Closure of factories, deceleration hit job growth, says study
53% OF THE 18,770 INDUSTRIAL UNITS THAT CLOSED DOWN BETWEEN 2007 AND 2014 WERE IN THE MAJHA REGION
CHANDIGARH: The decline in growth of industrial units, fluctuations in fixed investment and closure of 18,770 factories in Punjab has hit employment generation, particularly in medium and large ones, in the state, says a study done by economists Dr RS Ghuman and Dr Jatinder Singh.
The paper “Industrialisation in Punjab: Status, Constraints and Policy Intervention” published by the Centre for Research in Rural and Industrial Development (CRRID) says the decline in the growth of industrial units after 2000 was largely because of the closure of many factories in the state with 18,770 units shutting down between 2007 and 2014.
About 75% of closed down units were located in Majha and Doaba regions with 8,053 being in Amritsar alone, leading to loss of employment of many skilled and unskilled workers, the study says.
Though the employment in the industrial sector has been increasing since 1980-81, the rate of increase has decelerated with the compound annual growth rate of employment turning negative in medium and large factories, according to the study. The negative growth implies that the number of workers employed in such units has declined in absolute terms over the last one-anda-half decades.
The CRRID study says the downfall of the industrial sector in the state started since the onset of liberal policy regime initiated in July 1991 as the Government of India phased out a series of benefits such as freight equalisation policy and special rebated for industrial development in border areas.
“The elimination of such benefits as well as lack of minerals and other natural resources in Punjab placed the state industrial sector in disadvantageous position. Also, almost all the industrial units (99.72%) in the state are small and finance is the major constraint. Due to this, these units could not upgrade according to the changing market and technological dynamics,” reveals the study.
Another factor, according to the two economists, responsible for the deceleration is financial assistance and tax concessions provided by the Centre to industrial units in neighbouring states, including HP, J&K and Chhattisgarh, which led to the emergence of strong industrial sector there during the last two decades.
“Therefore, many existing industrial units from Punjab started shifting their production base in these states to avail benefits,” says the study, stressing the need for a long-term and formidable industrial policy to revive the industrial sector.
The two economists also suggested that the government and its policy makers must do an introspection why despite financial incentives, private investment is not coming to the state.