Policy flipflop may halt Narendra Modi’s plans

Labour unrest, land acquisition, judicial activism affect investor confidence

New Delhi: Despite Prime Minister Narendra Modi’s invitation to global industry to come and manufacture in India, the task does not appear so easy.

“State governments and local politics, judicial activism, environment problems, local NGOs, labour union unrest, land acquisition and policy uncertainty are some of the challenges which foreign and domestic investors face in setting up manufacturing plants in India,” said an official from one of the apex industry chambers.

Until these factors are looked into by the Narendra Modi government, he said it will be difficult for making India an export manufacturing hub.

Recently, two major multinationals Hyundai and Nokia which have been exporting from India have shifted their export operations.

The Korean car major has stopped exports from its Chennai plant to Europe after shifting the production of models for the continent to the company’s plants in Turkey and Czech republic.

Just like other auto companies, Hyundai, India’s largest car exporter, had faced labour unrest in 2009.

Nokia, which had its largest handset plant in India after China, shut its unit after a dispute over taxation. This will leave the field open to local smartphone companies, which import handsets from China, to sell in India.

A recent observation by the Supreme Court about the legality of coal blocks has again brought issue of policy uncertainty and the underlying risk associated with it for the investors on to the fore.

Analysts feel that the policy uncertainty had began with the UPA government’s decision to impose retrospective income-tax and the cancellation of 2G spectrum licenses.

Finance minister Arun Jaitley on Saturday admitted that the judgement could impact economic growth but expressed hope that uncertainty will not linger for long.

The Supreme Court’s judgement, which was awaited on Monday, would impact 218 blocks. Of which, 119 were allocated to private players and 99 to public sector units. Of these, 31 mines are operational and are producing coal.

According to some estimates, the investment, as on today, on end-use projects and coal blocks could be more than Rs 4 lakh crores.

Already multi-billion investment proposal by foreign steel companies have got delayed due to regulatory issues.

( Source : dc correspondent )
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