China is emerging as an aggressive power in South Asia. This is not a secret at all. The way  it has established itself in Pakistan  administered Kashmir and Gilgit – Baltistan  , erstwhile Northern Areas,  sums up new  challenges, both for the Indian security  and  economy. The challenge for India  is to compete with  China in improving security and economy  in Jammu and Kashmir, which, if measured by any standards, is an  island in the matters of economy and economic opportunities.

While there is much talk of strengthening the security system in response to the infrastructural build up and  more footprints of  Chinese construction workers and PLA   on the other side of the Line of Control, there hardly is any reference to boost the economy of this part of Jammu and Kashmir. At every turn, the satraps of the regional political groups, be they men and women from National Conference or Peoples Democratic Party, or, for that matter from those representing the national parties, particularly Congress and  Bhartiya Janta Party,  there is a relentless tendency  to  bring in politics  in every aspect of the life. There is more of politics in everything than  anything else, and there is absolutely no doubt that the Centre, too, has been playing politics all these  years. The separatists, who claim to be championing the cause of the people of Kashmir, have  an innate  tendency to subvert the prospects of the economic development, the result is that the Centre and the local establishment has allowed their words and actions as an excuse  for inaction.
The point of  China and its ever expanding military and economic presence in Pakistan administered Kashmir  has been brought in to draw comparisons  that how  this part is suffering economically. This  is true right from Kathua to Leh, Kishtwar to Kupwara, Kargil.  Chinese military  threat can be met by the Indian army, it has the capability to do so. It had re-written a new script in the mountain warfare during Kargil conflict and  the  Indian army  may not be having adequate roads, aircraft and tanks, but its spirit to fight back the adversary  on the borders – 2011 is not 1962- is too, well recognised by the world. That explains , why there are so many joint exercises   of the Indian army with many other armies of the world, apart from the leading military powers, like the United States, United  Kingdom.
India has the potential to  consolidate and expand the economy of Jammu and Kashmir, where the people and  entrepreneurs  are looking for opportunity. If Centre takes politics out of its  intentions to  develop the economy of the state, it can generate a lot of goodwill. This economic development should be all around and for all seasons  with  consistency.  So far, what has been seen is that the economic packages are linked to some agitation, more as a fire fighting measure, rather than as a result of long term planning or involvement with the people of the state.  All the regions of the state should be treated equal,  but unfortunately,  what has emerged so far, is that Centre  believes in some sort of charity  to a particular area at a particular point of time. Therefore, it is easy to  conclude when the Delhi  exhibits its reservations in developing the  economy of the state, the  multi nationals and the foreigners  also develop cold feet. It is sometimes some surprising that with the people  at the helm of affairs, icons of liberalism and reforms and deregulation, have other standards for  this state.
Instead of using economy as a  fire fighting measure, the  GoI  must  strengthen the  economy of Jammu and Kashmir – it is true the problem here is not purely  that of economics but no politics is  without economics -  to   make it a  fighting force against  the economic development in the neighbhourhood.  Sure, Delhi must be having friends, to  invest in economy and reap benefits  for themselves, the people of the state will  automatically enjoy benefits. But is Delhi willing to take the call- so far the story is having more halts and stumbling blocks than a  real intent to   reverse the trends of treating  Jammu and Kashmir as an  island.  For a while, there is a  need to look at the things  through  the economic prism, and India has its own example to follow- Americans are fearing India not because it is a military power, only because it is making its economic footprints more visible, globally.

http://www.greaterkashmir.com/news/2011/Nov/15/the-politics-of-economics-28.asp