Economic Pathways to Normalization in Kashmir

A critical review of past, present and future choices during a speech by Dr. Sazawal at the US Institute for Peace (USIP) in Washington, DC.

I want to thank the United States Institute of Peace (USIP) for giving me the opportunity to review two important papers and offer my views on the subject that has generated considerable interest and scrutiny in the last 55 years.

I will take a moment to digress and take you back to 1992 and 1993 (“the Oakley – Lewis era”) when USIP tried unsuccessfully to develop the framework for a political process to address the future of Jammu and Kashmir (J&K). One of the frequent invitees to those parleys was Mr. Bhabani Sen Gupta, an eminent Indian journalist, who reported in his newspaper that “dialogue at the USIP gave an impression that the U.S. was probing, if not promoting, the possibilities of an independent Kashmir.” Of course that was then and this is today. Much water, as one says, has flowed under the “zero Bridge” over the Jhelum River since. But I hope some lessons were learnt from that experience so that there is no reason to repeat mistakes of the past.

The two papers being discussed today have some similarities and yet are very different in other ways. Generally speaking, the two papers dwell on the concept that economic growth may provide a promising alternative pathway to peace in Kashmir, something that did not receive adequate attention in the past. Personally, I would not argue with such a hypothesis, especially since other true and tested methods – diplomacy, war, and terrorism – have all been tried and have failed to change the situation on the ground. I want to congratulate Mr. Wajahat Habibullah and the CSIS team led by Ambassador Tezi Schaffer for their singular dedication to resolution of the Kashmir issue, and for developing these two thought provoking reports.

Let me take the Center for Strategic and International Studies (CSIS) report first as it is still a “work in progress”. The paper lists seven (7) specific recommendations to develop Jammu and Kashmir’s economy and leverage it to enhance peace in the region. Under each recommendation, the paper briefly describes unilateral, bilateral and, in some cases, multilateral measures that could be taken to implement each recommendation.

The CSIS paper recommendations are highly inter-related covering jobs, economic growth, infrastructure, water and energy resources, tourism, trade and investment, and connectivity with outside world. Recommendations, in some cases, cover certain geographical areas on both sides of the Line of Actual Control (LAC) and seem to convey the common perception that the suffering in Kashmir could be alleviated if the governments of India and Pakistan would provide Kashmiris with additional funds, give them complete freedom on how to spend such funds and allow the state to access funds from overseas donors (especially the United States) to improve their life and living in order to compliment and strengthen political peacemaking currently underway between India and Pakistan. In theory, these are all very good suggestions.

The stated goals of the CSIS project, impressive as these seem to be, are contradictory to the vision that was laid out by one of its underwriters, Mr. Farooq Kathwari. In a speech in Geneva at the Pugwash Workshop in May 2003, Mr. Kathwari spoke of his association with the CSIS study and described the project in the following way: “The project will map out a vision of how Kashmir would fit into the regional and world economy following a peaceful settlement of the Kashmir problem.”

Seen from that perspective, the CSIS study does seem to make an implicit argument for a “separate enclave” in the former princely state of Jammu and Kashmir, something that Mr. Kathwari has argued for a long time. The region of interest is clearly the valley and the Azad Jammu and Kashmir (AJK) since other regions like the Northern Areas, Jammu, and Ladakh (regions that should play an integral role in the economic development of the state) are hardly mentioned. In this imaginary enclave, the allure of an international airport in Srinagar holds the promise of global identity for Kashmiri Muslims (since the report is mostly silent on other state constituents like Pandits, Dogras, Bodhs and Paharis) so that generous international donors are whisked away with least inconvenience to meet with eager trading partners, willing to invest in a business friendly environment of the enclave. I am sorry to wake you up from this dream, but we need to get real here.

While the report has highlighted the plight of internally displaced people (IDP) within AJK, the fact is that their number is just a fraction of the IDP’s on the Indian side of Kashmir who get no mention in the report. I am sad to say that on the Indian side, the government (both central and state) and public at large have not done much either for Kashmiri refugees (mostly Kashmiri Pandits) other than empty rhetoric about their return to the valley. It is my hope that the final CSIS report would acknowledge the role of Kashmiri Pandits and other ethnic minorities as constituents and stake-holders in the future prosperity of Kashmir.

