http://www.telegraphindia.com/1160112/jsp/opinion/story_63339.jsp#.VpS6YlIpq38
First Person Singular A.M.
Interpreting economic history is a tricky business. It is particularly so when the period under focus is relatively proximate to our times. Notion is often described as reality. For instance, it is a pet assumption that the decline in industrial investment in West Bengal from the late 1950s was the consequence of the rise of the aggressive labour movement under the auspices of the communist party. Could it not be an effect enshrined as the cause?
In most of the current discussions, a crucial development which took place in 1956 is left unmentioned. T.T. Krishnamachari was then the Union finance minister. He had business and industrial interests in Tamil Nadu. He knew what policies would hasten industrial growth in the south and did precisely what he wanted to do.
The development of machinery and machine tools-producing industries is vital for the growth and expansion of all other kinds of industrial products. Besides, steel is basic to the production of machinery and machine tools; steel output is facilitated by the conjunctive availability of iron ore and coal. It was British capital which took the initial steps towards introducing modern industry in India. The narrow region comprising the borders of Bengal, Bihar and Orissa had under the soil ample supplies of iron ore as well as coal. The foundation of the steel plant at Sakchi by Jamshedji Tata enthused industrial investors. The railways had already arrived in this part of the country. With the assured supply of steel from Jamshedpur, clusters of machinery and machine tool-producing units, big, medium and small, came up in Calcutta and its outskirts, Howrah, Serampore, Burdwan, all the way up to the Asansol-Raniganj belt - and Kharagpur. What was additionally interesting was that while scores of small machinery repairing shops and small contractors supplying umpteen requirements for these units began to flourish on either side of the Hooghly river, skill in handling machinery and the art of improvisation got installed among novices who did not even know the letters. Such skill formation was a tremendous boost in fostering an industrial climate in the entire area.
TTK got approved by the Union cabinet an innocent-looking resolution equalizing the freight all over the country of only iron ore and coal; no other industrial raw material was, however, touched. The locational advantage the eastern region had till now enjoyed in the machinery and the engineering industries got forfeited overnight. This also brought to an end the flow of investment into West Bengal.
The relevant data clinched the point I am making. True, the communists were slowly expanding their base; the huge influx of refugees from the then East Pakistan, the consequent overcrowding in Calcutta and the districts, and rising demand for housing and jobs led to a spectacular strengthening of the Left movement. Rising commodity prices without adequate adjustment of salary and allowances aggravated the discontent with the Congress regime. None of these factors affected capital investment in the 1950s.
The freight equalization changed the picture altogether. What was boom for the rest of the country became the curse for the eastern region, particularly West Bengal. B.C. Roy was then the chief minister of the state; his dominating personality made pygmies of other local politicians. He commanded equal deference at the Centre, including from Jawaharlal Nehru, the prime minister. None in West Bengal, even amongst the so called intelligentsia, was aware of what a calamity the state was facing. The Calcutta academia was crammed with economists of the highest calibre; they, too, were seemingly unaware of the implication of the freight equalization announcement. It was left to an émigré Bengali in Bombay, Sachin Chaudhuri, who had a few years ago floated the Economic Weekly. The journal was leading a hand-to-mouth existence; his personal finances were equally precarious. Chaudhuri, nonetheless, spent out of his own pocket to buy a return ticket and arrived in Calcutta. He wangled through friends an interview with B.C. Roy and tried to make the state chief minister aware of the peril underlying the TTK resolution. The eminent chief minister was the least concerned: he was going to build "his" West Bengal in his own manner, he was not interested in such piffling thing as freight equalization, let the Centre do what it wants to do, Jawaharlal has promised him a steel plant at Durgapur, he could not be happier. The proposed plant in Durgapur was part of the grand design envisaged at the moment as an integral entity of the heavy industry expansion programme in the public sector under the Second Five-Year Plan. A curious coincidence, once more not any academician loaded with knowledge of economic planning, but the honorary statistical adviser to the government, P.C. Mahalanobis, the founder of the Indian Statistical Institute, was the author of the great dream. Both B.C. Roy and Mahalanobis belonged to the Bengali Brahmo community. But the twain never met.
