditional industries.

Way Forward

• Boost Productive Investment: Encourage capital-intensive sectors via targeted tax incentives and land banks.
• Decentralise Governance: Transfer more functional powers to elected government to build public trust.
• Youth Employment Push: Launch sector-specific skilling missions and startup ecosystem for local youth, with a focus on promoting women entrepreneurs.
• Secure Tourism Corridors: Special security infrastructure in tourist zones; coordinated planning for adventure tourism.
• Fiscal Prudence Strategy: Rationalise expenditure, control borrowing, and explore PPP models for infrastructure.
• Financial Inclusion: Implement targeted programs to improve access to banking and financial services for all segments of society.

Conclusion

Six years after the decision to abrogate article 370, the gap between promise and performance is stark. While some indicators like revenue, security, and tourism show improvement, J&K’s macroeconomic fundamentals remain weak. The article 370 decision, while aimed at bringing J&K closer to the national mainstream, has had mixed results. For a genuine economic transformation, the Centre must shift from symbolism to sustained structural support.

The journey from the special constitutional status to the current union territory status has been complex, and the coming years will be crucial in determining whether the article 370 abrogation truly achieves its intended goals of peace, prosperity, and integration. It’s important to remember that Article 370 was originally intended as a temporary provision, and its removal was meant to fully integrate J&K into the Indian Union. However, the path to achieving this integration while addressing the region’s unique challenges remains a work in progress.

Source : IE

Mains Practice Question :

“Has the abrogation of Article 370 succeeded in achieving peace and prosperity in Jammu and Kashmir? Critically evaluate the economic and political outcomes of the Union Territory model in light of recent data and events.”