The CSIS report could be greatly strengthened if it would examine how monies are currently spent in the state, and whether public and private sector institutions on both sides of the LAC have the capability to reform and utilize existing funds efficiently before seeking additional investments. The recommendations presented in the report, which fall between confidence building measures (CBM) and symbolic gestures (SG), have an underlining theme that the state institutions are lacking new ideas and approaches. While I do not know much about the AJK, I do know that in the Indian side of Jammu and Kashmir the current and past state governments have held brain-storming sessions on this topic with and without outside subject matter experts. The state is always testing new ideas and approaches. For example, an Agricultural Marketing Act was passed recently to strengthen marketing of horticulture and agriculture products, including creating new marketing centers within the state to assist fruit producers. Similarly, there is an Industrial Advisory Committee to promote forest-based industries like joinery, medicinal and aromatic plants, cricket bats and minerals. A “Silk Park” has been proposed to boost the sericulture industry and government is always looking for new ideas to promote tourism. One recent idea was to promote travel of Indian government employees for vacations in Kashmir whose travel cost would be subsidized by the central government. There is also private industry involvement through the Federation of Industry, Jammu and Kashmir, and the Kashmir Chamber of Commerce and industry. The state government is also looking into exports to the South Asian Association for Regional Cooperation (SAARC) countries and holding discussions on a loan from the Asian Development Bank (ADB). In my opinion, the problem of poor economic development in Jammu and Kashmir is neither due to a lack of ideas, nor due to a lack of money, but mainly due to lack of principled political and administrative institutions in the state. This problem will be further aggravated if existing “checks and balances” imposed cursorily by India are done away with under the cloak of greater autonomy to the state. I will return to this theme later.

Mr. Habibullah’s report covers a wide canvass, and being an insider by having served both in the state and at the center, there is very little to argue about his facts and figures. I was struck by his admiration for the American role in Jammu and Kashmir, which I must say is very courageous. It was only recently that Jim Hoagland reminded his readers in the Washington Post that this is not the opportune moment for foreigners to show their closeness to Americans.

There are a couple of points in his report that I think are worth repeating. One is the ambiguity about the India-Pakistan rapprochement which was initiated last year. Mr. Habibullah thinks that it may be for real, but did include a reference to Prof. Stephen Cohen of Brookings who is skeptic about the outcome. My own views fall in the latter category. In January 2004, I wrote a paper where I compared the current peace talks between the Musharraf regime and the NDA government with the 1962-1963 India-Pakistan dialogue, with a twist that conditions in India and Pakistan today are reverse of what these were then. But not withstanding the good intentions of outside facilitators, the reality is that peace between India and Pakistan within existing contours of south asian polity is like a mating dance between a horse and an elephant – it is not going to happen!

Mr. Habibullah himself provides the reason. Quoting the words of Joseph Korbel, chairman of the United Nations Commission on India and Pakistan (UNCIP) until 1949, who said that “the real cause of all the bitterness and bloodshed, all the …. that have characterized the Kashmir dispute is the uncompromising and perhaps uncompromisable struggle of two ways of life, two concepts of political organization, two scales of values, two spiritual attitudes … a conflict in which Kashmir has become both symbol and background.” Mr. Korbel could have hardly imagined three wars involving Kashmir that have followed his uncanny assessment, but his statement is as valid today as it was then. So perhaps one has to be realistic and agree that if we achieve a détente in the subcontinent and promote economic ties and other CBMs between India and Pakistan, then that may be all that can be expected until the system changes in Pakistan.

