Overview of Haseeb Drabu’s Article: “Trouble in Trade”

Haseeb Drabu is a prominent Kashmiri economist and politician, known for his insights into the economic conditions of Jammu and Kashmir. He has served in various roles, including as the Finance Minister in the Jammu and Kashmir government, where he focused on fiscal reforms and economic development in the region. Drabu often writes articles that analyze the economic situation in Kashmir, discussing the challenges and opportunities within the local market and broader economic policies.

The article “Trouble in Trade,” published on April 9, 2025, highlights significant concerns regarding the economic health of Kashmir, particularly in the context of the recent Eid celebrations, which traditionally signify a peak shopping season. Below is a comprehensive breakdown of the article’s main points, insights, and underlying themes:

Key Themes and Points in the Article

1. Eid as an Economic Indicator:

• Drabu uses Eid as a visual barometer for the Valley’s economy, noting that instead of celebrating, local businesses face “palpable apprehension” and economic strain during this festive period.
• Reports indicate a stunning 95% drop in garment sales during Eid, suggesting a deep-rooted economic crisis affecting local traders.

1. Decline in Trade and Economic Growth:

• The article references data from the Directorate of Economics and Statistics, indicating that the tertiary sector, which makes up 60% of the local economy, has slowed dramatically.
• Growth rates for this sector halved to 5.8% in 2023-24, down from 11% in 2022-23, with specific declines in Hotel & Restaurant income from 38% to 13%.

1. Contradictory Signals: Investment vs. Economic Activity:

• While there are claims of massive investments (Rs. 3,389 crores recorded in 2023-24 and over Rs. 1.69 lakh crores in proposals), Drabu questions why the trade is struggling if such investments truly exist.
• This discrepancy suggests that although investments are pledged, they are not translating into active economic growth or job creation.

1. Composition and Size of the Tertiary Sector:

• Drabu illustrates that the tertiary sector contributes approximately Rs. 1.5 lakh crore to the economy but reveals that 20% of this comes from public administration, primarily supported through government salaries and pensions.
• Significant government expenditure (around Rs. 40,000 crores annually) sustains the income of over 6.5 lakh individuals, showing how dependent many local businesses are on these public funds.

1. Underwhelming Hospitality Sector Performance:

• Despite high tourist traffic, the share of Hotels and Restaurants in the State Domestic Product (SDP) is less than 1%, emphasizing their insufficient impact on Kashmir’s overall economic performance.
• The hospitality sector’s income totals around Rs. 2,700 crore per annum, which is substantially lower compared to hotel chains like Indian Hotels Corporation and OYO Rooms.

1. Issues Faced by Local Traders:

• The article describes a liquidity crisis affecting traders, where declining business volumes have led banks to cut credit limits, forcing them to pay cash upfront for supplies.
• Local traders express frustration with the phrase, “market main paisa nahi hai” (there’s no money in the market), underscoring cash flow problems.

1. Inflation and Cost Pressures:

• Increased inflation and disrupted supply chains have eroded profit margins for many businesses, leading to layoffs and business closures as operating costs rise without corresponding sales increases.

1. Government E-commerce and Impact on Local Businesses:

• The introduction of the Government e-Marketplace (GeM) for procurement has negatively impacted local suppliers, as it streamlines purchasing in a way that may bypass traditional local suppliers who rely on established relationships.
• Drabu cautions that this model, while efficient for the government, disrupts established practices that benefited local economies for years.

1. E-commerce and Retail Evolution:

• The article notes that e-commerce’s rise poses significant challenges to brick-and-mortar stores, with the need for local businesses to adapt to changing consumer behaviors and preferences.

1. Fact-Checking Local Economic Claims:
   • Drabu examines transactional data leading up to Eid, refuting claims of excessive spending. He posits that a substantial part of the reported Rs. 14,000 crores in transactions comprises government salaries and pensions, rather than indicating robust retail consumer behavior.
   • The data suggests that actual consumer spending might be closer to Rs. 3,500 to Rs. 4,000 crore for Eid, averaging about Rs. 5000 per person given the Valley’s population.

Conclusion

Haseeb Drabu’s article serves as a stark exploration of the complexities facing Kashmir’s economy. His analysis offers a multi-dimensional view, highlighting the disconnect between reported economic activities and the stark realities on the ground. He emphasizes the need for policymakers to address these challenges comprehensively, considering both local needs and market dynamics to foster genuine economic growth. The piece is thought-provoking, urging stakeholders to reevaluate methods to revitalize trade and commerce in the region entrenched in economic uncertainty.