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The National Democratic Alliance government has approved a 28,400 crore incentive package to boost industry and generate jobs in the newly created Union territory of Jammu and Kashmir.

The scheme, approved by the cabinet committee on economic affairs at a meeting chaired by Prime Minister Narendra Modi on Wednesday, aims to attract new investments into the region that has been ravaged by terrorist violence for decades resulting in slow industrial growth and lack of employment. The package, announced days after the conclusion of local body elections, also aims to support traditional industries in the region, according to a statement revealing details of the package released on Thursday.

The moves together aim to blunt criticism from Pakistan of human rights violations and suppression of rights of the people of the region by the Indian government.

Tourism is one of the mainstays of the economy, though a substantial portion of the population is also involved in agriculture. One of the aims of the industrial package is to ensure that the youth of the region get jobs and are not drawn towards terrorism and the narrative offered by Pakistan, a person familiar with the development said.

“Since 2019, the administration in Kashmir has been trying to speed up infrastructure development, besides changing the image of the administration to one that responds to the needs of the people," the person mentioned above said.

The scheme aims to ensure “a larger role for Jammu and Kashmir in the Indian economy", the government said on Thursday.

“The main purpose of the scheme is to generate employment, which directly leads to the socio-economic development of the area. …The present scheme is being implemented with the vision that industry and service-led development of Jammu and Kashmir needs to be given a fresh thrust with emphasis on job creation, skill development, and sustainable development by attracting new investment and nurturing the existing ones," it said.

“For the first time, any scheme is taking industrial development to the block level," the government said. Once implemented, the package will bring employment to 450,000 people of the region, officials have estimated.

One of the sweeteners announced to bring business into the region is an incentive of 30% of the investments made in plant and machinery or other durable assets such as buildings set up by service providers in certain zones, subject to a ceiling of 5 crore. In the case of certain other zones, the incentive offered could go up to 50% of the capital investment made, subject to a ceiling of 7.5 crore.

Capital interest subvention is at the annual rate of 6% for a maximum seven years on loan amounts up to 500 crore for investment in plant and machinery (in manufacturing) or construction of building and all other durable physical assets in the service sector.

Businesses are also being offered a goods and services tax-linked incentive. Three times the value of actual investment in plant and machinery or other durable physical assets will be offered in instalments for 10 years. The aim is to compensate for the disadvantages the Himalayan border region faces.

Existing industries in Jammu and Kashmir have been provided working capital support at the rate of 5% for 5 years.

The modalities of the scheme, which will be in place till 2037, are yet to be announced.

Jammu and Kashmir was made an Union territory, a region administered directly by New Delhi, in 2019, after Parliament revoked the special status granted to Kashmir.

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