Recasting India (6 page)

Back at the farm in Lassipura, Khurram Mir says the whole idea of new entrepreneurship is about people regaining respect and control of their own lives in a state that is estimated to have more than 330,000 military and paramilitary troops.

“There has been a respect deficit in the state. For instance, no one has ever appreciated the time of the farmer. The power was always in the hands of the people who were buying from the farmer. With this small board, right at the point of entry, we are saying ‘you are important' to the farmer,” says Mir, who started Harshna Naturals in 2008 after returning from America with a management degree from Purdue University. His father is one of the biggest fruit and vegetable traders in the region. “Basically I came back and told him, ‘Dad, I am starting a project that will put you out of business,'” smiles Mir. “And he said, ‘Well, we can always find other business opportunities but if the farmers continue to suffer, the state has no future. So best of luck to you.' That was all I needed.”

The first Rs 4 crores of investment built 5,000 metric tons (5,512 short tons) of capacity cold storage and a fruit sorting facility. Mir is now aiming to touch 40,000 metric-ton (44,092 short-ton) capacity at the cost of more than Rs 250 crore by 2014. He says there is no dearth of investors since Kashmir is one of the main production hubs for fruits in India with, for instance, 57 percent of the apple production of the country (1.8 million metric tons [1.98 million short tons] in 2010–2011).

But conservative estimates suggest that between 10 percent and 30 percent (in some seasons as high as 45 percent) of the Kashmiri apple crop gets wasted due to the lack of storage and processing facilities in the state, and the farmer is poorer for it. “The farmer has always had to sell when the trader tells him to—this has always been the way in Kashmir. But with the right storage facilities, the power shifts back to the farmer. He can choose when he wants to sell.”

To show that his efforts are bearing fruit, Mir forks out a set of charts that display how farmers are taking to Harshna. There are three kinds of business that Harshna is involved in: the company buys produce from farmers to stock and then sell at a later date; multinationals and big corporate houses like Reliance Fresh and Bharti Walmart use its cold storage facilities when they buy from local farmers; and local farmers themselves use the facilities.

The vision statement of Harshna Naturals says that the aim of the company is to be used almost wholly by local farmers. They are certainly moving in that direction. In 2008–2009, big companies used more than 60 percent of Harshna's facilities, while 30 percent was used in-house and only around 10 percent by the local farmers.

In 2012–2013, however, the company did not use any of its facilities to buy and store for itself, exiting that aspect of the business entirely. Less than 30 percent of the space was used by big companies and more than 70 percent by local farmers.

This has also meant that Mir's other big poster—warning that no one should be seen eating an apple within the compound—is taken very seriously these days. “If somebody is seen eating an apple, and there are farmers around, they will immediately wonder, ‘Whose apple is that?' And they raise the alarm. We are working to create an environment of full transparency, which has been difficult here.” Kashmir was ranked among the four most corrupt states in India in a 2008 Transparency International study; Mir says modern enterprise and systems are bringing sociological change.

“For instance, Kashmiris have always been called lazy, but in 2010, when the stone pelting was going on through the day, what we did was we just did all the work at night!” laughs Mir. “We told our employees that instead of working during the day, just work at night and that way our trucks could pass undisturbed.”
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In a state that has lost five years of working days to strikes in the last 23 years, such innovation is critical. “Today in Kashmir, if there is a will, there is a highway of enterprise that is open,” says Mir, who tells his employees that they should never aim to work at Harshna for more than two years. “My standard introduction is—after two years, if you do not leave me and start your own business, then I have failed.”

There are many signs that this time around, the peace wave might be enterprise driven. On the back of record tourist arrivals (1.1 million in 2011–2012), Congress Party general secretary Rahul Gandhi, a personal friend of state chief minister Omar Abdullah, made a gesture in October 2012 that was as much political as it was economic. He invited some of India's biggest tycoons, including Ratan Tata, Kumaramangalam Birla, Deepak Parekh and Rahul Bajaj, to visit the valley with him, promising to bring India's biggest business houses to the beleaguered region. Part of the idea was old—integrating the valley into the economic growth story of India—but as a top-ranking bureaucrat in the Kashmir government told me, the method was new.

