Recently, Kitex, the world’s third-largest supplier of infant wear, announced the withdrawal of a Rs 3,500-crore expansion plan from Kerala, alleging harassment by the state government. As per the director of Kitex, there have been no less than 73 inspections from government officials in one month. A high-stake drama followed the announcement, with nine Indian states vying for investment by Kitex. The Telangana government sent a private jet to the officials of Kitex to take them from Kochi to Hyderabad and offered a mind-boggling incentive. Pleased with the royal treatment of its new suitor, Kitex has announced a Rs 1,000-crore investment that may lead to 4,000 jobs in Telangana in the future.
Despite its stellar achievements in human development indices, Kerala always had an unfriendly business image. The state’s social reforms of the past century had resulted in a literate population that was savvy enough to take advantage of the booming oil economy in the Middle East. The huge remittance—sometimes more than the entire GSDP of many bigger Indian states—has catapulted Kerala to the top, boasting the highest standard of living in India. It was spared the fate of Bengal thanks to the foreign remittance by non-resident Keralites. But its shame as a haven of militant trade unionists resulted in missing the IT bus that helped Bangalore and Hyderabad become global cities.
In recent years, Kerala has been desperate to shake up the negative image. Its trade unions no longer hold the same terror as they used to be a decade ago. Trade unions are controlled by the politicians and are relatively easier to manage 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 shortage of archaic rules in India. Any local official can find some violation or another at most enterprises if he wants it. This army of lower-level bureaucracy than the often blamed militant trade unions has made Kerala business-unfriendly in recent times. Unimaginative politicians, who cannot think of any other protest methods other than Hartals, add to the problem. Add to these 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 have far lesser minimum wages. The nature of capitalism is such that the capital flees to the locations that offer the least cost. It is time for Kerala to think out of the 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 should better strengthen the tourism and service industry more and rein in the lower level bureaucracy 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 4,000 jobs. Most of these would be at the minimum wage level. Even if it provides another 8,000 indirect jobs at less than minimum wages, it is a miserable return on investment on the taxpayers’ money. The state governments would be better off using that money for direct transfer benefits for 12,000 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 our health infrastructure was. The education system is in a shambles. We are debating whether subsistence farmers should be given their small subsidy or not. There is a 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, wealthy 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 the media rank states based on how many private billionaires they woo, rather than on how well they perform their primary duties like providing health, education, law, and order, we are walking on a dangerous 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 essential infrastructure development is siphoned off to ensure the private business is profitable. Some of the most industrialised states in India have the highest poverty level, which should be an eye-opener. Industrialisation is not an end in itself; giving a decent standard of living for the people is.
Author of Asura, Ajaya series, Vanara and Bahubali trilogy