A rebuffed Sachin Chaudhuri returned to Bombay totally broken-hearted. He nonetheless continued with his campaign and kept writing editorial pieces, week after week, drawing attention to the gross discrimination against the eastern region. TTK was soon forced to quit as finance minister in the wake of the Mundhra scandal, but the freight equalization policy remained as a permanent edifice.
The other legacy of industrial enterprise bequeathed by the British to West Bengal was jute manufacturing. Raw jute was mostly produced in districts which became part of East Pakistan while almost the entire jute processing units were in West Bengal. Shortage of raw material affected the industry in the immediate post-Independence years and jute exports dropped dramatically. Rapid growth in raw jute cultivation took place in some of the West Bengal districts from the 1960s. But global circumstances had meanwhile changed, the use of plastic material caused a death blow to the demand for traditional jute bags. The global factors affected East Pakistan no less, but there was enough official initiative to diversify products from out of raw jute and the industry has continued to play a substantially important role in Bangladesh.
The story, however, would not be complete unless another blatant piece of official discrimination is placed on record. The Centre set up the Cotton Corporation of India and the Jute Corporation of India almost simultaneously; the purpose was to protect the interest of farm growers by offering them minimum support prices at which the government would purchase the fibres. The class factor, though, has cast a shadow here. Cotton growers in western India are by and large owners of large holdings, and have organic links with the manufacturing and exporting groups. In contrast, jute in West Bengal is mostly grown by small farmers who have little resources, little organizational acumen and therefore are in no position to exercise adequate political influence. The consequence has been severe. The Cotton Corporation has been extraordinarily enthusiastic to purchase raw cotton at prices even much, much higher than the officially announced procurement prices. On the other hand, year after year the Jute Corporation has failed to buy raw jute even at prices that were lower than the announced minimum support prices. No wonder the jute industry is gradually fading away. With supplies of raw jute altogether uncertain and at the mercy of the whims of speculators, world demand keeps declining and prospects of innovative new manufacturing directions are thin.
It is the totality of such developments which has contributed to intensify the gravity of the industrial crisis in West Bengal. One has to mention yet another factor. A certain listlessness has featured in the last decade of Congress rule in West Bengal; one result was no expansion in power production capacity during this period. Power shortage became an additional alibi for capital to stay away. The Left Front government tried to correct the situation by allocating by far the largest proportion of budgetary expenditure to electricity generation. One objective of its drive to alter Centre-state relations was to garner extra revenues for the state which could be set aside for industrial investment in the public sector. All this is by now a well-trodden story.
In fairness, retrospectively viewed, the decision of the last found regime to invite at the beginning of the century the Tatas to set up the small car project was not altogether unsound. Had the Singur plant become a reality, the capital flow to the state might have resumed. It was, however, the lack of competence of the state authorities that put an end to the venture: the land acquisition process could have been completed by adopting more democratic methods and there was perhaps no need to be so effusively generous while negotiating terms with the Tata Group. To add to the government's woes, its public relations, too, were abominably poor. The lady who spearheaded the resistance to the project and is now the state's chief minister shouted month after month that four hundred acres out of the total one thousand acres of land acquired at Singur were from unwilling farmers. The then government's response was diffuse and too much on the defensive; it is only now that the people in the state have been made aware that it was a very small minority of farmers owning barely forty acres of land who remained adamant. The vast majority had accepted the government's offer and quietly departed with the cheques offered as compensation for the sale of land.
The tragedy of Singur cannot, however, be obliterated. After the Tata nightmare and the present chief minister was indelibly marked as the person who was responsible for the episode, no capital from outside the state would arrive here as long as she stayed in command. All the claims she has been recently making of a gush of new investment in different spheres in the coming years are eyewash. There is one exception though. The amount she hopes would flow into real estate business will perhaps coincide with reality. Till very recently, gold was supposed the safest of outlays for speculative capital. China has destroyed that notion by its sudden manoeuvre to sell the metal in such huge quantities as to halve its global price within 24 hours. No similar possibility threatens investment in real estate. World population is bound to grow with each decade; speculative capital which fails to get an outlet in the real estate sector in Mumbai, Delhi, Bangalore, Hyderabad and Chennai, is likely to migrate to Calcutta and its neighbourhoods. That would hardly contribute towards lessening the state's industrial and employment problems.
