Will Kashmir Pay the Price of Pak-Sponsored Terrorism in J&K?

The Pahalgam massacre of April 22, 2025 will have far-reaching impact on the geopolitical situation in the sub-continent as well as on the prospects of tourism in the Valley. However, broader concerns are being raised by financial experts on what it could mean for the overall investor confidence. It is anybody’s guess that a deadly terrorist attack, attributed to The Resistance Force (TRF), an offshoot group of the Lashkar-e-Toiba, will affect investor sentiments and push the market to destabilize. However, market is buzzing with voices that are preaching caution to investors while asking them to keep a watch on geopolitical developments in the neighbourhood. But first, let’s do some number crunching in wake of that fateful incident.

For starters, on Monday, 6 days after the attack, the Indian stock market, opening after the weekend, surged higher with the Sensex jumping over 1,000 points. Nifty followed close behind with a 1.3% rally. The bullish moment of Indian stock market seems to indicate that the investors have brushed aside the escalation of armed activity between India and Pakistan. The hopeful Monday, though, came after almost a week. In the immediate aftermath of the terrorist killings, things went downhill immediately following the path set by the similar attacks by Pak-sponsored terrorists in Kashmir.

When the Indian Air Force struck deep into the enemy territory in Balakote, to avenge the Pulwama attack, Sensex, the following day, had fallen by 239 points while Nifty fell down by 44 points. But the next day, Sensex bounced back with a 165-point gain. The Pulwama attack itself had also triggered a slightly negative reaction. But eventually, the markets closed flat. Similarly, The Uri attack and the consequent surgical strikes in 2016 saw the market dropping more sharply. But, looking at the long-term historical data, of the past two decades especially, proves that stock markets often recuperate eventually.

However, looking at the situation from the local perspective could throw up some disturbances. For instance, the state GDP for FY25 was expected to increase by 7.06% before the terrorists struck. This was in keeping with the rising sentiment of positivity in the Kashmir Valley, owing to the substantial decrease in terror-related incidents between 2018-2023. It was also something almost everyone, from the government (in Centre and in State), the public, the media, the rest of the country wanted for Kashmir. Livelihoods were being restored across the Kashmir region, thanks to the record influx of tourists to the Valley. In fact, in 2024, a record 2.36 crore tourists visited Kashmir, which included 65,000 foreigners too. This vast tourism ecosystem sustains houseboat owners, hotel owners, taxi operators, tour guides, pony riders, handicraftsmen, and numerous other subsidiary sections of workers. All that was hit by the April 22 terror strike.

The catastrophic effect of loss of tourism opportunities is going to hit the economy of Kashmir more than it is going to impact anyone or anywhere else. If there is someone who realized it as soon as the attack took place, it was either the Central government or the Chief Minister Omar Abdullah. The Centre rushed Home Minister Amit Shah to be among the first responders to the situation in Kashmir and CM Abdullah was on top of things, both in the media and behind the closed-door meetings that were taking place every hour.

However, the Kashmir situation speaks of a deeper malaise – which has an all-pervasive presence in the Kashmiri society. It is the constant threat of terror attacks and a war-like environment, which just doesn’t let the mind rest even for a minute. The lack of infrastructure development is also a fallout of this constantly scary setting.

So, the governments’ roles are cut-out for them. They need to make effective use of everything available to them. Whether it is subduing Pakistan through all measures, whether military or diplomatic, or launching a crackdown on the terror network in the Valley with a renewed vigor.

The malaise of continuing terrorism in the Valley would, otherwise, cost it its most valuable asset – the tourist!

(The writer is a seasoned Banker and Mortgage Specialist working for India’s largest loan distributor company and occasional political commentator.)