“We have tried everything from interlocutors to prime ministerial missions. Now the thought is the delivery of hope cannot be just top-down. It has to be bottom-up too,” said the bureaucrat. “Sometimes economics can tell people that there is something to look forward to better than politics.”

Khurram Mir was at a closed-door meeting with the business leaders. “Mr. Birla said for enterprise to grow, there has to be a degree of stability. But I liked what Mr. Tata said—that the true spirit of enterprise is to circumvent the situation and continue the work, and that ultimately brings peace,” he says.

In 2011, Tata's Taj chain of hotels opened their first property in the valley, with an 89-room hotel overlooking the Dal Lake and Asia's largest tulip garden and boasting a 2,500-square-foot presidential suite. One of the earliest big hotel chains in the valley, The Lalit Group, announced in 2012 that their palace hotel in Srinagar had become the chain's highest revenue generating property after years of losses since they took it over. In 2012 Srinagar's first radio taxi service, called Snow Cabs, was launched, and Kashmir University started to offer its first MBA course.

Numbers back Tata's claim. According to the Home Ministry, terrorism-related murders in the valley in 2010–2011 amounted to 2.77 per 100,000 population, lower than the murder rate in Delhi (3.1) and Haryana (4.1). Essentially many more people are being murdered in the seemingly peaceful heart of India than in what is often described as “insurgency infested” Kashmir. So there is greater consensus than ever that Kashmir's military force needs to be drastically reduced, and a sense that that might be work in progress (the Home Ministry is reviewing a strong proposal) has lifted the mood. One of the big achievements of the Omar Abdullah government has been to keep the army largely in its barracks. For instance, compared to 2004–2005, there are far fewer in-your-face boots on the streets and military check points in Srinagar city. And why not? There is hope from the side of the terrorists too: Syed Salahuddin, the dreaded chief of the Pakistan-aided Hizbul Mujahideen, declared in 2012 that he has no more men in Kashmir. (In 2014, new threats emerged in Kashmir from ISIS and Al Qaeda, but the push to reduce army presence remains extremely strong and many argue it is key to reducing support for militancy.)

In a valley jaded by talk of violence and talk of peace in equal measure, enterprise-driven peace is a welcome new development. In these years, there have been regular summers of peace with the usual tourist flood and hype in a place where the first signpost outside the airport says “Welcome to paradise on earth,” taken from the lines written by the thirteenth-century poet Amir Khusrau: “
Agar firdous baroye zameen ast; Hami asto, hami asto, hami ast
” (If there is paradise on earth, it is here, it is here, it is here).

In a state that has one of the highest government employee-to-population ratios, with around 500,000 government workers (states of similar size like Jharkhand or Himachal Pradesh have one-fifth the number of state employees), stability among the guns has always meant a government job. Among the state's 350,000 craftsmen families, whose skills have been developed over the centuries, the trend in the last 20 years has been to abandon those skills to hunt for even the lowest-rung posts as a peon or a guard.

That might now be changing.

This is why after 14 months of hard work and an invitation to attend the L'Artigiano, the annual global arts fair in Milan, 29-year-old Arifa Jan still says she has to lead a dual life. A bit like Batman, she laughs.

Jan works to revive Numdah, the eleventh-century rug-making technique said to have been popularized by the Mughal emperor Akbar. Her father is a helper in the state transport department. Both her parents are illiterate.

“Usually Numdah was made by the lower castes, and that's why I can't even tell my relatives what exactly my business is. I just tell them that I am into handicrafts. I can never discuss what I am actually doing,” says Jan.

Two years ago she was selected for an unemployed youth training program of the JKEDI, which gives seed capital between Rs 3 and 7.5 lakhs upon completion of training. Jan decided to work with Numdah, which was a dying art form in the valley, with terrible quality and inflated prices. She uses only pure merino wool for her rugs, which cost between Rs 3,200 and Rs 8,500 (the cheap rugs made with cotton come apart in weeks). Of the first lot of 300 pieces that she made, 85 percent were sold immediately. She was also invited to participate in the fests organized by Dastkar, the crafts body in Delhi.

