Anand Neelakantan's Blog - Posts Tagged "kitex"
The Government and the business.
Recently, Kitex, the world’s third largest supplier of infant wear, announced the withdrawal of a 3500 crore expansion plan from Kerala alleging harassment by the state government. As per the director of Kitex, there has been no less than 73 inspections from government officials in a span of one month. The announcement was followed by a high stake drama with nine Indian states vying for investment by Kitex. Telangana government sent a private jet to the officials of Kitex to take them from Kochi to Hyderabad and offered mind boggling incentive. Pleased with the royal treatment of its new suitor, Kitex has announced a thousand crore investment that may lead to four thousand jobs in Telangana in the future.
Despite its stellar achievements in human development indices, Kerala always had a business unfriendly image. Kerala’s social reforms of the past century had resulted in a literate population who were savvy enough to take advantage of the booming oil economy in the Middle East. The huge remittance, sometime more than the entire GSDP of many bigger Indian states, have catapulted Kerala to have the highest standard of living in India . It was spared the fate of Bengal thanks to the foreign remittance by non resident Keralite. But its disrepute as a haven of militant trade unionists resulted in it missing the IT bus that helped the Bangalore and Hyderabad become global cities.
In the recent years, Kerala has been desperate to shake up the negative image. Its trade unions no longer hold the same terror as it used to be a decade ago. Trade unions are controlled by the politicians and is relatively easier to control if the political leaders sense a change of mood in the people’s tolerance level. The state bureaucracy, especially at the lower level, is a different story altogether. Fed by years of anti -capitalist slogans, the petty officials go with a vengeance against any form of enterprise, whether it is a tiny corner store or a multi-national. There is no dearth of archaic rules in India. Any local official can find some violation or another at most enterprises if he wants it. It is this army of lower level bureaucracy than the often blamed militant trade unions that is making Kerala business unfriendly in the recent times. Unimaginative politicians who cannot think of any other protest methods other than Hartals adds to the problem. Add to these, is the issue of higher population density, higher wages, a working class that is aware of its rights, higher environment consciousness and you face an almost impossible hurdle to industrialise Kerala.
Kerala has the highest minimum and actual wage in the country. A labour intensive industry like Textile will always find it cheaper to set up factories in places that has far lesser minimum wages. The nature of modern capital is such that it flees to the places of least cost. It is time for Kerala to think out of box. It is better not to have manufacturing industries that pollute this pristine state when one cannot compete in wages with other parts of the country. It would better to strengthen the tourism and service industry more and rein in the lower level buoerocracy than get into a bidding match for transferring government money into private coffers.
The Chief Ministers of various states are competing with each other by offering mind boggling incentives for businesses. The ostentatious reason is that these manufacturing units give jobs to the locals. Take the case of Kitex which has promised 4000 jobs. Most of it would be in the minimum wage level. Even if it provides another 8000 indirect jobs at less than minimum wages, it is a miserable return on investment on the tax payer’s money. The state governments would be better off using that money for direct transfer benefit for 12000 people instead of offering huge incentives to Kitex.
For the country to prosper, we need to encourage private enterprise, but that shouldn’t be at the cost of providing basic facilities to people. In the last Covid wave, we saw how inadequately prepared is our health infrastructure. Education system is in shambles. We are debating whether sustenance farmers should be given their tiny subsidy or not. There is raging debate on whether higher education should be subsidised. But when it comes to attracting private investment, there is no debate. The consensus now is that the poor rich businessmen should be given all possible subsidies. The private entrepreneur who cannot succeed without government subsidy, free land, electricity and tax benefits should wind up his business and take up a job.
When people and media rank states based on how many private billionaires they wooed, than on how well they perform their basic duties like providing health, education and law and order, we are walking in a perilous path. Big businesses are pitching one state government against another. For fear of the private industry fleeing to choose another rival state, the governments cannot even ensure statutory requirements from the factories. We now have a strange system where public money that should go for basic infrastructure development is siphoned off to ensure the private business is profitable. Some of the most industrialised states in India has the highest poverty level too should be an eye opener. Industrialisation is not an end in itself, giving a decent standard of living for the people is.
Despite its stellar achievements in human development indices, Kerala always had a business unfriendly image. Kerala’s social reforms of the past century had resulted in a literate population who were savvy enough to take advantage of the booming oil economy in the Middle East. The huge remittance, sometime more than the entire GSDP of many bigger Indian states, have catapulted Kerala to have the highest standard of living in India . It was spared the fate of Bengal thanks to the foreign remittance by non resident Keralite. But its disrepute as a haven of militant trade unionists resulted in it missing the IT bus that helped the Bangalore and Hyderabad become global cities.
In the recent years, Kerala has been desperate to shake up the negative image. Its trade unions no longer hold the same terror as it used to be a decade ago. Trade unions are controlled by the politicians and is relatively easier to control if the political leaders sense a change of mood in the people’s tolerance level. The state bureaucracy, especially at the lower level, is a different story altogether. Fed by years of anti -capitalist slogans, the petty officials go with a vengeance against any form of enterprise, whether it is a tiny corner store or a multi-national. There is no dearth of archaic rules in India. Any local official can find some violation or another at most enterprises if he wants it. It is this army of lower level bureaucracy than the often blamed militant trade unions that is making Kerala business unfriendly in the recent times. Unimaginative politicians who cannot think of any other protest methods other than Hartals adds to the problem. Add to these, is the issue of higher population density, higher wages, a working class that is aware of its rights, higher environment consciousness and you face an almost impossible hurdle to industrialise Kerala.
Kerala has the highest minimum and actual wage in the country. A labour intensive industry like Textile will always find it cheaper to set up factories in places that has far lesser minimum wages. The nature of modern capital is such that it flees to the places of least cost. It is time for Kerala to think out of box. It is better not to have manufacturing industries that pollute this pristine state when one cannot compete in wages with other parts of the country. It would better to strengthen the tourism and service industry more and rein in the lower level buoerocracy than get into a bidding match for transferring government money into private coffers.
The Chief Ministers of various states are competing with each other by offering mind boggling incentives for businesses. The ostentatious reason is that these manufacturing units give jobs to the locals. Take the case of Kitex which has promised 4000 jobs. Most of it would be in the minimum wage level. Even if it provides another 8000 indirect jobs at less than minimum wages, it is a miserable return on investment on the tax payer’s money. The state governments would be better off using that money for direct transfer benefit for 12000 people instead of offering huge incentives to Kitex.
For the country to prosper, we need to encourage private enterprise, but that shouldn’t be at the cost of providing basic facilities to people. In the last Covid wave, we saw how inadequately prepared is our health infrastructure. Education system is in shambles. We are debating whether sustenance farmers should be given their tiny subsidy or not. There is raging debate on whether higher education should be subsidised. But when it comes to attracting private investment, there is no debate. The consensus now is that the poor rich businessmen should be given all possible subsidies. The private entrepreneur who cannot succeed without government subsidy, free land, electricity and tax benefits should wind up his business and take up a job.
When people and media rank states based on how many private billionaires they wooed, than on how well they perform their basic duties like providing health, education and law and order, we are walking in a perilous path. Big businesses are pitching one state government against another. For fear of the private industry fleeing to choose another rival state, the governments cannot even ensure statutory requirements from the factories. We now have a strange system where public money that should go for basic infrastructure development is siphoned off to ensure the private business is profitable. Some of the most industrialised states in India has the highest poverty level too should be an eye opener. Industrialisation is not an end in itself, giving a decent standard of living for the people is.
