The economic activity and credit growth in as many as nine districts of the Kashmir valley have been severely hit due to the unrest in Jammu and Kashmir over the past one year.
The economic activity and credit growth in as many as nine districts of the Kashmir valley have been severely hit due to the unrest in Jammu and Kashmir over the past one year. According to Reserve Bank of India (RBI) data obtained by Indian Express, the credit growth across these districts, including Srinagar, fell below 5 per cent for the quarter ended March 2017. The districts are those hit by turmoil lately. The year-on-year growth in Srinagar stood at 8.37 per cent in the quarter ended March 2016, but fell to 0.34 per cent in the quarter ended March 2017. This was the was lowest among 22 districts in the state. Even in Shopian, the economic growth fell from 10.25 per cent to 1.15 per cent in the same period and in Anantnag, from a high of 20.6 per cent to 7.35 per cent.
The graph is almost similar in other districts including Samba, Baramulla, Bandipore, Kulgam, Ganderbal, Badgam and Pulwama. Speaking to the newspaper, an economic expert in Srinagar stated that real reason behind the dip in economic situation of the state is due to the ongoing unrest since the middle of 2016. “Almost everything has come to a standstill over the last one year. Historically, tourism-oriented sectors, such as hotels, transportation, handicraft and horticulture, have been the major sectors driving credit growth. But with decline in tourism over the last one year, all these sectors have suffered,” said the expert.
As per RBI data, even other districts faced downfall in economic activities, but their growth rate remained stagnant between 6 to 20 per cent. The overall credit growth of the state decreased from 14.1 per cent in the quarter ended March 2016 to 5.05 per cent in March 2017.
A senior banker with a leading bank in J&K claimed that while credit off-take has fallen on account of weak sentiment and lack of confidence among customers and banks, the region has simultaneously witnessed a hike in bank NPAs over the last three years.
“The period between 2010 and 2014 was peaceful and witnessed a lot of investment activity, especially in the hotel and transportation industry, as tourism grew. However, with a sharp decline in business activity over the last three years (since the 2014 floods), a lot of loans given by banks to the hotel and travel industry turned into NPAs. If on one hand, businessmen saw a sharp decline in business and revenue, the other impact has been the rise in unemployment,” the banker told Indian Express.
He further added that it would need a peaceful five to six months to improve consumer sentiment and banks’ comfort to lend. “During periods of unrest and turmoil, there is a shift in priorities and we are witnessing deferment in consumption-related decisions, too. If someone was planning to buy a car, he has postponed it and is instead hoarding foodgrain for 8-10 months. I think a revival in credit off-take will only be visible if peace is restored for a period of 5-6 months,” he highlighting that banks are now practicing significant caution for lending money.
While the gross bank credit growth has dipped down significantly and hit 3.5 per cent in May 2017, the personal loan segment, which reflects consumption-led credit demand, grew at 13.7 per cent, the report added.