From Business World of 29 March 2004. Maharashtra is close to my heart; I grew up in Poona, climbing trees and eating green mangos. I was sad to see its cosmopolitanism destroyed by Shiv Sena, and the consequent migration of Gujarati industrialists to Gujarat. CII's invitation gave me a chance to give a sermon.
Is Maharashtra
competitive?
CII Maharashtra invited me to Bombay to
speak to them on how to make Maharashtra competitive. I did not know there was
a problem; Maharashtra continues to be India’s foremost industrial state. I
looked at the figures; they did not give any strong indicator of lack of
competitiveness. Its per capita income is exceeded only by Delhi, Punjab and
Haryana; and the share of industry in its GDP is one-third – the highest for
any Indian state.
But perhaps the
figures we look at do not measure competitiveness. Look at Punjab and Haryana:
the richest states of India, but who would go and invest over there? If
openness made a state competitive, Daman would be the most competitive
territory of India (actually, that is not a joke; Daman’s industrial strength
is impressive). If balance of payments is the indicator, Japan has had a
chronically strong balance of payments, and its growth has been miserable. If
we take foreign investment, there are very few places where foreign investment
makes a decisive difference; most growth is due to local capital, enterprise
and brains.
On almost all
counts, Maharashtra has not done too badly. Historically, its source of
strength was Bombay. A British stronghold, it was never attacked by Maratha
armies. Once the Maratha empire was defeated, Bombay became the fulcrum of
British western India. First it prospered on the opium brought down from
Central Provinces and Berar and exported to China. With the money made in
opium, Bombaymen built textile mills; they were the source of Maharashtra’s industrial supremacy for almost a century. And as textiles slowed down, the import-substituting
industrialization launched by independent India gave Maharashtra wider
opportunities; it thrived on engineering, automobiles, chemicals and
pharmaceuticals.
This era of easy
industrialization came to an end in 1991; with liberalization, the older
industries of Maharashtra have gone through tough times. That is the cause of
depression amongst Maharashtra’s industrialists. Maharashtra has not done badly
in the new industries. In software it has the giant TCS, and many other smaller
firms. But the south has done better. Bombay probably has larger
pharmaceutical manufacturing capacity – all the great multinationals are there
– but Hyderabad is better known for its innovative firms.
Bangalore has
created brand value. When firms in America want to outsource, they do not
think of India – they think of Bangalore. They might have thought of Bombay,
but the descendants of the Marathas wantonly destroyed its brand value by
renaming it. Bombay was once India’s most cosmopolitan city; Poona attracted
students from all over India. The antics of Shiv Sena gave Maharashtra a bad
name; its reputation of being hospitable to people from everywhere was taken
over by Bangalore.
Maharashtra may
seem to suffer from its historical baggage; its Thana-Belapur belt looks like
the graveyard of industry. But no industry is passé; the very industries that
are half-dead in Maharashtra are flourishing in China. Europe has much industry
that is very old but highly modern.
That is what
Maharashtra needs to do – revamp its industry and bring it into the modern
world. Many industrialists have done it; but there are many left behind. They
complain about three things: labour laws, which make it impossible to reshape
the labour force to the requirements of the market; octroi, which slows down
and raises the cost of transport, and property laws, which do not allow
industrialists to change property use. These are very much the creations of the
state; the Maharashtra government is the prime culprit in the lingering death
of industry.
But it is also
true that hire-and-fire was not the way of most of the world. Europe has never
believed in it; nor have the Japanese. They have suffered for not believing in
it. But both have developed strong traditions of retraining their labour forces
as a result. In the modern, globalized world, it is no longer possible for
people to go on doing the same job their entire lifetimes. They can expect to
stay employed only if they adapt themselves to the changing markets. They must
have a sense of ownership in the enterprise, and they must keep learning to
make the enterprise a learning organization.
To give them
this capacity is the task of management; perhaps this is where the
industrialists of Maharashtra are still a bit old-fashioned. What Maharashtra
needs is a change in mindsets, a common sense of sharing. It is not what Shiv
Sena would encourage; but Maharashtra is in peril. It needs to unite, it needs
to open itself to outside talent, it needs to become more inclusive.
