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How not to wreck one garage to fit a car

It is now official. Nano, the world’s cheapest car, will not be assembled in the potato and rice fields of Singur, thanks to the relentless opposition to the project by Mamata Banerjee.

india Updated: Oct 05, 2008 22:30 IST

It is now official. Nano, the world’s cheapest car, will not be assembled in the potato and rice fields of Singur, thanks to the relentless opposition to the project by Mamata Banerjee of the Trinamool Congress. This is a serious setback for West Bengal’s efforts to rapidly industrialise the state. The Tatas, doubtless, have other sites to locate their facility, including Pantnagar in Uttarakhand, Pimpri in Maharashtra and Dharwad in Karnataka. This is the larger truth. Corporations offering big-ticket investments play off one state against another to get the best deal. The Tatas have not yet announced where they are going and this could be an indication that rivals have not matched what they secured in West Bengal.

West Bengal’s Left Front government, for its part, also needs to introspect on what went wrong in its efforts to invite the Tatas. The first lesson, obviously, is that rolling out a redder carpet than necessary to attract capital is hardly a guarantee for success. Communists are often quick to accuse others of selling out. But the fact is that they followed suit in giving the Tatas financial incentives and subsidies that no state can possibly offer. In their desperation to reverse the de-industrialisation of the 1960s and 1970s, they can, thus, be accused of following the same neo-liberal policies that they so fondly attack at the Centre to invite industry back to West Bengal.

States don’t need to race to the bottom to secure such investments. To attract Ford, Tamil Nadu offered tax breaks and other concessions that meant no benefit for the state exchequer for a decade. The extremely liberal terms for inviting South Korea’s Pohang Iron and Steel Company to set up a 12 million-tonne steel plant in Orissa also raise the question of whether the deal’s costs far outweigh the benefits. Companies will surely come

if they are provided stable governance and basic infrastructure. As most of the procedural constraints are at the state government’s level, providing an investment-friendly environment often suffices more than financial incentives.