Business | General
Tata's pullout from West Bengal will hit investment climate
The decision by India's Tata Motors Ltd. to move a factory out of West Bengal after violent protests may affect the broader investment climate in the country, deterring foreign investors and denting economic growth.
- Reuters
- Published: 00:02 October 5, 2008
Mumbai: The decision by India's Tata Motors Ltd. to move a factory out of West Bengal after violent protests may affect the broader investment climate in the country, deterring foreign investors and denting economic growth.
Violent protests by farmers whose land was taken by the state for the construction of the low-cost Nano car plant forced Tata Motors, the country's top vehicle maker, to pull out on Friday after a last ditch meeting with the state's chief minister.
Analysts said though the immediate impact would be limited to West Bengal as the Tatas move to a more industry-friendly state, it would have wider repercussions as more states may adopt a harder anti-industry tone for political gains.
"Though West Bengal is different from other states in showing it can throw out established industrial houses for political mileage, it may be the start of a very dangerous broader trend which does not bode well for the economy," said T.K. Bhaumik, chairman of the economic affairs committee at Asso-cham, an industry body.
In September, an Indian unit of Dow Chemical Co was asked to stop construction work in the Maharashtra state, home of the country's financial capital and Reliance Industries, the country's most valuable firm faced violent protests last year over its retail foray.
South Korean steel firm Posco is facing protests to acquire forest land for a $12 billion (Dh44.04 billion) plant in Orissa and Goa dropped plans to build special economic zones after protests from political parties.
Analysts said industrial activity which is already slowing due to tight monetary policy and weaker economic growth may be further affected by such protests.
A study in August by the central bank showed Indian private firms will invest Rs1.73 trillion ($37 billion) in fresh projects in 2008-09, a 30 per cent decline from Rs2.45 trillion in 2007-08.
"Politicians in this country must choose over perpetuating poverty to gain votes or pursuing economic development and you cannot have 9 per cent plus growth if you bar your companies from making investments," Bhaumik said.
Industrial output is mostly for the domestic market and accounts for about a fifth of gross domestic product, helping the economy expand at an average 8.8 per cent in the last five fiscal years.
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