State Business Relations and Performance of Manufacturing Sector in Andhra Pradesh – A

Case Study

K. Srinivasulu

Introduction

• Industrial development - result of conscious government policy effort with public investment playing a crucial role

• Given its expansion, State’s role in ensuring developmental success or failure deserves serious analytical attention

• Central objective – examine politics of government and business relation and how it affected industrial development in general and expansion of manufacturing sector in particular in AP

Outcome

• Shift in political regimes’ approach to SBRs is positively correlated to the political economy of change in the post-green revolution period

• Dominance of registered manufacturing in total manufacturing output of the State

• However, growth in output did not contribute to increase in the employment in this sector

Contd…

• Our primary survey analysis shows that out of the various services provided by the business association, providing information on government regulations is the most useful for the firm

• Joining a business association is particularly useful for the large and medium scale firms

Contd…

• Overall, our findings support the view that organized private sector and effective state business relations are helpful for firm performance and state business relations have improved over time in AP

• Political environment of the state provides a market friendly atmosphere and signals the pro-business attitude

• SBRs in AP will become more meaningful if the small firms are also promoted on par with large and medium scale firms

Policy Implications

• Provide better infrastructural facilities• Special nodal agency with powers to settle

issues affecting investment projects• Allocation of funds towards incentives for

industrial investment promotion policy• Provide rebate on power tariff• Set up exclusive industrial parks• Allocate at least 15-20 percent of land

towards MSME sector • Help in reviving sick SSI units

Industrializing West Bengal? The case of Institutional rigidity

Deepita Chakravarty

Indranil Bose

• The reasons behind the decline of large-scale industry • The increasing importance of the unorganized

manufacturing in West Bengal• The LFG assumes power in 1977,introducing major

rural institutional reforms, resulting in the further growth of unorganized manufacturing.

• urban unemployment and apparent decline in the labour militancy; the background of the change in the industrial policy.

• The new industrial policy of 1994-95: a critical juncture.

• Contradictory behaviour of policy and performance.

The percentage share of the formal and informal manufacturing[1] in WB (at 1993-94 prices)

0

10

20

30

40

50

60

70

1980

-81

1982

-83

1984

-85

1986

-87

1988

-89

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

2004

-05

Formal

Informal

Source: National Accounts Statistics (NAS), WB

[1] NAS represents data in terms of ‘registered and unregistered’ sectors more or less with the same meaning as ‘formal and informal’ sectors.

The probable reasons behind proliferation of informal sector and non-performance of formal manufacturing

• Lack of infrastructure especially power • Absence of land bank• Regulation hazards• Increasing interference of the ‘party’ and also the opposition

Besides, the entire domain of policy-making and implementation has become complicated. Presently, the businesses have to negotiate with the government, the party and also with the Opposition.

The omnipresent phenomenon of the institution of ‘party’ seems to have encroached upon administrative spheres increasingly often paralyzing administration and incapacitating it for action

The issue of labour: institutional stickiness

• We suspect the apparently docile character of organized labour and their unions. Organized labour in the state is showing an extreme path dependency arising out of uncertainty in the prospect of future gains.

True, the ‘gherao’ culture , which terrorised managers in the sixties and seventies, is no longer in evidence. However, the unions still bargain quite adamantly for higher wages , although not insistent on filling up vacancies or making the contract workers permanent.

• In the changed scenario, the senior trade union leaders are seeking to improve the work ethic among permanent workers of the manufacturing units.

• But the management feel that the permanent workers have got habituated not to work and work only on ‘overtime’ payment, which in Bengal, virtually means extra payment without extra hours of work.

• Tremendous increase of absenteeism among permanent workers in recent years. Nowadays management have to face is some kind of continuous indirect pressure, which is a serious deterrent to new investment .

Management are weary of technology-intensive large investment

Policy implicationsThe obvious implications:

a. Improvement in infrastructure

b. Creation of land bank

c. Reduction of regulatory hazards

d. Improvement of work ethic

The far-reaching implications:

a. Need for alteration in the outlook of the ruling party, ruling coalition and the opposition. Industrialization by any means, particularly those having harmful implications for the poor, will only alienate the state from its own people.

b. The ‘party’ should minimize interference in administrative matters and allow administrative institutions to work independently.

c. The state should pay heed to improving the quality of labour, particularly the skill base.