Policy flip- flop may halt Modi plans

Labour unrest, apathy of state governments, judicial activism affect investor confidence

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

“Regional 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. in the country

Until these factors are looked into by the Modi government, he said it will be difficult to make 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 the 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 ( SC) about the legality of coal blocks has again brought up the issue of policy uncertainty and the underlying risk associated with it for the investors to the fore.

Analysts feel that the policy uncertainty had begun with the UPA government’s decision to impose retrospective tax and the cancellation of 2G spectrum licenses by the Supreme Court.

On the issue of coal allocation, finance minister Arun Jaitley on Saturday admitted that the Supreme Court judgement could impact economic growth but expressed hope that the uncertainty will not linger for long as the judgement expected on Monday, would impact 218 blocks.

One hundred of these blocks 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 ` 4 lakh crores.