But Pakistan did leave its indelible mark in Jammu and Kashmir and one has to live with those ground realities. First, it invaded and annexed part of the state that acceded to the Indian Union in accordance with the India Independence Act of 1947 that was passed by the British Parliament. Second, it capitalized on shifting Muslim outlook in the valley following the return of Sheikh Abdullah to power in 1975. Sheikh had always mixed Kashmiriyat and politics in making his case for independent Kashmir. But back in power after 23 years of wilderness and knowing that he could not get independence from India, he decided to subvert the state from within, inviting Saudi and other middle eastern mullahs to preach in Kashmir. Soon madrassas began to spring up, next the daily wear of people changed followed by frenzy construction of new mosques everywhere. What was basically a south asian “sufi culture” (most local valley Muslims are converts from Hindu faith), was slowly and partially replaced by distinctly pan-Arabic culture. Whereas in 1965, Kashmiri Muslims actively assisted Indian armed forces in rounding up Pakistani armed intruders, by 1985 there were many radical Islamic groups in Kashmir preaching hatred towards religious minorities. And finally they struck – in 1986 there were large-scale communal riots in Southern Kashmir in an ancient town called Anantnag (renamed by believers as “Islamabad”) resulting in burning and looting of Pandit homes and temples, making nearly 1500 people homeless and setting in motion the first waves of refugees who fled in terror. In response to a letter that I sent to the New York Times requesting the paper to investigate the incident, its chief correspondent in New Delhi, Steve Weisman, replied on April 15, 1986, “As you probably know, protesting Moslems .. attacked temples, homes and stores of Kashmiri Pundits. I plan to travel to Kashmir soon to write again about this problem.”

For Pakistan the time was ripe for another intervention and they did. Brig. Gen. Feroz Hassan Khan (retd.), who has served in the strategic division of Pakistan’s Joint Services Headquarters and was previously a commander in the Siachen theatre, remarked at a gathering of south asia experts in Washington about two years back that “once India occupied the Siachen Glacier by force in 1984, the Pakistani military command authorized the new campaign in Kashmir.” In other words, the Operation Meghdoot was reciprocated by Pakistan’s covert offensive in Kashmir. Whatever the reason, the first batches of saboteurs from the valley were on their way to various military-intelligence facilities in Pakistan for terrorist training. The first group of returning insurgents who took the name of the Jammu and Kashmir Liberation Front (JKLF) went on a killing spree, murdering mostly unarmed Kashmiri Pandits and a few Indian soldiers. In 2001, a Pandit film maker, Ajay Raina, visited Srinagar and met with Javed Mir at the JKLF office. Mr. Raina recorded Javed Mir saying the following on the video tape, “yes, we did kill many Kashmiri Pandits at the beginning of the Azadi movement, but today we are a non-violent organization.”

I wanted to bring up these episodes only to correct some of Mr. Habibullah’s perceptions (shared by others) that some how there was a “magical change” in the attitude of Kashmiri Muslims in 1987 following the rigging of local elections, or that it was only the Hizbul Mujahadeen (HM) that has killed Kashmiri Pandits.

A common theme in the two reports, and again the common wisdom among many south asia experts, is that India should reduce its military size in Kashmir. As much as Kashmiris today are begging foreign Islamic warriors to leave their land, I do recall how warmly the foreign Jihadis were greeted at the beginning of insurgency. Similarly, clamoring for reduced military force today will turn into another desperate cry for public safety and security tomorrow. If there is one lesson to be learned in the post 9/11 scenario, it is that bringing peace in lands infested by armed zealots and terrorists is lot more challenging than winning wars. The degree of violence in Kashmir may be down today, but it would be suicidal to take that peace for granted.

Another interesting observation made by Mr. Habibullah is that while recent upheaval has taken a heavy toll on Kashmir’s economy, “the richest source of income has become the threat and use of violence”. This statement is true for individuals wedded to guns, but the reality in Kashmir is that the greatest source of income for the state has been harnessing “the art of alienation” that has done wonders in getting favorable press attention world-wide and in opening treasury doors in New Delhi.

While Mr. Habibullah admits that Kashmir’s poverty rate is below the national average, what he does not say is that it is among the lowest in India. Only 4% of the state’s population is below the Indian definition of poverty, and when you compare it to nearly 43% being in the same condition in Bihar, you get an idea why there are nearly 100,000 semi-skilled migrant Muslim laborers from Bihar and Uttar Pradesh that are filling low-grade jobs in Kashmir valley deemed too menial (or low-paying) by unemployed locals (nearly 150,000 were unemployed in Kashmir about two years back). A local paper, Greater Kashmir even carried a headline in June 2003 noting, “Kashmir – Saudi Arabia for Biharis.”