“I feel that there are a lot of things that the world does not know about Kashmir. That's what my business is all about. I want to teach the world about Kashmir,” says Jan, who recently got her passport for her first trip outside India (to Milan). Even in India, she has only traveled to Delhi.

To understand what is happening to a state economy where the average annual gross state domestic product has more than doubled—from around $6 billion to more than $13 billion—between 2004 and 2012, listen to Haseeb Drabu, the former chairman of the Jammu and Kashmir (J&K) Bank, who now works as a private consultant in Mumbai.

“There was always a lot of money in the state,” says Drabu. “Kashmir has never had the kind of poverty that for instance Bihar or Bengal had with absolute malnutrition. Whether it's from the central government or from vested interests in militancy (including from Pakistan), money has flowed into the state. But now there is a palpable difference. The son of an orchardist is not content to remain just another orchardist. He wants to bring in modern machinery and take it to the next level. Is this one big magical change? No. But you are definitely seeing the beginning of a change in mindset and sociological makeup. People are not leaving everything to the government. They are taking some things into their own hands.”

Drabu says a lot of the change also happened with the penetration of the availability of finance. During his tenure from 2005 to 2010 as chairman and CEO of J&K Bank, Drabu changed the lending pattern of the bank from 10 percent to people in the valley and the rest to big companies across India to 60 percent local lending. He says it helped the bank build an almost zero non-performing asset book since “it was hundreds of small loans.” It also took the credit deposit ratio (CDR; the ratio between the amount of money a bank holds and the amount it lends) from 20 percent to 62 percent. According to the Reserve Bank of India, a low CDR is usually indicative of tepid entrepreneurial activity. While the CDR has fallen from the heights achieved by Drabu, not least because of the massive slowdown in the Indian economy in the last couple of years, it is still growing year-on-year. According to the latest figures available in March 2013, J&K Bank's CDR rose from 36.14 percent to 39.59 percent between March 2012 and 2013. In the first two quarters of 2014, it showed a surge in CDR to 42.81 percent by March 31, 2014.
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One of the numbers that suggest this is the rise of the state's GDP. As Drabu explains, a compounded annual growth rate (CAGR) of 13.2 percent in recent years cannot be only government dole and illicit money.

Fayaz Bhat, 47, took advantage of this growth when he started iQuasar (earlier Musky Software) in 2004. The company now has a turnover of $2 million and 47 employees. His office is at the software development park at Rangreth on the outskirts of Srinagar. He says he fights every day to change the mindset of the people around him, including that of his own father, who was a gauge reader with the state water board. “Even today my father is not happy that I am doing something on my own. If I tell him that my private sector job pays Rs 50,000 and a government job pays Rs 10,000 a month, he will say take the government job,” says Bhat who is now COO at iQuasar.

But that's not the only impediment to entrepreneurship. Speaking on Skype from Manhattan, Bhat's partner Tahir Qazi, who is CEO, says their company is a great example of how “India grows at night when the government sleeps.” “As Kashmiri entrepreneurs we began with a feeling that we need to make things happen in spite of the problems. For instance, we have never paid one paisa in bribes. Everyone here pays bribes but we just don't. That means we are obstructed at every level by bureaucrats all the time.”

A case in point is this Kafkaesque incident: in late 2012 iQuasar received their latest factory license, good for two years, from the Department of Labour and the office of the Chief Inspector of Factories. The license, a copy of which was shown to me, clearly says that it's valid until December 31, 2011.

Only it was signed on September 19, 2012, and sent to the company.

“Now what do I do with this? You tell me,” says Bhat with a smile. He says he will keep the license and assume it is for the next two years and only apply again for 2015.

Nearby, at the Essar-owned Aegis BPO (business process outsourcing company), Omar Wani, the manager in charge for Kashmir, says he once had a raid by factory inspectors who accused him of not having a manufacturing license.