ANALYSIS Pahalgam terror attack may derail tourism, investments into Jammu and Kashmir

investment proposals worth Rs 1.63 lakh crores (up to December,2024) have been received by J&K.

The terror strike in Pahalgam, which has left at least 26 people, most of them tourists, dead and sent shockwaves across the country, has likely dealt a huge blow to Jammu & Kashmir’s tourism sector, a mainstay of the economy that had just started looking up.

Several tourists have cancelled their summer travel plans to the Kashmir Valley. Experts fear that the April 22 attack, one of the deadliest strike against civilians in recent memory, could also see businesses put their investment plans on hold, potentially impacting the gross state domestic product (GSDP), which beat the national average in FY25.

The tourism sector accounts for 7-8 percent of the J&K’s GSDP.

J&K’s Economic Survey 2024-25 said the UT’s GSDP, in real terms, grew 7.06 percent in 2024-25 (advance estimates), largely at the same rate as in 2023-24 (7.08 percent). In 2022-23, the GSDP had risen sharply by 9.31 percent, while in 2021-22, it had grown merely 2.67 percent. The year 2020-21 had seen GSDP growth at (-)1.33 percent, and 2019-20 at (-)0.99 percent.

The current UT of J&K came into existence on October 31, 2019, when the former state was reorganized into two UTs - the other being Ladakh. The years 2019-20 and 2020-21 recorded negative growth rates, primarily due to development activity halting due to the abrogation of Article 370 as well as pandemic-related restrictions.

However, since 2022-23, J&K's economic growth has fared slightly above than the national average, and in the past three financial years, the UT's growth has averaged 7.81%, marginally more than the nation's average of 7.77%.

For 2025-26, the UT’s GSDP was being projected to grow around 9.5 percent, driven by strategic policy measures, infrastructure development and business friendly initiatives, J&K’s Chief Minister Omar Abdullah had said during his Budget speech in March.

India’s GDP is seen growing by 6.5 percent in 2024-25, according to second advance estimates. In 2023-24, the GDP grew sharply by 9.2 percent, and in 2022-23, by 7.6 percent. The years 2021-22 and 2020-21 recorded growth rates at 9.7 percent and (-)5.8 percent, respectively. And in 2025-26, the RBI has projected the growth at 6.5 percent.

J&K’s Economic Survey states that the UT is actively contributing to India’s GDP to the tune of 0.8 percent. This figure may take a slight hit, following the terror attack on April 22, experts reckon.

Rise in GSDP & Per Capita Income

J&K is estimated to have achieved a compound annual growth rate of 4.89 percent in its real GSDP between 2019-20 and 2024-25, in comparison to 4.81 percent growth from 2011-12 to 2019-20. “This improved growth suggests that the J&K is experiencing enhanced economic activities and development initiatives, which could be attributed to various factors, including several government initiatives aimed at economic development, infrastructure enhancement and business facilitation,” said the Economic Survey for the state.

The Per Capita Income (PCI) of Jammu and Kashmir has witnessed significant growth, increasing by approximately 148 percent between 2014-15 and 2024-25, with an estimated PCI of Rs 1.55 lakh for 2024-25. “Although J&K's PCI remains below the national average, the gap has been narrowing, as the ratio of J&K's PCI to India's PCI has risen from 71.9% in 2014-15 to nearly 77.3% in 2024-25. This growth highlights improved living standards and greater economic prosperity for the residents of J&K,” the survey said.

The PCI of J&K at current prices is anticipated to have grown at the rate of 10.6 percent in 2024-25 as compared to the pan-India growth of 8.7 percent. In most recent years (2023-24 to 2024-25), J&K has shown robust growth in PCI, outpacing the national growth rate.

The comparative analysis of J&K’s Per Capita Income (Per Capita NSDP) at current prices with that of northern states from 2019-20 to 2023-24 indicates that J&K’s per capita income grew at a compound annual growth rate of 8.3 percent which is higher than Punjab (6.2 percent), Delhi (6.7 percent), Himachal Pradesh (6.0 percent) and Chandigarh (6.5 percent), the survey highlighted.

Tourism & Construction

Tourism is the primary economic driver for Jammu & Kashmir, providing jobs to a large number of people and generating economic activities in the tertiary sector as well.

The tertiary sector (services) is estimated to have a major share of 61.70 percent in J&K’s gross state value added (GSVA) during 2024-25 and an employment share of 31.31 percent. The size and growth rate of the services sector is critical for the growth of GSDP, given its share in the overall economy.

“Within this sector, tourism can make a significant contribution and there is a substantial potential for tourism development, leveraging Jammu & Kashmir’s natural beauty and cultural heritage which can create numerous jobs and spur economic growth,” the survey said.

The secondary sector, meanwhile, is estimated to account for about 18.30 percent in the GSVA estimates of J&K during 2024-25, with construction accounting for about 42.46 percent of the total value added by this category. Construction has been a major employer in J&K with 14.94 percent share in jobs during 2023-24, underscoring ongoing infrastructure development and urbanization efforts in J&K. In 2018-19, the secondary sector’s share in J&K’s GSDP was about 28%.

Investment Proposals

The Economic Survey also said that investment proposals worth Rs 1.63 lakh crore (up to December 2024) have been received by J&K which are slated to directly provide employment to more than 5.90 lakh people. As many as 1,984 units at an investment of Rs 9,606.46 crore and generating employment of 63,710 have come up in J&K since 2019, till December 2024. This includes 334 units creating employment for 8,443 persons with investment of Rs. 2,977 crore in 2024-25, up to December 2024.

Moreover, Centre has rolled out a New Central Sector Scheme (NCSS) at an outlay of Rs 28,400 crore for Industrial development of J&K in 2021 which envisages incentives like capital investment incentive, capital interest subvention, GST linked incentive etc. This package received an overwhelming response and was fully subscribed. As of September 2024, the deadline for registration, a total of 971 applications, representing an investment of Rs 10,471 crore that can potentially generate employment of 51,897 have been approved, the survey said.

Additionally, J&K has witnessed the setup of industries with investments exceeding Rs 500 crore. These large-scale ventures have catalysed the development of ancillary industries, enhanced local employment, and firmly positioned J&K as a competitive investment destination, said the survey. As many as 8,306 new applications have been received with proposed combined investment of Rs 1.63 lakh crore and the potential to create employment for approximately 5.90 lakh individuals.