Business thrives amid Kashmir war
After 17 years of violent separatist conflict, Indian Kashmir has become a high-tech business success story.
from the April 12, 2007 edition
Page 2 of 3
That daring is now earning the bank rich dividends. HDFC is today one of the many private banks in Kashmir. It has more than 8,000 accounts and has fetched business worth nearly 2.5 trillion Indian rupees ($58.5 million).
This year, the bank plans to start five more branches in the state, two of which will be in the notoriously violent Baramullah and Pulwama districts. The move, although potentially dangerous, demonstrates instinctive business acumen. HDFC hopes to cash in on a wealthy orchard-owning clientele that has long felt the vacuum of a full-service bank.
Thanks to land reforms nearly five years ago, a majority of Kashmiris own land, a fact that has contributed to the population's wealth.
Ironically, Kashmir's raging conflict has also enriched the region. Over the past 17 years, the local government has benefited from special treatment from the central Indian government, allowing it to manage a large conflict-oriented economy. Since the insurgency first began in 1990, the central government has financed 100 percent of Kashmir's budget. That's an exception in India: Generally, the central government funds only 20 percent of the cost of federal state development, requiring the states to raise the rest.
Also, even though tourism, Kashmir's main revenue-earner, declined during years of militancy, the huge expansion of India's armed presence in the region has since made up for the loss, say local businessmen. Over 600,000 Indian military personnel, all potential consumers for local products, are currently based in Kashmir.
But now that the violence is ebbing, Kashmir's fortunes may shift, says Daniel Markey, South Asia fellow at the Council on Foreign Relations in Washington.
"Now we may be seeing the beginnings of a 'postconflict' economy" in Kashmir, he says. "Reducing violence means that the cash of the conflict economy can now be more safely invested in the state to build lasting businesses."
Setting an ambitious target of 8 percent growth in the next few years, Tariq Hameed Karra, Kashmir's minister for finance and planning, says the region's economy is at a "takeoff stage."
To lure investors, the central Indian government will, until 2012, offer new industries a total excise-tax exemption for their first 10 years of operation.
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