Within minutes of blood-soaked mayhem, 26 innocent lives were lost in Pahalgam’s Baisaran on April 22. The massacre has also fractured the sense of security in Jammu and Kashmir, tarnished the region’s reputation, and unsettled the underlying economic equations. Beyond becoming a focal point in New Delhi’s national security calculus, it has triggered a socio-economic challenge of a different kind in J&K.
Story continues below this ad
In the immediate aftermath, mainstream narratives quickly coalesced around the disruption to tourism, as if the tragedy’s gravest consequence was the blow dealt to the Valley’s travel season. While tourism undeniably acts as a potent amplifier for economic activity, its portrayal as the singular lifeline of J&K’s economy deserves closer scrutiny.
Unlike core sectors such as agriculture, manufacturing, or construction, the role of tourism in an economy is more nuanced. In most economic assessments, tourism is not treated as a standalone sector while calculating the GDP. Instead, its impact is spread across several areas — like hospitality, transport, and retail — making it difficult to measure precisely. This scattered nature of tourism’s contribution often leads to an overestimation of its overall weight in the economy.
In J&K, as in many other regions, the hotel industry is the most direct and significant beneficiary of tourism. According to the latest J&K Economic Survey (2024–25), the estimated annual Gross State Value Added (GSVA) from the hotel industry stands at around Rs 2,700 crore. This spending not only creates jobs within hotels but also supports indirect employment across the value chain. For instance, hotels source food from local farmers, who in turn spend earnings on agricultural inputs or household goods.
Story continues below this ad
Tourists also boost demand for local handicrafts, souvenirs, and services like taxis, shikaras, and pony rides — fuelling a parallel gig economy. In economic parlance, this ripple effect is known as the multiplier effect, which measures how many times a rupee spent by a tourist circulates through the local economy. While the value of the multiplier factor varies across economies, a recent study by Hrridaysh P Deshpande (2021) estimates India’s tourism multiplier at 3.11. Applying this to J&K, the Rs 2,700 crore spent annually by tourists potentially generates a total economic contribution of about Rs 8,400 crore. Against the backdrop of J&K’s estimated nominal GSDP (Gross State Domestic Product) of Rs 2.65 lakh crore, this translates to a tourism sector contribution of just 3.17 per cent — a modest share that challenges the popular perception of tourism as the backbone of the region’s economy.
While tourism’s macroeconomic share may appear modest, its microeconomic impact is profound. Barring hoteliers, a significant portion of the population, who rely on tourism for their livelihoods, belong to the lower strata of the economic segment. Gig economy elements like taxi drivers, shikara operators, pony handlers, hotel staff, and street vendors form the underbelly of the region’s tourism economy. These individuals often operate without formal employment contracts, making them particularly vulnerable to fluctuations in tourist inflow. An incident like the Pahalgam attack that leads to immediate cancellations directly affects their daily earnings and financial stability.
While tourism often captures attention with its immediacy and visibility, the deeper currents of Jammu and Kashmir’s economy run through sectors that are less glamorous but far more foundational. Agriculture — particularly horticulture — is a key pillar, contributing over Rs 50,000 crore, or roughly 20 per cent of the Union Territory’s annual GSDP. Horticulture alone supports the livelihoods of more than seven lakh families. Complementing this is J&K’s rich tradition of handicrafts and cottage industries. Artisans skilled in Pashmina weaving, carpet making, papier-mâché, and wood carving form the backbone of this sector. According to official estimates, handicrafts provide direct and indirect employment to over four lakh individuals, many of whom belong to economically weaker sections.
Another critical anchor of the region’s economy is the public sector. With the private sector still nascent, government expenditure serves as the central axis around which consumption and investment revolve. With approximately 4.5 lakh government employees and 2.3 lakh pensioners, the public sector pumps around Rs 40,000 crore annually into the local economy through salaries and pensions. This steady income stream fuels household spending, which remains one of the strongest drivers of consumption in the region.
Additionally, the construction sector — augmented by public capital expenditure of around Rs 12,000 crore — contributes nearly eight per cent to the GSDP and generates employment for over seven lakh people annually. The remaining output is distributed across the trading sector (10 per cent), manufacturing (5.7 per cent), and other tertiary activities, reflecting the broad-based, yet often underappreciated, economic diversity of Jammu and Kashmir.
A significant portion of the tourism gig workforce comprises migratory workers who, in the face of disruptions like the Pahalgam attack, often return to the low-wage work in agriculture and handicrafts. This fragility and the cyclical nature of livelihoods in the region has been a constant feature for the last three decades.
While tourism’s direct contribution to J&K’s GSDP may be modest, its symbolic and psychological significance is far greater. In macroeconomic terms, GDP is an arithmetic sum of four key engines: Consumption, private investment, government spending, and net exports. In Jammu and Kashmir’s context, tourism indirectly supports two of these components — consumption and private investment. Incidents like the Pahalgam attack do not merely disrupt travel itineraries; they ripple through the economy by dampening investor sentiment and curbing household spending, particularly in tourism-dependent sectors.
The recent uptick in external investor interest — a positive sign for a region with an underdeveloped private sector — risks a reversal in the face of this renewed instability. The impact on the indirect tax collections, which support over 14 per cent of the revenue receipts of the UT’s budget, can also lead to disruptions in the fiscal calculus, thereby impacting government spending.
The Pahalgam tragedy is a grim reminder that enduring economic prosperity cannot exist without lasting peace and stability. While tourism may be the most visible casualty of violence, its effects ripple far beyond, disrupting entire sectors, livelihoods, and investor confidence.
Jammu and Kashmir’s diverse economy — rooted in agriculture, handicrafts, construction, and public spending — holds immense potential, but only if protected from the persistent shocks of insecurity and violence. The road ahead requires more than just improved tourism strategies or economic incentives; it demands a steadfast commitment to peace and security, inclusive governance, and political stability. Without these foundations, no development plan can endure for long.
The writer is a research scholar in the field of Economics at the Department of Humanities, Social Sciences and Management, National Institute of Technology, Srinagar
