India’s sagging and sputtering industrial growth has been put down in the mainstream discourse to the ‘lack of ease of doing business’. But it seems that something more basic has happened.

A recent paper, ‘Import liberalisation and premature deindustrialisation in India’ by Sudip Chaudhuri ( Economic and Political Weekly , October 24, 2015) points out that post-reform India has destroyed domestic industry — and not enhanced its competitiveness — while foreign inflows have hardly gone into greenfield projects. The economy displays telltale signs of deindustrialisation: fall in share of manufacturing in GDP and in the share of employment. “Nearly half the flows in manufacturing during the period September 2004 to March 2013 were used for acquiring existing companies,” the paper observes. In view of the gradual disappearance of domestic industry, it would seem that Make in India has not come a moment too late.

But there are no indications that Make in India is addressing the situation. It is stuck in the old formula: rolling out the carpet for foreign investors without addressing the concerns of domestic manufacturing. China has already decimated our small industries, thanks to an adverse duty regime (WTO, as the paper says, is no excuse).

What is surprising is the absence of protest from domestic industry. Where has the ‘Bombay Club’ of the early 1990s spearheaded by voices like Tarun Das gone? Where are the Ramesh Chauhans fighting multinationals? Cipla and Natco are exceptions, but the pharma and auto sectors, unlike most others, had evolved to a level of competence owing to state support, before they were opened up.

Informal voices in domestic industry, anecdotal accounts and media reports suggest an exit from manufacturing to real estate and finance — in other words, Indian capital is moving out of production to a sort of rent-seeking. Otherwise, what explains this resounding silence?

A Srinivas Senior Deputy Editor

Related Topics