The importance of the industrial manufacturing sector for economic development is a fact. The structural change from low productive agriculture to a productive industrial sector gave credence to manufacturing as an ‘engine of growth’. It is due to the power of manufacturing that China became an economic powerhouse at the global level.
Concerning the landlocked border state Punjab, far from the sea ports, has certain disadvantages for investments essential for the industrial sector, consequently resulting in moderate growth in the industrial sector. Still, its key manufacturing industries have strong potential to foster growth.
To give a boost to the industrial sector, the Aam Aadmi Party (AAP) government has come up with ‘Punjab Industrial and Business Development Policy-2022’, to put the state back on the high trajectory of growth and prosperity. To make this five-year policy-based plan a big success, a conducive environment for the industry needs to back it with the right focused direction. Punjab Chief Minister Bhagwant Mann may enhance the initiative of ‘Sarkar Tuhade Dwar’ to ‘Sarkar Karobar Ke Dwar’, an event of regular visits among the stakeholders to redress their grievances and to incorporate their feedback to scrutinise the strengths and weaknesses of the state and then explore the upcoming opportunities and prompt the desirable Punjab landscape as a global manufacturing and export destination.
Drive Out the Weaknesses
Punjab accounts for about 5 percent of industrial units in the country whereas the states of Tamil Nadu, Telangana, Karnataka, Maharashtra, and Gujarat account for 55 percent of India’s total industrial units. Punjab has registered a 3.6 percent CAGR (Compound Annual Growth Rate) in the industrial sector for the last five fiscal years (2017-18 to 2022-23), while Tamil Nadu’s growth was 11.27 percent, the highest in the country followed by Maharashtra 8.8 percent, Gujarat 8.1 percent, Telangana 7.9 percent and Karnataka 7.6 percent. Neighbouring state Haryana registered 5.9 percent while the national average growth rate was 5.63 percent.
The erosion of industry is one of the major crises facing Punjab. At a time when the Central government is attempting to project India as a manufacturing destination, why are Ludhiana, Jalandhar, and Amritsar –once India’s leading industrial clusters – going stagnant rather than growing? One of the major reasons in this landlocked border state is the all-time high cost of land affects competitiveness. The skyrocketing pricing of land is out of reach for new investment, that’s why major existing players prefer their expansions outside Punjab. Yarn and textiles giants that originated from Ludhiana now expanded their 40 to 50 percent of production in Madhya Pradesh, a similar trend can be seen in another mainstay – the cycles industry too expanding in UP.
Second is the location disadvantage. Being far from the seaport makes the industry’s operations non-competitive as exports and imports are very critical. Nearness to seaports is advantageous. In that sense, Punjab manufacturers have to transport raw materials from the 2000 km away seaports. And to transport finished goods from here, they have to pay about four-time the freight, in comparison to their counterparts in coastal states. To overcome this big disadvantage ‘Punjab on wheels’ (state-owned wagons), would be a milestone for industrial growth.
Strengths to Thrive
Punjab occupies a place of pride in India’s industrial map, which is attributable to its MSME sector. The state inherited a fragile industrial base when the country was partitioned in 1947 and suffered further erosion when it was reorganised in 1966 after Haryana came into existence. In the decade of mid-80s and early 90s, it had been through a tough time of terrorism and social unrest, which affected industrial growth and tended to cause some outmigration of industry. In the last three decades, with the restoration of peace, the previous state governments tried to activate the process of industrial development with the hope of entering into a new era of progress.
With a peaceful and competitive workforce, no lockouts and no strikes, and flexibility on interstate migrant policy, Punjab’s existing industrial sector mainstay is 99.7 percent MSMEs (3.5 lakhs) are highly vibrant and dynamic and contribute significantly to the economic and social development by fostering entrepreneurship and generating employment opportunities at large. Punjab’s entrepreneurial spirit is recognised as an ‘achiever’ among the landlocked states.
Apart from industrial hubs like Ludhiana, Jalandhar, Mohali and Mandi Gobindgarh, Punjab has to develop industrial hubs in every district. If the government is trying to attract new industries, it must support and thrive the strengths of each district. It should encourage an inter-state competitive level playing field, not a competition within state existing versus new industries.
Why Focus is Needed
Despite all the exercises, the differentiator is missing as the Punjab industry needs hand-holding and a conducive environment. Still, the officials adopted a lackadaisical approach towards the industry and continued with predecessors and other states’ old practices and policies. Under the new industrial policy, there are a couple of complex riders to incentivize the existing industry on the minimum expansion of the installed capacity to 25 percent with 25 additional fixed capital investments. Recently, another significant disadvantage for the industry has been added, as Punjab is the country’s first state that levied very high charges and strict patrolling on groundwater extraction. The power tariff also has been increased by 10 percent. These are a few reasons why CM Mann should be more attentive and focused on the industrial sector because he wishes to make Rangla (Vibrant) Punjab.
Way Forward
CM Mann is very much capable of creating a conducive atmosphere to boost robust industrial growth. Some more focus is needed to fuel the enterprising spirit of Punjabis who made Punjab a pride ‘MSMEs Hero’. Overall, many investment opportunities have a great deal of potential to be incentivized to nurture a competitive ecosystem for the labour-intensive sectors which could further transform the investments as a job engine to make ‘Brand Punjab’.
The writer is Vice-Chairman of Sonalika Group, Vice Chairman (Cabinet minister rank) of Punjab Economic Policy and Planning Board. The views expressed in this article are those of the author and do not represent the stand of this publication.
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