J&K Budget 2026: Khud Kafeel Kashmir
Omar Abdullah’s first Budget, presented amid the transition to elected governance, read like an extension of Nirmala Sitharaman’s eighth J&K Budget -- heavy on central devolutions, light on local ingenuity. Perhaps being in unchartered waters of governance of J&K as a UT and the brevity of time constrained bold thinking; after all, he did walk into a disempowered seat. The new administrative power structure was designed to constrain the authority of the elected Chief Minister.
After a year of running the new set up, this year’s J&K Budget must show some intent, ambition and heft to address the economic distress in various segments of the local economy. This year’s budget should go beyond the accounts and spell out a strategy in line with the new political economy of the state. The core underlying budgetary strategy that can be outlined in the budget speech is one of “Khud Kafeel Kashmir”. Aligning with the national strategy of Atmanirbhar Bharat, Omar must make it the rallying point for governance.
A self-reliant Kashmir—Khud Kafeel Kashmir -- transcends economics; it is a political necessity to reclaim narrative control in an era of centralized power structure. Without it, J&K risks remaining a fiscal appendage, its liabilities soaring to 60 percent of GSDP while per capita income lags 24 percent behind the national average.
The navigation path must be spelt out clearly with timelines. He must articulate a dual-pronged strategy: a macroeconomic stabilization program for immediate relief and a structural adjustment plan for long-term resilience. Stabilization, comprising short-term initiatives to arrest decline and revive key sectors. Structural Adjustment, the long-term developmental strategy, must be tailored to Kashmir’s unique vulnerabilities and strengths.
Kashmir’s economy has historically been export-oriented yet import-dependent, with a staggering 35 to 40 percent of its Gross State Domestic Product tied to external inflows. This structural imbalance, exacerbated by global disruptions like the pandemic and local volatility, has left sectors like horticulture and crafts trapped in costly inventory cycles, unable to realize value amid supply chain fractures.
First, stabilization is imperative. The economy’s immediate wounds stem from years of exogenous shocks. Horticulture, the backbone of rural livelihoods and a $2.5 billion export powerhouse (primarily apples, walnuts, and saffron), has suffered serious impairment. Yields stagnate at around 10.5 metric tons per hectare—far below global benchmarks of 50 MT/ha -- due to outdated practices, climate vulnerabilities, and market disruptions.
A series of sector-specific policy interventions need to be undertaken. For the commercial plantation sector, subsidized crop insurance, priority sector priced loans for high-density orchards, and capital support for new Controlled Atmosphere stores to extend shelf life of produce must be prioritized. This is restitution for a sector employing, directly and indirectly, over 60 percent of the valley’s workforce, while contributing disproportionately to economic volatility.
Similarly, the MSME sector -- often household-based and informal -- generates $1.5 billion annually but operates on razor-thin margins amid enhanced import competition and lowered policy protection. The predator is policy-induced demand collapse and poor credit access, with J&K’s credit-to-GSDP ratio at 38 percent against Maharashtra’s 99 percent. Relief will also require debt restructuring, skill upgradation grants, and e-commerce linkages to national and global value chains.
Funding stabilization demands fiscal discipline, not wizardry. Redirect subsidies lavished on attracting external industry—often illusory promises yielding little beyond MoUs. In 2023, touted proposals worth Rs 84,544 crore delivered only Rs 2,518 crore in actual investment, while capital stock has halved since 2016-17. Complement this with a 10 percent across-the-board cut in revenue expenditure—trimming bureaucratic bloat, where salaries and pensions consume 70 percent of the Budget. This could generate Rs 5,000-7,000 crore, sufficient for relief without inflating the fiscal deficit, already at 6 percent against FRBM norms.
Stabilization is but a bandage; true healing demands structural adjustment which will get funding support from the national Atmanirbhar kitty—no favors, as most such spending occurs in the states. An economic package of Rs 20 lakh crore (approx. US$ 268 billion), it includes the Production Linked Incentive (PLI) schemes and sector-specific reforms. The Union government has committed Rs 1.97 lakh crore over 5 years for PLI schemes across 14 key sectors to create manufacturing global champions. For MSME there is a national package of Rs 3 lakh crore in collateral-free automatic loans, ₹20,000 crore as subordinate debt for stressed MSMEs, and ₹50,000 crore in equity infusion through a ‘Fund of Funds’.
J&K must boldly embrace and leverage Atmanirbhar Bharat, infusing it with aggressive import substitution to dismantle the import stranglehold. The visitor economy generates $2 billion but imports 40 percent of input. Importing raw materials for crafts and machinery for horticulture fuels a chronic trade deficit that erodes growth potential.
Alignment means localizing production: cluster-based incentives for domestic fertilizers, packaging, and textile inputs; promotion of bio-fertilizers and indigenous seeds in horticulture to reduce imported chemical costs by 20-30 percent; R&D hubs reviving traditional dyes and looms with technology, including AI-driven design tools that preserve cultural motifs while scaling output.
Instead of subsidizing outside investors when local enterprises teeter on collapse, it makes more sense to reallocate those funds to nurture existing businesses to foster inorganic growth over imported glamour. With literally no greenfield investment by national corporates despite concessions, it might be worthwhile to try brownfield expansion of existing local enterprises in partnership with external investors.
A clear preference should be given to financial capital (e.g., private equity, venture funds) over direct industrial capital (e.g., corporates establishing mass-production units). Financial capital allows local enterprises to retain greater control, scale strategically, and align with regional needs. It avoids the potential downsides of external corporate dominance that prioritizes national supply chains over local ecosystem development.
This is not mere rhetoric; it is existential. In the post-2019 landscape of restricted political autonomy and administrative authority, economic self-sufficiency remains the last bastion of agency.
This is no retreat to outdated protectionism but a forward-looking pivot to sustainability. Critics may call it insular, but history vindicates caution. Pre-2019, scarce public investment deterred private industry—Central PSUs invested a paltry Rs 150 crore despite no land barriers. Post-abrogation, over-reliance on optics like fests and Tulip gardens masks underlying frailties.
Now that it is evident that statehood is not around the corner, let J&K not get trapped into thinking like an administrative outpost. Instead, think of it as a vibrant economy, with fiscal tools, howsoever limited, to foster local growth.
In essence, Budget 2026 must transcend band-aid fixes. By funding stabilization internally and aligning structural reforms with Atmanirbhar’s self-reliance ethos, Omar Abdullah can forge Khud Kafeel Kashmir—a resilient, import-light economy where horticulture thrives on innovation, MSMEs on revival, and growth on local agency. This isn’t just policy; it’s reclamation. Fail to seize it, and J&K risks perpetuating a narrative of dependency, its economic imperatives forever subordinated to political expediency. The choice is clear: self-reliance or stagnation.
Tail piece
Omar Abdullah doesn’t have to look far. He can take a leaf out of his grandfather’s play book who was similarly placed in 1975. Amid political reconciliation and administrative stabilization following decades of overt and covert central oversight, Sheikh Abdullah having accepted the diminished role of Chief Minister, prioritized economic revival for rural Kashmiris -- his political support and backbone of the economy. He enacted the J&K Agrarian Reforms Act, 1976, building on his revolutionary “land to the tiller” policy. This step was economically transformative as it boosted rural productivity, reduced poverty, and promoted equity in an agrarian society where over 70% depended on agriculture. Politically, it reinforced his legacy as champion of the dispossessed, adapting earlier land reforms to new realities. Cleverly, he aligned it with Indira Gandhi’s 20-Point Program, addressing rural poverty and providing debt relief for the poor.
The author is a Contributing Editor of Greater Kashmir.
