Sunday, June 10, 2018

Who's (Literally) Killing Indian Manufacturing?

Sometime ago, I audited a graduate-level course at the University of Birmingham on Political Risk Analysis (PRA). In a nutshell, the perspective taken in PRA is of a foreign investor determining, you guessed it, the political risks involved in investing abroad. From the course description:

Political risk analysis evaluates the political context in which political actors take into account not only government policies towards the economy, for example regulatory regimes, but also other potential risks such as political violence, corruption, organised crime, human rights abuses, and environmental risks. Actors in both public and private sectors must attempt to assess the political risks attached to a particular country, policy area, or both, when investing their resources in that region, country or policy area.
I don't mean to toot my alma mater's horn too loudly [honk-honk], but Brum is one of the few universities in the UK (and probably the world) which offers such a course. How likely is it that a Hugo or Evo or Vladimir will expropriate your investment? Like all investors, knowing whether you can recoup your money when times get rough is an important consideration.

What brought my PRA days back to mind were recent events in India that pose challenges to would-be investors. India's physical infrastructure is famously in need of improvement--its roads, ports, and airports have suffered from previous neglect. India's services-focused growth is partly attributable to associated difficulties in linking the country to the global supply chain. Something with much clearer PRA elements, though, is the country's continuing tradition of militant labor. A while back, I discussed how Ratan Tata's plant to produce the "one lakh car" in Singur was endangered by farmers accusing Tata in cahoots with the local government of unjustly taking away their land. It has now come to pass that Tata has written off its $350 million investment in the Singur plant and will look elsewhere. From the WSJ:
Tata's decision underlines a thorny issue for manufacturing investors in India: poor local communities -- sometimes backed by political or environmental activists -- are often suspicious of industrial projects planned for their regions, despite the promise of job creation and stimulation of local economies.

Although it has invested more than $300 million in its West Bengal factory, about an hour's drive from Kolkata, Tata said it had decided to relocate production of its $2,500 Nano minicar to another locale. The company said several Indian states expressed interest, but added that it hadn't yet selected an alternative site. The West Bengal site was expected to eventually generate almost 20,000 jobs...

Protesters were demanding that more than 300 acres of the 1,000 acre site be returned to farmers who were forced by the state government to give up land. "We don't see any change" to the opposition, Mr. Tata said. The relocation "was done for the well-being of our employees, safety of our contractors and vendors."
Not knowing all the facts on the ground, I cannot disallow the possibility that the land was indeed taken away in an unjust manner. However, given Tata's generally good CSR reputation and the seeming characterization of any industrial initiative in India as exploitative in the full Marxist sense, I am beginning to wonder if they're mainly cases of the "standing up for one's rights" or of something else. Here's a dead serious case in point - a manager for a foreign multinational was recently chased and killed by an angry mob:
The last moments of Lalit Kishore Chaudhary, chief executive of a multinational auto parts company in India, were filled with terror. On Monday, the quiet and dedicated 47-year-old businessman was hunted through Graziano Trasmissioni India’s plant on the outskirts of Delhi by an angry mob. His assailants had forced their way through the entrance gate with a truck to embark on what his company described as a hunt for white-collar workers.

“He tried to escape the mob by locking himself into one of the offices. The locked door was broken. He tried to escape again by jumping out of the window and was beaten to death at the very point he landed,” Graziano told the Financial Times.

For 10 years, the company’s factory in Greater Noida ran smoothly. The Italian multinational was part of a wave of foreign interest from Europe, the US and Japan that identified big savings in tapping Indian engineering skills. Now the plant is closed and the owners, the Swiss industrial group Oerlikon, are pondering whether to keep it that way.

The frenzied killing of Mr Chaudhary in an industrial zone has plunged the business community into shock. His murder by former employees armed with hammers and metal bars is sharply at odds with India’s image of opening up to foreign capital and non-violent [Gandhian, I presume] protest, whether political or industrial.

It also asks uncomfortable questions about India’s labour relations, striking a blow to a sector at the forefront of the country’s foreign investment drive. A torrent of disapproval has poured from prominent Indian business associations and people, including Nandan Nilekani, chairman of Infosys, the outsourcing company. Mr Nilekani said no dispute could be settled by “murdering an adversary”.

Others have expressed shock that a severe breakdown in law and order could take place in an industrial hub that is also home to LG, Samsung, Yamaha and Honda. “[Graziano] is not a high- profile company,” said Jayant Bhuyam, deputy director general of the Confederation of Indian Industry. “It’s not in the badlands stuck out in the country. It’s near the capital.”

By contrast, the killing has sown discord in the government. Oscar Fernandes, the labour minister, was forced to apologise for remarks in which he appeared to defend the actions of the rioters. His response that the attack “should serve as a warning for management” betrayed an antipathy towards foreign capital that lurks behind India’s transformation from a largely agrarian economy to a fast-industrialising one.

Kamal Nath, the commerce and industry minister and India’s trade negotiator, swiftly set about setting the record straight. Describing the violence as a “stray occurrence”, Mr Nath said it was “completely at variance with the Indian culture and tradition of peace”.

The police have arrested 136 people and are pledging to reveal on Tuesday the names of those charged with murder. But they face sharp criticism for failing to prevent Monday’s attack and being ill-equipped to tackle labour unrest...“There has been a big outcry by investors. If this is the state of affairs, they say, we should be quite worried. There are concerns that no foreign investment will come.”
The Italian government is now investigating the matter and the plant has since reopened. However, along with its weak physical infrastructure, these two incidences sow doubts about the viability of Indian manufacturing. PRA is important in knowing the probabilities that these issues will arise, with often dire consequences.

10/8 UPDATE: Tata has decided to move the Nano plant to Gujarat. According to Tata, production will not be delayed much in the process. From the Economic Times:
Tata Motors will take at least one year to construct the mother plant. Much of the machinery currently located in Singur will be moved to the new location at Sanand. “A lot of the assets will be relocated,” Mr Tata told ET earlier in an interview.

Mr Tata said he plans to stick as close as possible to his deadline for launching the Nano. Earlier, the Tata Group had said that it plans to launch the Nano in October-December 2008. It is possible that this might slip to January-March 2009, a senior Tata Motor official said. The first batch of Nanos will be rolled from ‘makeshift’ facilities located in Tata Motors’ existing factories in Pune and Pantnagar. Initial production volumes will be lower because of the delay caused by the events at Singur.

About Us

WorldTruth

News And Reports On Serious Current Conspiracy Theories including The New World Order Freemasons Extraterrestrials Religion Secret Societies Global Warming Secret Government projects and facilities, including the notorious Area 51 in Nevada, as well as "Alien-related laws", government contractors, agencies and aircraft. Daily Weird News and Odd Strange Videos, Conspiracy Theories, Latest UFO Sightings, Creepy Aliens, Scary Ghosts, Ancient & Unexplained Mysteries!