Manish Sabharwal, chairman of human resources firm TeamLease Services grew up in Jammu and Kashmir as a child. Despite its abundant natural resources, Sabharwal says it’s an economic infant. In an email interview, he said the abolition of Articles 370 and 35A could be good for the state, as these had created “huge regulatory and legislative cholesterol in land and labour markets. Edited excerpts:

J&K is known for high emotions and low economy. As an entrepreneur, how do you assess the development of your home state?

J&K is an economic infant. My views about productivity have been greatly influenced by the research of Professor Ricardo Hausmann who believes that economic development is like a game of Scrabble—the more letters you have, the more words you can make and the more longer words you can make. And the government provides the vowels. J&K does not have enough private sector letters and politics hasn’t produced enough vowels because it is insufficiently urbanized, financialized, formalized and industrialized.

This has disastrous consequences; the huge chunk of Kashmir’s workforce employed in horticulture and handicrafts gets less than 20% of the final sale price of their goods because of lack of design, distribution and capital. The hospitality industry does not have a robust local people supply chain, has less business model diversity, and lower employment elasticity of growth because of weak access to technology, capital, and marketing. The state not only has a lower credit-to- GDP ratio than Bihar, but its primary banking institution is almost unskilled—it knows how to give money but not how to get it back. Low formalization means no private firm with more than 500 formal employees. There is only one listed company, and private investment last year was less than 1,000 crore. Given how the potential for professional tourism, horticulture, handicrafts, and manufacturing could combine with how smart the people are, it is not unfair to say that the J&K economy is a 10-horsepower engine running on one horsepower.

Do you see more investments in the two UTs?

Economic prosperity depends on land, labour and capital combining in productive ways to create scalable enterprises that employ skilled people. Article 370 and 35A created huge regulatory and legislative cholesterol in land markets and labour markets that created an antibiotic reaction to formal enterprises, institutional capital, and professional workers. Kashmir has not been a meritocracy for many years and who you know was more important than the courage in your heart, the sweat on your brow, or the strength of your back. The political oligopoly that did not see its primary job as job creation will find its position challenged in the new dispensation.

You have spoken about labour-market migration; how do you see the changes to J&K’s status impacting it?

In the short run, nobody can take jobs to people; you need to take people to jobs. Only the economically illiterate view migration as good or bad; no geography in India has all the labour and skills it needs and migration is essential for economic growth and vibrancy. It’s disproportionately sized diaspora of skilled professionals in India and overseas should not be viewed as brain drain but brain circulation; they are J&K’s biggest hope for economic rejuvenation. My sense is the change will make J&K a very attractive place for investments, professionals, and high quality jobs.

Will political unrest, and local anger impact growth?

I am told that we don’t live in an economy but a society but as economist Albert Hirschman reminded us, interests (jobs, skills, enterprises, assets, income, growth, etc.) trump passions.

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