First Person Singular A.M.
Interpreting economic history is a tricky business. It is particularly so when the period under focus is relatively proximate to our times. Notion is often described as reality. For instance, it is a pet assumption that the decline in industrial investment in West Bengal from the late 1950s was the consequence of the rise of the aggressive labour movement under the auspices of the communist party. Could it not be an effect enshrined as the cause?
In most of the current discussions, a crucial development which took place in 1956 is left unmentioned. T.T. Krishnamachari was then the Union finance minister. He had business and industrial interests in Tamil Nadu. He knew what policies would hasten industrial growth in the south and did precisely what he wanted to do.
The development of machinery and machine tools-producing industries is vital for the growth and expansion of all other kinds of industrial products. Besides, steel is basic to the production of machinery and machine tools; steel output is facilitated by the conjunctive availability of iron ore and coal. It was British capital which took the initial steps towards introducing modern industry in India. The narrow region comprising the borders of Bengal, Bihar and Orissa had under the soil ample supplies of iron ore as well as coal. The foundation of the steel plant at Sakchi by Jamshedji Tata enthused industrial investors. The railways had already arrived in this part of the country. With the assured supply of steel from Jamshedpur, clusters of machinery and machine tool-producing units, big, medium and small, came up in Calcutta and its outskirts, Howrah, Serampore, Burdwan, all the way up to the Asansol-Raniganj belt - and Kharagpur. What was additionally interesting was that while scores of small machinery repairing shops and small contractors supplying umpteen requirements for these units began to flourish on either side of the Hooghly river, skill in handling machinery and the art of improvisation got installed among novices who did not even know the letters. Such skill formation was a tremendous boost in fostering an industrial climate in the entire area.
TTK got approved by the Union cabinet an innocent-looking resolution equalizing the freight all over the country of only iron ore and coal; no other industrial raw material was, however, touched. The locational advantage the eastern region had till now enjoyed in the machinery and the engineering industries got forfeited overnight. This also brought to an end the flow of investment into West Bengal.
The relevant data clinched the point I am making. True, the communists were slowly expanding their base; the huge influx of refugees from the then East Pakistan, the consequent overcrowding in Calcutta and the districts, and rising demand for housing and jobs led to a spectacular strengthening of the Left movement. Rising commodity prices without adequate adjustment of salary and allowances aggravated the discontent with the Congress regime. None of these factors affected capital investment in the 1950s.
The freight equalization changed the picture altogether. What was boom for the rest of the country became the curse for the eastern region, particularly West Bengal. B.C. Roy was then the chief minister of the state; his dominating personality made pygmies of other local politicians. He commanded equal deference at the Centre, including from Jawaharlal Nehru, the prime minister. None in West Bengal, even amongst the so called intelligentsia, was aware of what a calamity the state was facing. The Calcutta academia was crammed with economists of the highest calibre; they, too, were seemingly unaware of the implication of the freight equalization announcement. It was left to an émigré Bengali in Bombay, Sachin Chaudhuri, who had a few years ago floated the Economic Weekly. The journal was leading a hand-to-mouth existence; his personal finances were equally precarious. Chaudhuri, nonetheless, spent out of his own pocket to buy a return ticket and arrived in Calcutta. He wangled through friends an interview with B.C. Roy and tried to make the state chief minister aware of the peril underlying the TTK resolution. The eminent chief minister was the least concerned: he was going to build "his" West Bengal in his own manner, he was not interested in such piffling thing as freight equalization, let the Centre do what it wants to do, Jawaharlal has promised him a steel plant at Durgapur, he could not be happier. The proposed plant in Durgapur was part of the grand design envisaged at the moment as an integral entity of the heavy industry expansion programme in the public sector under the Second Five-Year Plan. A curious coincidence, once more not any academician loaded with knowledge of economic planning, but the honorary statistical adviser to the government, P.C. Mahalanobis, the founder of the Indian Statistical Institute, was the author of the great dream. Both B.C. Roy and Mahalanobis belonged to the Bengali Brahmo community. But the twain never met.
