Flight of Industries from Punjab

Dr Ashwani Mahajan
After independence till the year 2011-12, Punjab was considered to be the one of the rich and prosperous states of India. In the year 2000-01, the per capita income of Punjab, was not only highest in the country, it was 9 percent more than the second richest state, namely, Haryana. But in the year 2012-13, the per capita income of Punjab slipped to the second position and today Punjab has reached the 10th position in terms of per capita income among the states with a population of more than 1 crore and the 19th position among all the states, and has now become the second slowest growing states in the country.
In the year 2011-12, when Punjab’s per capita income was the highest in the country, the share of agriculture was 24 percent, that of industries 28.4 percent and that of services 47.6 percent. But by the year 2022-23, the share of agriculture had increased to 28.94 percent, while the share of industries and services was reduced to 25.51 percent and 45.91 percent respectively. It can be assumed that the industry and service sector has shrunk in Punjab. While talking about its neighboring state Haryana, the share of industries in GDP in Haryana has increased from 25.90 percent to 28 percent between the years 2011-12 and 2021-22. The share of industries in Gujarat has increased from 36 percent to 43 percent during the same period, and in Tamil Nadu from 27.9 percent to 33 percent.
It can be understood that during this period, deindustrialization has taken place in Punjab. Although Punjab is famous in the world for population migrating to different parts of the world, since the beginning, because after independence, a large number of Punjabi people migrated to USA, Canada, Europe and many other countries. Punjab benefited a lot from these migrant Punjabis. The money sent to Punjab by the migrant Punjabis from abroad was greatly beneficial for the development of agriculture and industries. A wave of industrial development was seen in Punjab for a long time.
But for quite some time now it has been observed that not only has the industrial development of Punjab come to a halt, but a large number of industries have now started migrating out of Punjab. Industries of Punjab have now started shifting to its neighbouring states like Haryana, Himachal Pradesh, Rajasthan etc. as well as to distant states like Madhya Pradesh, Maharashtra, Tamil Nadu, Gujarat etc. Punjab was especially known for its engineering industry, but many engineering companies have now shifted to the user states of their products. On the other hand, Jalandhar was considered a big centre for sports products, many sports industries there, have now shifted to Meerut, Uttar Pradesh. It is being observed that textile and garment industries have shifted to Madhya Pradesh, bicycle industry to Chennai and China, knitwear industry to Africa, South-East Asia and Madhya Pradesh.
Anti-industry policies of Punjab government
The agriculture sector in Punjab has been considered very important from the economic point of view. It is worth noting that although only 28.94 percent of the total GDP in Punjab is coming from agriculture, more than 65 percent of its population depends directly on agriculture. A sad part of Indian democracy is its populist policies. In Punjab these populist policies have worked to adversely affect the economic development of Punjab. Punjab, that is, the region of five rivers, has been very rich in terms of water. But in Punjab, due to the ease of groundwater extraction, a large number of tube wells were installed. To please farmers, the Punjab government started the scheme of giving free electricity for agriculture. In such a situation, excessive exploitation of water started. Due to this, many districts of Punjab have now become dark zones, that is, where the availability of groundwater has depleted excessively.
But the Punjab government’s policy of giving free electricity to agriculture has not only affected the availability of groundwater but has also affected the industries there. The Punjab government has put most of the burden of free electricity for agriculture on industries and businesses. Due to this electricity has become very expensive for industries, causing huge disadvantage to Punjab industry vis a vis their counterparts elsewhere. This has seriously affected the viability of industries. They have no option left but to move out of Punjab to other states and even to foreign countries.
Environmental laws in Punjab are such that it is almost impossible to comply with them. In such a situation, industries have no choice but to shut down their units, or move to other states. Not only this, industries and businesses in Punjab also have to pay high water cess, due to which industries have to face losses.
Conditions becoming difficult
One of the reasons for rapid industrial and economic development in states like Gujarat, Tamil Nadu, Andhra Pradesh etc. is infrastructure development and other facilities, which leads to reduction in their logistics cost. It is well known that Punjabis are good entrepreneurs, which made Punjab excel in industrial and commercial development. But today Punjab is lagging behind in competition with those states where logistics cost is low and where there has been significant progress in infrastructure. It is worth noting that the condition of infrastructure in Punjab has become much worse in recent years.
Not only this, the implementation of GST system has also affected the industries of Punjab. Earlier, indirect taxes were levied at a low rate by the Punjab government, but after the implementation of GST system, possibility of state specific fiscal incentives are very limited, due to which the competitive power of the industries of Punjab has now become much lower than other states.
Obstacles for new and old industries
If someone wants to set up a new industry in Punjab, then not only environmental but also other types of clearances are highly difficult. Not only this, allotment of land for industries is also very difficult and is also plagued by corruption.
The financial sector in Punjab has also been seriously affected, because most of the agricultural loans of Punjab have turned bad and due to this, NPAs in Punjab is also very high.
Not only is this, the continuously deteriorating law and order situation in Punjab wreaking havoc for the industries. Separatist forces are becoming a big obstacle in the development of Punjab.
Half-hearted efforts
The distance from the sea and the high logistics cost of exports are also one of the reasons why Punjab’s industries have to send goods through a long route. Earlier, goods could be sent through Pakistan, but now since that route is closed, goods can now be sent overseas only through Mumbai port. To deal with this situation, air cargo facility was started in Amritsar, but there was a lack of complementary efforts. Due to lack of backward linkages of air cargo with industries, only 20 percent of the air cargo facility is being used presently.
While other state governments are offering various incentives to attract industries, the Punjab government has not only lacked an industrial policy for a long time, but there has been a continuous deterioration in the infrastructure required for industries. There is also a lack of research and development activities. Due to lack of industrial development, Punjab is continuously lagging behind economically, but the biggest concern is that the Punjab administration has no thought or policy initiatives on this subject. In such a situation, if this trend is not stopped, Punjab can lag far behind in economic development, which will be neither good for Punjab nor for the country.
(The author is Professor, PGDAV College, University of Delhi)

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