For any person who has heard various stories of strife and mayhem in Kashmir, the first visit to the valley is a shock. “You expect a Jaffna, you expect a Palestine, you expect a Lebanon, and you find a boom town”, wrote the correspondent for the New York Times when she visited the valley for the first time in October 2002. She noted in her published report that deposits in the State’s largest bank (J&K Bank) had grown from $458 million to $2.29 billion in a decade, and I can tell you from the latest Bank figures that J&K Bank deposits today stand at whopping $4.15 billion. Other press reports have noted that the real estate values have shot up by as much as 1000% in the previous decade, and the number of motorized vehicles has jumped up by 500% in the same period. Indeed, Jammu and Kashmir has one of the highest per capita consumption and one of the lowest GNP among the Indian states. Most of that GNP is created by the export of horticulture and handicrafts to the Indian market that Kashmiris “discovered” out of necessity following the insurgency in 1990’s. Many wisely decided that it was time to go to customers rather than the other way around as it used to be, and Kashmiri traders began their foray into the huge Indian market. This is one of best success stories of Kashmiri entrepreneurship.

Today, according to the “official” budget, Jammu and Kashmir spends nearly Rs. 300 million everyday to meet its budget needs. Nearly one-third of this amount is spent on capital and related projects (aimed at creating wealth and called “works” by the state), the other one-third is spent on services (power purchases, interest payments, state security services and repayment of outstanding arrears) and the remaining one-third is spent on salaries, benefits and pension of state employees. The state employees’ number about 400,000 (includes about 25,000 temporary hires) which is approximately 3.6% of the total state population. Who pays for this largess? For a state with about 1% of India’s population, India has been quite generous in providing more than 10% of its capital budget to Kashmir every year. To meet the total planned spending, the state believes it can muster about 18% of its needs, 72% is contributed by the central government mostly as a grant, and the remaining 10% is raised from loans provided by either the central government or other institutions.

In addition, there is an “overdraft” (a sort of temporary daily borrowing) to allow for those times when the state may have a cash flow problem. While the Reserve Bank of India (RBI) has decreed that states can not borrow more than Rs. 100 million on a daily basis, the overdraft in the case of J&K is Rs. 10 billion on a daily basis.

And that is not all. There are national budget schemes outside of the normal state plans like the poverty reduction programs, affirmative action programs (Kashmir is the only state in India where the majority community benefits from such programs), rural development programs, and emergency relief programs that provide additional funding to the state. Even the rehabilitation of Kashmiri Pandits, which should be part and parcel of the state’s priorities and a “line item” within its budget, is not included in the state budget and funded separately by the center.

Jammu and Kashmir, having political clout like no other state in the Indian union gets even more special treatment – BJP government had promised another Rs. 11.5 billion this year. And recently the State finance minister, Mr. Muzaffar Hussain Baig (Harvard educated lawyer who made his mark defending Iranian government at the Hague), noted that this year he expects an additional Rs. 6.5 billion for the Baglihar power generation project, Rs. 3 billion for transitioning away from J&K Bank overdrafts and Rs. 12.5 billion loan from the ADB for infrastructure development.

Taken together, the total annual state spending is nearly Rs. 150 billion plus, which excludes money spent by the central government on military and other central security services that also pumps additional sums into the local economy. Contrary to common wisdom, the state security budget is a small fraction of state’s total budget (officially this cost is pegged at Rs. 6 billion annually but analysts believe it is more like Rs. 10 billion). Incidentally, the remittances from Kashmiris settled in Saudi Arabia and elsewhere (amounting to about Rs. 500 million annually) do not even register a blip in the state finances. So the issue definitely is not money. If alienation of 12 million souls (here I am considering that every man, women and child in Jammu and Kashmir – not just in the valley – is alienated) can not be solved by Rs. 150 billion, then I can not see how more money can help the situation any better. Let me repeat – the issue is not a lack of funds given to the state. Nor is there a dearth of ideas on how this money could be spent.

