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India's tricky path to industrialisation
FT.com | October 11, 2008
It should have been a perfect marriage. Ratan Tata, the acceptable face of Indian capitalism, and the Communist party rulers of West Bengal, a late convert to the cause of industrialisation and a friend to India 's poor. Instead, the attempt to negotiate a tiny plot of land for India 's most imaginative industrial project, construction of the $2,200 per unit Nano mini-car factory, has ended in defeat. Why?
For all its claim to be socially responsible, Tata has taken a don't-look, don't-see approach. It outsourced the task of acquiring land to politicians who, according to one commentator, can be "bought and sold like vegetables".
Peasants in 18th-century Britain were thrown off the land. Enclosure acts reduced the commons, pushing people from the countryside to become fodder for industrialisation. Similarly, China has managed the process of industrialisation reasonably smoothly: by force and without the niceties of land rights.
For better or for worse, India became a democracy before it set off seriously on the road to industrialisation. Moreover, it is a democracy where minority causes, even that of 400 hold-out farmers in West Bengal, can hold the national good to ransom. That, in part, explains why roughly half of the Chinese population is now urban while, in India, just over 22 per cent lives - often in squalid conditions - in the cities.
Make no mistake. If India cannot industrialise, it will never be prosperous. Those who defend the status quo are condemning hundreds of millions of peasants to a life of back-breaking and unproductive toil, and the often violent discrimination of the caste system. Romanticising village life is something villagers cannot afford. The average Indian farmer lives a shorter and more brutish life than the most humble of nouveau-urban Chinese.
So what is to be done? First, clear rules need to be set - and transparently implemented - for purchasing agricultural land. Fair compensation must be paid and, when necessary, alternative work found. If farmers are merely dispossessed in the vague hope that they will drift to the cities, India will inevitably suffer violent peasant revolt.
Second, cities must be made more attractive. India should spend on infrastructure to make towns a bigger draw. If migrants know that urban living offers water, electricity, decent housing and the chance of better health and education for themselves and their children, cities will become places where people want to live. Few were thrown off the land when Japan and South Korea were industrialising. But they came to the cities anyway.
Third, the government must invest in rural health and education. Even if India truly wanted to industrialise, it lacks the human capital to do so. Many of the poorly educated, undernourished products of India 's rural idyll are simply not skilled or healthy enough to join the global workforce. Unless they can be made so, India will always lag behind. It will be a country with a tiny minority of computer engineers and call-centre operators and a vast majority of subsistence farmers. In other words, it will be poor, very poor.
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