Democratic Industrialisation & Development
Historically, a nation cannot develop and grow without an industrial base and such an industrial base is built with the manufacturing industry at the core. Further this cannot be created if the domestic industry is not internationally competitive in both quality and price. The technical and economic backwardness of our country is age-old and was handed down to us by our colonial past. Under the changing global industrial climate, a new model for industrialisation is essential but it has to ground its origin in the democratic structure of the nation as opposed to being guided by indiscriminate market forces.
The industrialisation paradigm is closely linked to development of a nation and its people. Only just and equitable industrialisation can lead to economic development. Development of a nation and people is very closely associated with the nature of industrialisation. Manufacture of luxury commodities and items of conspicuous consumption cannot lead to development, but to growth that spawns further imbalance and inequality. Given the nature of these industrial units they are also necessarily more capital intensive and hence are neither employment generating and usually nor self-reliant. A large component of their capital goods consumption is dependent on imports and thereby do not create a second line of subsidiaries and/or supply line manufacturing units to further the industrialisation process.
Industrialisation initiatives should also be closely linked with the tax structure of the country. The current model of industrialisation is based on tax incentives provided to new units to venture into new regions. The outcome is a steady closing down of factories in old industrial hubs and movement towards backward regions of the country as well as to the Special Economic Zones. The tax incentives to Capital can only be justified if there are concurrent benefits derived from such incentives. However more often than not the collective cost paid for such an initiative far exceeds the benefits derived from it.
We are not opposed to industrialisation nor are we opposed to creation of industrial zones for increasing the manufacturing capacity of the economy. We believe just and equitable industrialisation leads to economic development. But we strongly oppose any industrialisation initiative that solely promotes private profit motives of corporates and have no provision for development of the people of the area or the workers employed in these newly created zones. We believe that industrialisation can be positive and beneficial to society if it is within a legal and egalitarian framework. This framework needs to have clearly defined justiciable rights of affected people for compensation and comprehensive rehabilitation so that all affected can benefit from it.
NTUI also supports the creation of industrial zones in less developed areas with an aim at industrialisation that not only creates new employment opportunities but also makes provisions for housing, schools, medical facilities for the workers employed in these zones and the people living in the area. Tax exemptions and other incentives given to these units should be made subject to the conditionality of promotion of decent labour standards by these units. Labour rights should be an integral part of any legislation that promotes the process of industrialisation. Further, the policy for industrialisation should also incorporate a policy of compensation and rehabilitation for all those who are dependent on the land that is acquired for the industrialisation such that they can lead a decent life.
NTUI believes that industrialisation can be positive and beneficial to society if it is within a legal, equitable and participatory framework.
Promotion Self-reliant Manufacturing Base
Setting up of standalone manufacturing units for production of luxury items by large corporates cannot be termed as industrialisation. Industrialisation should necessarily be the development and promotion of such manufacturing units that source their raw materials from other domestic manufacturing units thereby widening the production base. Large-scale dependence on imports for raw materials and capital goods only serves the corporate profit motive of using low-waged third world labour for assembling commodities.
More often the subsidiaries and supply line units are more labour intensive and the manufacturing in these units less skill dependent. Consequently the scope of absorbing local people as employees in these units is more likely than in the mother plant. So even if the mother plant is capital-intensive, large employment can be generated.
In the decision to promote SEZs, the current industrial policy indicates a clear shift in focus from promotion of manufacturing industries and earning of foreign exchange to pacifying owners of capital, both foreign and domestic, to make large scale investments in India irrespective of its productivity. Investment in an economy does not necessarily contribute to the expansion of production capacity. It may be spent on the purchase of existing assets or be in residential construction or retail outlets etc. which usually involves lower risk but also are less productive than investment in new manufacturing units. The SEZ Act makes room for this kind of low risk investment. This kind of industrialisation cannot promote development of an region and its people.
Create Employment Opportunities
The promotion of such self-reliant units would also mean creation of employment opportunities not only is the mother unit but also in the subsidiaries. Hence the scale of employment magnifies manifold without affecting the productivity of units.
Promotion of Decent Labour Standards
Promotion of decent labour standards should be made a pre-requisite for accessing tax exemptions or other incentives for these units. The international standards of decent work and application of all national laws should be stringently monitored by the Government for granting and continuation of any tax or other incentives to these units. New industrial initiatives should necessarily promote better quality jobs than already existent.
Integrated Rehabilitation Policy
A clearly defined and transparent legal framework and procedure should be institutionalised before large-scale industrialisation projects are undertaken. The industrialisation policy should have the rehabilitation programme as an integral part of it and it should focus on means of livelihood rather than on assets. The policy should make provisions for adequate compensation and rehabilitation for those displaced. It is essential to develop a culture that respects the importance of developing community-based, locally appropriate alternatives to coercive evictions. The state should take responsibility for any land acquisition for the purpose of industrial projects and come up with a clearly defined and transparent land-use policy for it.
Widening and Strengthening the Tax Base
We also believe such industrialisation ultimately should contribute to the tax revenue of a nation that is essential for its development. The initial tax holidays granted to manufacturing firms for moving into new regions are only justifiable if eventually these units contribute substantially to the tax revenue of the country.
The policy to promote SEZs involves huge tax exemptions. One can draw a direct correlation to industrial closures in traditional industrial areas and a sudden burst of investment in the SEZs. There is sufficient incentive for existing domestic capital to relocate to the SEZs and for new domestic and foreign firms to set up units in them. Also, given the nature of the tax exemptions, the owners of units in SEZs can utilise all the tax and other benefits for 5 years, then close shop, and start the unit in some other zone or even within the zone with a new name, thereby promoting unstable industrialisation. Such an industrialisation also has no development agenda for either the area where it is located or for the workers working in these units.
Balance with Agriculture
It is also essential to remember that, while industry is the main foundation, agriculture constitutes the basis for industrial development, both as a market that absorbs the products of industry and as a supplier of raw materials and foodstuffs essential in order to import machinery for the needs of our national economy. Hence the task of supplying agriculture with means of production essential in order to accelerate and promote its reconstruction on a new technical basis. The state should make efforts to draw a balance between agriculture and industries such that industrialisation does not proceed at the cost of agriculture. But for the accomplishment of this task a fast rate of development of the industrial sector is essential.
Development of region and people
All such industrialisation initiatives should lead to the development of the region and the people and not solely promote private profit motives of corporates. The increasing economic integration of the Indian economy with global processes has intensified the offensive of capital on both labour and land resources. With and more multinationals coming in to invest in India, land is becoming increasingly prized with its price more soaring to unprecedented highs. Thus development of basic infrastructure and provision of primary services such as healthcare, education in these newly industrialised regions should form part of the government responsibility for development of the region. The state cannot rely on private capital to further development agendas.
January 2007