“Economic change in all periods depends, more than most economist’s think, on what people believe…” Joel Mokyr

J&K stands at a curious juncture. Since 2019, the Union Territory has received unprecedented infrastructure investment over ₹32,000 crore committed across highways, railways, power projects, and urban infrastructure. Investment applications approximately totaling 1.69 lakh crore sit in government pipelines promising lakhs of jobs. J&K appears to be entering an economic renaissance.

Yet on the ground, a different reality persists. Unemployment among youth stands at 18%, one of India’s highest. The credit-deposit ratio languishes at 62.01%, far below the national average, indicating banks remain reluctant to finance local enterprise. The jobs created have been largely from low-value micro-enterprises. Youth continue fleeing to metros for opportunity, and government positions attract nearly 100,000 applicants for 1,200 positions. A desperation revealing structural economic gaps that highways and tunnels cannot bridge.

This paradox reveals a fundamental economic truth that both policymakers and investors often overlook. Infrastructure and capital investment are necessary prerequisites for modern economic growth, but they are decidedly insufficient. Moreover sustained, inclusive development, as demonstrated by Joel Mokyr the American Israeli Nobel Prize winner for economics in 2025 through his analysis explains sustained technological progress and growth emerged only in specific historical contexts where knowledge ecosystems complemented physical investments. J&K’s experience illuminates why and more importantly, what must accompany infrastructure to translate it into genuine prosperity.

The relationship between infrastructure and economic growth is neither direct nor proportional. Empirical research confirms that while infrastructure investment yields positive economic returns, the magnitude varies dramatically by context. A 10% increase in public infrastructure investment yields roughly 1.2% long-term national output growth, meaningful but modest. More critically, the returns diminish rapidly when infrastructure arrives without complementary institutional, human capital, and knowledge investments.

Consider the fundamental mechanics. A new highway reduces transportation costs and benefits commerce. A railway tunnel cuts travel time, attracts tourism, and enables market access. These are real gains. But they solve only one problem, the friction of geography and distance. They do not address the deeper question:

What economic activities will flow through this newly accessible infrastructure?

In J&K’s case, infrastructure improvements have reduced friction but have not generated corresponding economic transformation. The region’s services sector dominates GSDP while employing only 31.3% of workers. This composition reveals the issue of high-productivity sectors like services and tourism generating output without proportional job creation. Meanwhile,........

© Greater Kashmir