The statistics related to employment generation puncture holes into an accepted fallacy — which was propagated by Modi too — that more investments implied more jobs. This is not true in the case of Gujarat; this won’t be true for the country. The reason: mega projects that entail huge investments produce fewer jobs. A 10,000 mw power plant may directly employ just 100 people; a port that handles lakhs of tonnes of cargo possibly 60 people. Even in developed nations such as the US, the majority of the jobs are created by the small and medium enterprises....... Third, Modi’s relative success to woo investments in Gujarat, and now across the country, is based on his theory of exclusive, but democratised, crony capitalism. The underlying axiom is that business houses should be given huge tax sops that could run into thousands of crores of rupees. Various studies indicate that Gujarat leads in the quantum of such incentives, or subsidies, given to businesses, compared to other states. For example, when Modi wooed the Tata Group to make its Nano cars in the state, he handed it sops worth a whopping Rs 38,000 crore....... One study found that the majority of the tax subsidies, given to the investors, was grabbed by large business houses. Thus, the main beneficiaries of this largesse are the already-rich companies. The small and medium enterprises, which generated most jobs, and which needed these incentives more than their large compatriots, were usually left in the lurch. This logically increased the gap between the large and the small; the latter could never aspire to become bigger...... Obviously, this club of sops is quite exclusive. It is difficult to join it, but once a business group entered it, it continued to get higher incentives with each new project. In a sense, it was a form of crony capitalism, where limited number of business owners got the maximum amount of state subsidies. But to ensure transparency, and curb outward and visible corruption, Modi democratised the process in Gujarat. Every member of the ‘subsidy club’ received almost similar sops. The concept of wooing business investors through subsidies in the form of taxes that they do not pay for several years goes contrary to Modi’s reforms vision to slash subsidies that go to the poor people. Diesel is deregulated so that the farmers pay the market prices. LPG cylinder prices are sought to be pegged to international rates. Minimum support prices for food crops are not the right way to help the farmers.........
Posted on: Sat, 15 Nov 2014 03:02:34 +0000
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