The real issue is how effectively the money is being used. And when you look at how the state has carefully constructed a political wall around itself (called autonomy or the Article 370 of the Indian Constitution), you realize that the wall is not to preserve regional identity but to manage and run (collectively) an insider operation where politicians of all denominations and local bureaucracy (together roughly about 5% of the total population) are living off the hide of remaining 95% people. Of these, nearly 20% represent the “middle class” consisting mostly of small businesses and professionals (and their families) and another 75% who are mostly living in villages and farms. While the people in the middle have learned how to “grease the system” and be politically pliant and financially healthy under all sorts of challenging conditions, it is the rural poor – the ones who need most help – that are told that India is not providing enough development money and is “treating Kashmir as a step child”. To check how this “feudal operation” works, one has to only review the J&K Constitution and see how it treats human rights, due process, property ownership, transparency in governance and accountability.

One may ask, what are the federal laws that were extended to the state in the past that have undermined its autonomy? This is a favorite topic among people that have nurtured the Kashmir issue to remain as an “issue” until now. In 1958, India extended laws pertaining to strengthening administrative services, extending the British-modeled Indian Administrative Service (IAS) and the Indian Police Service (IPS). Indeed, if that law would not have been applied, Mr. Habibullah would have never served in Jammu and Kashmir. In the same year, the Indian Parliament extended financial oversight by the Comptroller & Auditor General of India (comparable to the General Accounting Office in the U.S.) to examine state’s finances. In 1960, the federal laws extended to the state allowed a state petitioner to seek redress in the Indian Supreme Court. In 1961, industrial regulations and environmental laws were extended to the state. In 1965, laws pertaining to welfare of labor, social security and social insurance were extended to the state. No one has explained why these laws, which have enriched the civil society in Kashmir, are injurious to its regional identity.

Indeed, the state has consistently tried on its own to undermine social and gender equality, and minority rights through its distinctly separate constitution. Unlike other Indian states, there is no wealth and real-estate tax in Kashmir. So the rich are getting richer. But before any outsiders jumps up with joy to think that they have finally found their retirement haven, let it be known that state laws for foreigners (that means anyone from outside the state including India) are different from locals and this affects everything from land ownership to tax treatment, from political rights to various other benefits that only locals enjoy. Recently, the state wanted to pass a bill that would have taken away some rights of women if they married outside of Kashmir (no rights were taken from men if they do the same), and it was only after a national outcry and pressure from other regions of the state that put the bill into a freeze. Not unexpectantly, all Muslim leaders in the valley, including separatists, expressed support for this anti-women bill. Similarly, in spite of repeated directives by the National Commission for Minorities (NCM) to grant a minority status to Kashmiri Pandits, the state government has steadfastly refused to do so. As attractive as additional autonomy appears to my American friends, it strikes fear among women and minorities in the state.

To examine how the insider operation (circumventing Indian laws by claiming autonomy) works in Kashmir, let us look at three specific examples. Lately, we have heard a lot about how well the J&K Bank (the state is its largest share holder) is doing. But the bank has improperly profited from its insider links with the state government. Even though federal laws direct the states to keep budget overdraft under Rs. 100 million on a daily basis and requires that these sums be borrowed from the RBI, the state has set its own rules (claiming autonomy) and borrowed as much as Rs. 12 billion on an aggregate daily basis from the J&K Bank. Currently the daily overdraft amount is nearly Rs. 10 billion. Whereas, the RBI charges about 5% interest, the J&K Bank has historically charged between 14% and 20% to the state and in the past the Bank has added another 5% interest if the borrowing falls below Rs. 6 billion. In effect there is a disincentive to get off this money spigot. From 1997 to 2001, the state paid Rs. 5.27 billion or over Rs. 1 billion annually to J&K Bank to service this debt. So why would the state agree to such outrageous terms with its own bank? The answer is not surprising when you consider that the interest payments are recovered from Indian tax payer through liberal federal grants to the state every year.

