New Delhi, Feb 6 Over the last decade, Pakistan-occupied Kashmir (PoK) has experienced persistent economic stagnation and a major contributor to economic deceleration, which is getting worse, is the region’s growing fiscal vulnerability, a report has said.
According to the report in European Times, the deepening economic stagnation in PoK is marked by “slowing growth, rising unemployment, rising poverty, and shrinking development spending”.
In 2020, public development spending accounted for 32 to 35 per cent of regional budgets.
While high inflation eroded incomes, while weak industrialisation, declining infrastructure investment, and credit constraints constrained private-sector growth, greater dependence on remittances and federal transfers reflects fragile fiscal capacity.
Moreover, governance gaps, climate stress, and weaknesses in human capital have reinforced a cycle of vulnerability, restricting sustainable and inclusive development, the report stressed.
“Between 2020 and 2024-25, key indicators show declining productivity, rising unemployment, weakening public investment, and increasing dependence on external support. These trends have reshaped the region’s economic, infrastructural, and social landscape,” the report mentioned.
While average income stood at approximately $1,400 to $1,500 in 2020, it declined slightly to about $1,300 to $1,400 by 2024-25 due to high inflation and currency depreciation.
“This erosion of purchasing power has reduced household consumption and weakened local demand, further suppressing economic activity,” the report revealed.
Meanwhile, the absence of industrial clusters, poor logistics, and weak access to finance have prevented industrial expansion.
“The region has failed to generate high-productivity employment, reinforcing dependence on agriculture, government jobs, and remittances,” the report further stated.
In 2020, unemployment was estimated at around 6 to 7 per cent. By 2024-25, it had increased to nearly 9-11 per cent, with youth and educated workers most affected.
Agriculture’s productivity has also declined to nearly 92–95 by 2024/25. Climate variability, floods, landslides, soil erosion, and limited irrigation facilities have reduced crop yields. Road connectivity remains uneven, particularly in remote mountainous districts.
Small and medium enterprises face difficulties accessing formal finance, forcing them to rely on informal lenders at high interest rates, said the report.
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