Economics 101 : Without Land, Labour, Capital Reforms : How will India attract Manufacturing Cos relocating from China and elsewhere

I came across a Tweet by Seshadrichari ji who cites a Nomura report that out of 56 companies moving out of China, only 03 located to India with the maximum going out to South East Asia. He targets Politics, Bureaucracy, etc as causes.

In my belief, its a more simplistic dimension. Economics Lesson 101 – is that there are four factors of production – Land (Encompassess all Natural Resources), Labour (all Human Resources), Capital (both Domestic and External) and Entrepreneur.

I recall Dr Arvind Panagariya’s criticism of UPA era Land Acquisition Bill and efforts by NDA Modi Government in early phase to reform the Bill which did not pass through the Legislature and had to be withdrawn and then forgotten. India is hungry for industries but cannot offer Land and Natural Resources neccessary for setting up factories or Raw Material supplies.

I also recall Dr Arvind Panagariya’s efforts to Implement Labour reforms which also did not pass the political muster and except some relaxations in Rajasthan were never implemented. Indians are willing to work in GCC countries without any rights – the Khalifa system means they don’t have right to leave employment and the employer can fire any time – but stringently oppose any labour reforms such as retrenchment with compensation in India.

The only capital reforms in India have been relaxations in Foreign Capital – Increase in limits of Investment – equity and debt, abolition of the Foreign Investment Production Board, etc. The domestic Capital continues to be fettered by various retrictions, inefficiencies and high taxes (proposed even higher in a CoViD response scenario). While foreign capital can bring in technology, maybe force the bureaucracy to fall in line due to political intervention – no one can import the entire value supply chain – You need supplier for raw materials, logistics, trade and distribution system and importantly buyers (consumers) which continue to be burdened by ineffecient domestic capital regulations and high taxes.

Without reforms in Land, Labour and Capital, the essential factors of production, I do not see how India can become a preferred destination of Companies relocating out of China or anywhere. It would not matter how much efforts the top leadership of the country makes, for their would be no results on the ground.

I also have an interesting observation to share. Rahul Gandhi ji, de facto leader of Congress party, India’s principal opposition party mentions in his election affidavit his education qualification as Class XII and M Phil in Development Economics from a foreign university. He does not mention a Bachelors or a Masters where one learns the basics of a subject – in his case Economics. 

Finally, Rahul Gandhi ji and his party, oppose tooth and nail all reforms in Land, Labour and Capital, which result in absence of enterprises operating in India but still have the gumption to question – “Where are the jobs?”. The answer would in all probabilities be simple to a Economics 101 student.

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