The second largest employer in the state (after the security services) is the Education Department. Part of the reason is mushrooming of new colleges and universities all over the state with mediocre standards of education. These days a 30% grade allows you to graduate to the next class, and at the height of militancy in mid 1990’s teachers were threatened and asked to leave class rooms during tests (which they did) so that students could copy and cheat openly. It is not therefore surprising to read in the CSIS report that a common complaint in Kashmir is that in spite of high unemployment, “qualified people are hard to find.” In 1969, the state exercised its right to split the Jammu and Kashmir University into two universities (to meet regional aspirations) and the Kashmir University was born. Since its inception, the Kashmir University has not prepared its annual accounts so its assets and liabilities are unknown. What is known is that the number of facility and support staff together exceed the number of students enrolled in the University, nearly 10,000 library books borrowed by about 3000 students have never been returned, and an endowment fund started in 1997 by taxing students to pay for development activities has been diverted to hire additional staff. By the way, Jammu and Kashmir is the only state in India offering free education from kindergarten to undergraduate college level. But what is the value? Is this the kind of education that will attract investment and be an incubator for new business growth?

Finally, the “watch dog” that could have helped in cleaning up the financial mess has been totally sidelined in Kashmir. The Indian GAO (called the Comptroller and Auditor General of India – CAG) dutifully audits state financial books (if available) and reports its findings to the state every year. And the state follows its ritual of tabling this report in the Legislative Assembly on the last day of the Budget session just before the session ends. Neither the chief minister nor his cabinet look at the report or discuss its recommendations. It is the “thieves honor” among state politicians (of all denominations) that allows this important report to be ignored in every budget session after budget session. I was specifically told by a state official that the CAG report is “boycotted” because it is an infringement on state’s autonomy.

Again, the reasons are obvious. The CAG report examines how “capital projects”, state public sector undertakings (PSUs) and other government institutions are doing fiscally. One year’s results are hardly different from the next. The common story every year is how massive amount of funds are either misused or appear to be missing, how most PSUs (notable exception is the J&K Bank) are losing money year after year, and how government rolls are fattened up by nepotism and improper hiring. Most of the 24 PSU’s have no financial controls, no internal audits and practically no corrective action is taken for mismanagement. Previous efforts to privatize many of the PSU’s (Indian Government nudged by suggesting the Madhav Gobole Commission), ended the same way as all other efforts to decrease the size of the public sector. No wonder the CSIS study reports that most Kashmiris believe that only state government jobs are “real jobs.” Kashmir is a proof of how excessive government spending, in spite of the best intentions, can actually debilitate citizens who are now biting the very hand that feeds them. For Kashmiris to save themselves and prevent an ecological nightmare that looms from unplanned and excessive growth in its cities, they must change their ways of depending on government dole, improve their civil society, encourage private sector growth and help in reforming the state from within. There can not be any hope for significant outside investment (even from Indian business houses) until structural changes are carried out in the state, including new laws that ensure transparency, accountability, and a higher quality of governance.

The state cabinet is yet another example of the bloated government. Whereas the rest of the country follows the law that requires a state government to limit the size of its ministry to 15% of the strength of the legislature, the J&K state has argued that its special status (autonomy) allows it to have a ministry of any size. So the jumbo size J&K government comprises of 36% of the state legislature, spending Rs. 11 million every month on maintaining such a large group of ministers. The bloated ministry is a natural consequence of a bloated bureaucracy mired in inefficiency, mis-management and public rip-off.

But let me not leave you with an impression that there is not suffering and alienation among the people. There is. On one side there are victims of the proxy war, jihad, separatist movement or whatever. That suffering can end only when terrorism and gun culture disappear from the valley. The Indian Army strength in Kashmir from 1947 through 1990 was not very different from what it is today and yet in all those years and through three India – Pakistan wars, we did not hear about a single case of human rights abuse by Indian security forces. However, that does not absolve the Indian security forces or the Special Operations Group (SOG) of the local police from human rights violations that are occurring today due to excessive use of force. Even those who have nothing to do with the gun are affected and need assistance on an urgent basis. For example, medical assistance is needed for treating various psychological disorders and other mental diseases not only among those in the valley today (as Mr. Habibullah has pointed out), but also among displaced Kashmiri Pandits living in various refugee camps. At the risk of sounding parochial, let me point out that there is no higher loss than the loss of your home and hearth, your roots and your culture, all of which have been experienced by Pandit refugees.

