R. Suryamurthy
A devastating terror strike in Pahalgam has sent shockwaves across the nation and is feared to have dealt a significant blow to Jammu & Kashmir’s crucial tourism industry. The attack, which claimed the lives of at least 26 people, predominantly tourists, comes at a time when the sector was experiencing a promising resurgence and contributing significantly to the Union Territory’s economy.
The immediate aftermath of the April 22 attack has seen a wave of cancellations from tourists who had planned summer trips to the Kashmir Valley. Experts warn that this brutal incident, one of the deadliest against civilians in recent memory, could also deter businesses from pursuing investment plans, potentially impacting the Gross State Domestic Product (GSDP), which had recently outperformed the national average.
Tourism forms a vital 7-8 percent of J&K’s GSDP. The Economic Survey 2024-25 highlighted a robust real GSDP growth of 7.06 percent in FY25 (advance estimates), mirroring the previous year’s 7.08 percent. This growth followed a sharp 9.31 percent increase in 2022-23, indicating a positive economic trajectory after the contractions experienced in 2019-20 and 2020-21 due to the reorganisation of the former state and the COVID-19 pandemic.
Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings Ltd, described the attack as a “momentous moment, a tipping point” following the abrogation of Article 370. He stated that the incident has not only sounded a “death knell to tourism in Kashmir” but has also severely damaged the overall safety and security environment and investor confidence. “It thus severely impaired the process and pattern of economic development built assiduously over the last few years,” Dr. Sharma added.
His analysis highlighted the stark contrast between the pre-attack economic indicators and the likely fallout. J&K’s GSDP was projected to grow by 7.06% in FY25, outpacing India’s GDP growth. The region had witnessed a compound annual growth rate (CAGR) of 4.89% between 2019 and 2025, with per capita income rising to ₹1,54,703 in FY25, a 10.6% year-on-year increase. Simultaneously, terror incidents had significantly declined from 228 in 2018 to 46 in 2023. The Sopore mandi’s annual turnover had reached ₹7,000 crore in 2024, supporting livelihoods across several districts.
However, the anticipated collapse in tourist arrivals, which had surged from 34 lakh in 2020 to a record 2.36 crore in 2024, including 65,000 foreign tourists, presents a grim outlook. Dr. Sharma warned that the shattering of the belief that terrorism was a thing of the past would severely impact income, output, and employment across various sectors, including tourism, retail, handicrafts, and more. He emphasised that the attack is “symptomatic of a deeper malaise – the malaise of a constant terrorist threat in the State, and needs to be tackled on a war footing.”
The current UT of J&K, formed in October 2019, has shown promising economic recovery since 2022-23, with an average growth of 7.81% in the past three financial years, slightly above the national average of 7.77%. Chief Minister Omar Abdullah had projected a GSDP growth of around 9.5 percent for 2025-26, driven by strategic policies and infrastructure development.
The Economic Survey indicates that J&K contributes about 0.8 percent to India’s GDP. Experts now believe this figure may see a downturn following the recent terror attack.
Despite the setbacks in 2019-20 and 2020-21, J&K had achieved a CAGR of 4.89 percent in its real GSDP between 2019-20 and 2024-25, an improvement from the 4.81 percent growth between 2011-12 and 2019-20. The Per Capita Income (PCI) also saw significant growth, increasing by approximately 148 percent between 2014-15 and 2024-25, reaching an estimated ₹1.55 lakh for 2024-25. Notably, J&K’s PCI growth of 10.6 percent in 2024-25 outpaced the national growth of 8.7 percent.
The tertiary sector, with tourism as a key component, accounts for a major 61.70 percent share in J&K’s gross state value added (GSVA) and 31.31 percent in employment. The Economic Survey had highlighted the substantial potential for tourism development, leveraging the region’s natural beauty and cultural heritage to create jobs and spur economic growth.
The terror attack has occurred at the peak of the tourist season (April to October), leading to reports of up to 90% cancellations in some segments, particularly from states like West Bengal, which constitutes a significant portion of annual tourist inflow. The vast tourism ecosystem in Kashmir, encompassing houseboats, hotels, taxi operators, guides, and handicraft sellers, now faces severe uncertainty.
The fallout is expected to extend beyond tourism, potentially impacting GSDP projections, halting infrastructure projects, and deterring investors. Ancillary sectors like transport, banking, retail, and handicrafts are already feeling the strain, with concerns about loan defaults and a potential rise in unemployment. The start-up ecosystem, which had seen significant growth, could also stagnate.
The deliberate targeting of tourists in the Pahalgam attack marks a dangerous shift and undermines the narrative of normalcy that had been carefully cultivated. The incident poses a significant challenge to the region’s economic progress and requires immediate and robust measures to restore confidence and security.