A rebuffed Sachin Chaudhuri returned to Bombay totally broken-hearted. He nonetheless continued with his campaign and kept writing editorial pieces, week after week, drawing attention to the gross discrimination against the eastern region. TTK was soon forced to quit as finance minister in the wake of the Mundhra scandal, but the freight equalization policy remained as a permanent edifice.
The other legacy of industrial enterprise bequeathed by the British to West Bengal was jute manufacturing. Raw jute was mostly produced in districts which became part of East Pakistan while almost the entire jute processing units were in West Bengal. Shortage of raw material affected the industry in the immediate post-Independence years and jute exports dropped dramatically. Rapid growth in raw jute cultivation took place in some of the West Bengal districts from the 1960s. But global circumstances had meanwhile changed, the use of plastic material caused a death blow to the demand for traditional jute bags. The global factors affected East Pakistan no less, but there was enough official initiative to diversify products from out of raw jute and the industry has continued to play a substantially important role in Bangladesh.
The story, however, would not be complete unless another blatant piece of official discrimination is placed on record. The Centre set up the Cotton Corporation of India and the Jute Corporation of India almost simultaneously; the purpose was to protect the interest of farm growers by offering them minimum support prices at which the government would purchase the fibres. The class factor, though, has cast a shadow here. Cotton growers in western India are by and large owners of large holdings, and have organic links with the manufacturing and exporting groups. In contrast, jute in West Bengal is mostly grown by small farmers who have little resources, little organizational acumen and therefore are in no position to exercise adequate political influence. The consequence has been severe. The Cotton Corporation has been extraordinarily enthusiastic to purchase raw cotton at prices even much, much higher than the officially announced procurement prices. On the other hand, year after year the Jute Corporation has failed to buy raw jute even at prices that were lower than the announced minimum support prices. No wonder the jute industry is gradually fading away. With supplies of raw jute altogether uncertain and at the mercy of the whims of speculators, world demand keeps declining and prospects of innovative new manufacturing directions are thin.
It is the totality of such developments which has contributed to intensify the gravity of the industrial crisis in West Bengal. One has to mention yet another factor. A certain listlessness has featured in the last decade of Congress rule in West Bengal; one result was no expansion in power production capacity during this period. Power shortage became an additional alibi for capital to stay away. The Left Front government tried to correct the situation by allocating by far the largest proportion of budgetary expenditure to electricity generation. One objective of its drive to alter Centre-state relations was to garner extra revenues for the state which could be set aside for industrial investment in the public sector. All this is by now a well-trodden story.
In fairness, retrospectively viewed, the decision of the last found regime to invite at the beginning of the century the Tatas to set up the small car project was not altogether unsound. Had the Singur plant become a reality, the capital flow to the state might have resumed. It was, however, the lack of competence of the state authorities that put an end to the venture: the land acquisition process could have been completed by adopting more democratic methods and there was perhaps no need to be so effusively generous while negotiating terms with the Tata Group. To add to the government's woes, its public relations, too, were abominably poor. The lady who spearheaded the resistance to the project and is now the state's chief minister shouted month after month that four hundred acres out of the total one thousand acres of land acquired at Singur were from unwilling farmers. The then government's response was diffuse and too much on the defensive; it is only now that the people in the state have been made aware that it was a very small minority of farmers owning barely forty acres of land who remained adamant. The vast majority had accepted the government's offer and quietly departed with the cheques offered as compensation for the sale of land.
The tragedy of Singur cannot, however, be obliterated. After the Tata nightmare and the present chief minister was indelibly marked as the person who was responsible for the episode, no capital from outside the state would arrive here as long as she stayed in command. All the claims she has been recently making of a gush of new investment in different spheres in the coming years are eyewash. There is one exception though. The amount she hopes would flow into real estate business will perhaps coincide with reality. Till very recently, gold was supposed the safest of outlays for speculative capital. China has destroyed that notion by its sudden manoeuvre to sell the metal in such huge quantities as to halve its global price within 24 hours. No similar possibility threatens investment in real estate. World population is bound to grow with each decade; speculative capital which fails to get an outlet in the real estate sector in Mumbai, Delhi, Bangalore, Hyderabad and Chennai, is likely to migrate to Calcutta and its neighbourhoods. That would hardly contribute towards lessening the state's industrial and employment problems.
No comments:
Post a Comment