Srinagar, July 31: Due to unrest in Jammu and Kashmir over the last year, the economic activity and credit growth have severely dented across nine districts in the Valley. These districts were affected the most because of the unrest, showed the data available with Reserve Bank of India (RBI). According to the RBI data, along with these districts, the credit growth fell below 5 per cent even in Srinagar for the quarter ended March 2017. The credit growth in Srinagar in the quarter ended March 2016 was 8.37 percent and it fell to 0.34 per cent in the quarter ended March 2017. This was lowest among the 22 district in the state. Credit growth is an important determinant of economic activity within an area.

In Shopian, the credit growth fell from 10.25 percent to 1.15 per cent and in Anantnag from a high of 20.6 percent to 7.35 per cent, in the same period. Same is the case with districts Samba, Baramulla, Bandipora, Kulgam, Ganderbal, Badgam and Pulwama. The high growth shows that individuals have a higher propensity to borrow and spend. This high growth reflects the tendency of businesses to borrow and invest. While the gross bank credit growth in the economy has been on a decline and hit 3.5 per cent in May 2017, the personal loan segment, which reflects consumption-led credit demand, grew at 13.7 per cent.

One of the experts in Srinagar told that the unrest since the middle of 2016 left a bigger impact as it followed the 2014 floods that also made a severe dent in the state’s economy, reports Indian Express. “Almost everything has come to a standstill over the last one year. Historically, tourism-oriented sectors, such as hotels, transportation, handicraft and horticulture, have been the major sectors driving credit growth. But with decline in tourism over the last one year, all these sectors have suffered,” said the expert.

Even bankers said that biggest decline in economic activity due to the unrest is seen in Srinagar, Shopian, Anantnag, Pulwama, and Kulgam. The data by RBI mentions that while other districts got impacted, their growth was comparatively better and stood between 6 per cent and 20 per cent. However, for a state as a whole, the dent in the credit growth from 14.1 per cent in the quarter ended March 2016 is now reduced to 5.05 per cent in March 2017. A senior banker in J&K’s leading bank said that while credit off-take has fallen on account of weak sentiment and lack of confidence among customers and banks, the region has also witnessed a rise in bank NPAs over the last three years as the revenue flow for many borrowers dried up.  (ALSO READ: Stone-pelting Curbed by 50% in Kashmir Valley, Claims CRPF)

“The period between 2010 and 2014 was peaceful and witnessed a lot of investment activity, especially in the hotel and transportation industry, as tourism grew. However, with a sharp decline in business activity over the last three years (since the 2014 floods), a lot of loans given by banks to the hotel and travel industry turned into NPAs. If on one hand, businessmen saw a sharp decline in business and revenue, the other impact has been the rise in unemployment,” the banker said. The banker said that unless there are 5-6 months of peace, consumer sentiment and banks’ ‘comfort to lend’ won’t improve.

The banker further added, “During periods of unrest and turmoil, there is a shift in priorities and we are witnessing deferment in consumption-related decisions, too. If someone was planning to buy a car, he has postponed it and is instead hoarding foodgrain for 8-10 months. I think a revival in credit off-take will only be visible if peace is restored for a period of 5-6 months.” He also said that that banks are practicing significant caution now while lending.