The ceasefire between India and Pakistan is likely to bring normalcy to North Indian states, but Jammu and Kashmir will take time to recover amidst a tense situation.
However, a Moneycontrol analysis shows that the economy of the union territory will likely bounce back within two years, as it has after previous conflicts.
While the erstwhile state of Jammu and Kashmir (J&K) was growing at an average of 5.1 percent for five years before the Kargil war of 1999, growth in FY00 and FY01 was lower at 4.5 percent and 1.8 percent, respectively.
It is only in FY92 that growth bounced back to 5.2 percent and averaged 5.3 percent over the next four years.
Analysis from previous wars shows a similar situation.
J&K averaged 3.7 percent growth for the four years till FY65, but real growth dipped to 0.9 percent over the next two years (FY66 and FY67), before picking back up to 6.3 percent between FY68 and FY71.
The start of the conflict in December 1971 (FY72) again put a dent in growth for the region as real economy for the border state averaged a 1.7 percent increase. In FY72, real growth for J&K declined to 2.6 percent, followed by 0.7 percent increase in FY73, compared with 8.4 percent rise in FY71.
The only period where growth remained subdued for longer was during the insurgency starting 1989 when growth in the region was depressed for three years.
From a high of 12.4 percent in FY89, growth in the northern state reduced to 3.1 percent in FY90, 6 percent in FY91, before slipping back to 3.1 percent in FY92.
It is only in FY93 that growth recovered to 4.7 percent, averaging 5.2 percent thereafter until the Kargil war.
The union territory of J&K averaged 7.8 percent growth between FY23 and FY25, on par with the national growth rate.
On April 22, the union territory suffered a setback as terrorists killed 26 people in Pahalgam, marking one of the worst attacks in the valley in nearly three decades.
The ensuing tensions brought India and Pakistan to the brink of war, with India targeting nine terror bases in Pakistan and the Islamic Republic retaliating by launching drone strikes against India.
The countries agreed to a ceasefire brokered by the US on May 10.
Tourism, which accounts for nearly a tenth of the state GDP, is likely to be affected with situation yet to return to normal and a fragile ceasefire hanging over the head.
Major violations of the ceasefire were recorded on May 10, with attacks on J&K capital Srinagar.
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