Now let me turn to another class of suffering and alienated Kashmiri people who I believe should be the focus of this economic discussion. These are people that many of you may not have met or perhaps even seen. These are poor rural people of Kashmir, mostly illiterates, mostly in poor health and mostly lacking basic necessities of life. The true challenge in Kashmir is to get past the so-called alienated people in its cities and suburbs (who are by comparison elites), and reach out to poor villagers for whom very little has changed in the last 55 years. They lead lives of acute somberness and silence that has less to do with political ideologies and more to do with loss of hope and an utter feeling of helplessness. This sense of alienation is not just limited to Muslims as most Pandit refugees in camps share the same feeling. Any assistance must put emphasis on rural poor and the return of displaced people so that everyone can join the mainstream economy.

Nearly 75% people in the state are directly or indirectly tied to farming and agriculture. The “have-nots” fall mostly in this sector. So if the state has to improve the economy as a whole, it must address the development of this sector. And yet most of the development funds in the state go to other sectors like industry and tourism which so far have brought marginal returns to the overall state economy. A recent op-ed in the Greater Kashmir pointed out this contradiction in state’s priorities. The columnist, Mr. Nissar Bhat, questioned the investment of large amounts in tourism when in fact similar investments in farm sector would pay much higher dividends in the long run.

In summary, let me highlight some of the main points in my presentation.

First, there is no solution to the Kashmir issue other than how the ground is demarcated today. It may not become an international boundary and India and Pakistan may never sign a peace deal on Kashmir, but the demarcation line is not going to change either. So the sooner we get past that mental block, and focus on economic development and growth in terms of the whole region, the better. Second, the notion that alienation in Kashmir can be overcome by additional financial assistance is not borne by facts. Kashmiris need assistance, but this assistance has to be in the form of advice and expert help that will allow them to step out of their self-imposed isolation and learn about good governance, transparency, accountability, and citizenship responsibilities – basic civil society reconstruction stuff that India should have insisted on as an act of “tough love” but shied away from because of political expediency. If “frustrated youth” turned to gun for lack of economic opportunities, then it is yet another reason why the state needs to overhaul itself structurally and not pass the buck to the center. The truth is that the Article 370 has enslaved Kashmiri people into mediocrity, destroyed their entrepreneurial spirit, turned them into “red tape custodians”, and made corruption and hustling as a way of life.

Third, it is unlikely that there will be any major investment in the state without a redirection of its priorities and what the International Monetary Fund (IMF) would call structural changes in the state laws, along with significant improvement in the governance. The public sector growth must be arrested and private sector growth encouraged. But this is easier said than done without a massive overhaul of the system and state institutions. In any case, the change can not happen overnight. You will know whether some of that change is happening when you see major Indian business houses investing in the state.

Fourth, please find ways to help the rural poor in Kashmir because the ruling classes in the state (in government, out of government or against government) and the Indian government have failed in this task. The trickle down effect, no matter how large the Indian generosity is at the beginning of the food chain, never makes it to their level. Oligarchy and sycophancy are alive and well in Kashmir. We need a completely new mind set to bring economic help to disfranchised people – both in the valley and in refugee camps. Political and economic space must be created to allow displaced Kashmiri Pandits to return to the valley and join in creating economic prosperity in Jammu and Kashmir.

Finally, I am tempted to say that as much as the United States believes that India sees everything through the “Pakistani prism”, I am convinced that America itself has a tendency to see everything from the “nuclear prism” in south asia. On this point, my advice would be that America should redirect its focus in the subcontinent and make Indian and Pakistani active participation in the SAARC and the South Asian Free Trade Agreement (SAFTA) as its number one priority. Kashmir can not bloom in isolation because there is no such separate country. On the other hand, if India and Pakistan become peaceful trading partners, there is every reason to believe that people from all regions of Jammu and Kashmir will find themselves in the midst of that trading boom. People will travel at will and fences and boundary will lose their significance. What wars and militancy could not achieve in Kashmir will become reality through peaceful coexistence and growing commerce.

To read the previous correspondence between USIP and the author, dated December 31, 1992, please click here