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G. Srinivasan

New Delhi, Oct. 7 In an irony of sorts, the presentation of the report of the Group on National Manufacturing Competitiveness Council (NMCC) plumping for an average manufacturing sector growth of 12-14 per cent a year to the Prime Minister was succeeded by the “painful decision” of Tata Motors to pull out its prestigious Nano car project from Singur in West Bengal. This was after agonisingly protracted spell of trouble and tension to the investor and to the State Government, triggered by a raging controversy over the land clearance to the whole project.

Manufacturing activity is vital to ensure industrial growth in a relatively industrially impoverished eastern State such as West Bengal or Orissa, where the South Korean steel major Posco is setting up a steel plant. But both these projects in this region were hamstrung by protestors for a host of reasons that directly impinge upon their livelihood security. It is easier for big companies to get land cleared by the State Governments through the latter’s long arm of the law on a pittance as compensation but it is a fallacy to leave the affected people without ensuring their future livelihood or income to subsist.

In this context, the report of the NMCC under the Chairmanship of Dr V. Krishnamurthy has aptly asked the Government to put in place “a participatory process of the stakeholders in decision-making, well-designed incentives and disincentives and an accountability structure including well-designed regulatory structures”. The Group suggested this in support of a manufacturing/industrial policy, though not in any specific reference to recent happenings in Orissa or West Bengal.

Whether it is the Central Government going in for special economic zones (SEZs) to alter the industrial and infrastructure topography of the country through huge acquisition of cultivable/wasteland for big projects or State Governments, keen to industrialise their States even by uprooting farmers or tribals as is the case of Bastar district in Chhattisgarh in Central India for putting up steel plants or mining iron ores from the area, the issue is one of safeguarding the fundamental livelihood concerns of local people who have been engaged in one or another activity in that locale.

It is unfortunate that the Governments at both the Centre and in the States have not addressed this point effectively to stave off potential trouble. The legislation for rehabilitation and resettlement of victims of big projects is yet to be cleared even as contentious developments do occur periodically to highlight the glaring gap between policy and happenings on the ground.

The Group avers that the average rate of manufacturing has not picked up to its potential in the country. During 1991-92 to 2007-08, the manufacturing sector grew only at about 6.7 per cent, though in the current decade beginning 2000, the sector witnessed a 7.9 per cent growth a year on an average. But this level is not still adequate for the long-term growth of the economy and for poverty reduction.

That the authorities have lost the zest to be legitimately interventionist or supportive of manufacturing activity is borne out by the Group when it laconically stated that “it appeared as though government policy pendulum may have swung from one extreme of excessive controls to the other of abandonment or minimising the role of the State in so far as the manufacturing sector is concerned”.

This is also compounded by lack of space today “for undertaking many policies such as selective import protection, local content requirements, export subsidies, directed credit and differential interest rates, performance and entry rules for foreign investors and copying of foreign products”. The policy space is thus “unavailable substantially and also unacceptable to the WTO and major trading partners”, it said adding that “India missed the bus not merely in terms of implementing the reforms in time, but also in terms of loss of policy space”.

Even as countries pride on resource nationalism by not letting indiscriminate export of mineral wealth or natural resources, the Group’s suggestion to aggressively direct the outward investments into purchase of raw material assets required for manufacturing such as coking coal, chrome ore, iron ore when they are not available in adequate quantity domestically may not gel well with our trading partners.

When Posco sought to ship some quantity of ores from its India project in Orissa once the project gets operational, a lot of hue and cry was made by political parties that the South Korean firm would squander the country’s precious iron ore reserves. It would be a parody of our stance when Indian companies are now told to invest in raw material assets abroad when every country is suffering from resource nationalism rather legitimately, policy analysts say.

The way out of this is to fashion indigenous response taking on board the concerns of all stakeholders so that development does not degenerate into discontent or create fresh flashpoints of prospective disruption to the economy.

More Stories on : Industrial Policy | Tata Motors Ltd

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