Industries in Uttarakhand : Uttarakhand in 20 years #2

This article discusses industries in Uttarakhand in last 20 years and the road ahead. This article is second in a series of around 20 articles, that deal with taking stock of Uttarakhand after 20 years of its establishment.

Reasons given to oppose industries in Uttarakhand hills

My last blogpost on Uttarakhand generated some discussion on twitter and in certain groups. One of the feedbacks I got was that industries in Uttarakhand are not a good strategy. Various reasons were adduced, some related to environment and others with infrastructure and factors of production. I have enumerated the same, as well as other reasons that can be used against industry in Uttarakhand, below. I have also included my brief remarks in italics.:-

  1. Industries are not suitable for Uttarakhand as hill areas are ecologically sensitive and industries will pollute the pristine environment.
    1. My comments:  I will try to point towards a few industries that pollute way less than others. In this regard, please note that tourism, mainstay of our economy, also pollutes.
  2. Industries require water in large quantities and also pollute it.
    1. My comments: Uttarakhand is an upper riparian state, and as such we have no dearth of water. We need to manage water smartly to make it available to industries. As stated above, I consider only less or non-polluting industries.
  3. There is no accumulated capital in hill areas. Therefore, no investment possible. Secondly, establishing industry will have higher costs in Uttarakhand due to nature of topography {hill area}.
    1. My comments: Investors can always come from outside if proper facilities are provided. As for capital cost of setting up industries, the criticism is correct. The State government shall have to provide some initial subsidy/tax break etc. so that the effect is nullified.
  4. Hill areas of Uttarakhand do not have land available for industries.
    1. My comments : This is not correct. Our farmed area is decreasing every year in the hills. These farms, which have been deserted and are near towns can be used. Much of the forest area, is forest only in papers. According to India State of Forest Report by Forest Survey of India, Uttarakhand’s recorded Forest Area{on paper} is around 70%, while actual forest cover is only around 45%. Some of the non-forest area, recorded as forest and near towns, can also be used.
  5. Hill areas do not have skilled labours for manufacturing.
    1. My comments:- Acquiring skills for most industries only requires a few months at most. Uttarakhand has a large migrant population, many of whom are well trained. They would be quite willing to return if they can get jobs near their homes.
  6. Uttarakhand has no infrastructure to support establishment of industries.
    1. My comments: It is true. But I did mention that infrastructure should be one of the priorities. Also, I do not expect industries in Uttarakhand would be established in next 1 year. This has to be a 7-10 year plan if we move at a good pace.

Current situation of Industries in Uttarakhand

Concentrated in plains

It is no secret that there is an imbalance in industrial development in Uttarakhand. Let us see from the economic Survey of Government of Uttarakhand. It is clear that only certain districts have any significant industry. Other districts lag far behind.

Certain districts in Uttarakhand have industries.
Certain districts in Uttarakhand have industries

Hills have only resource extraction based industries

Most of the industry in hills is based around resource extraction i.e. mining and exploitation of forests. Even the industries for processing these these raw materials are not established in hills.

SIIDCUL land banks

Government has established SIDCUL for development of industries. It has acquired land in many areas for establishing industries.  Almost all of these land banks are in plain areas, except 1 in Chamoli and 1 in Nainital. See the details in table attached. If this is not partial treatment of hills, what is?

land for industries in uttarakhand only in plains?
Land for industries in uttarakhand only in plains?

Employment in manufacturing in Uttarakhand

The issue of unemployment is very important. In Uttarakhand, a large and educated youth population is unemployed. The following data shows that the private sector in Uttarakhand employs only 1 lakh people, while govt employs double the number. The number of registered unemployed as per government data is around 8.5 lakh. Even if we include the MSMEs, the total employed population in private sector comes to approx. 3 lakh. This is shameful.

Organised sector is tiny in Uttarakhand
Organised sector is tiny in Uttarakhand
8.5 lakh berojgars!
8.5 lakh berojgars!

Govt policies for manufacturing in Uttarakhand

Government of course has made many policies. Be it MSME, land banks, cluster approach, manufacturing of solar panels, manufacturing of Electric Vehicles or even start ups etc., govt has a policy on everything. These provide for no stamp duty, cheap electricity and even capital subsidy. But the bureaucratic nature of such policies and rampant corruption, coupled with no interest shown by the government of popularizing them means not much on ground. The investor’s summit did not help as much as it could have. I will discuss the issue of policy errors in a separate post.

Why industries in Uttarakhand:-

Some people may ask why even have industry in Uttarakhand. These may include some environmentalists, Marxists or even some foreign funded NGOs. I put in my humble two cents below:-

Agriculture cannot provide

In Uttarakhand, more than 50% of the population depends on agriculture and primary activities. However, the share of this sector in value addition{income} of the state is less than 10%{for agriculture only around 4%}. A vast majority of farms are small or marginal in the hills and even with suitable inputs cannot produce much surplus. There are some areas which can improve{as we will discuss in future}, but it is impossible that such a large proportion of population can improve the standard of living by just being dependent on agriculture. Most of hill farmers live at subsistence level and among them, many are socially very backward.

Because this is how it has been done

Industry provides more value addition and more wages leading to raising the standard of living. This has been true of industrialized countries as well as industrialized areas in the country and indeed in the state itself.

Only regular wage work in organised sector can cure the problem of unemployment. The talk of self-employment is all good, but the fact is not everyone has the aptitude or the inclination to become an entrepreneur. Not many wish to take the financial risk. Regular job is the most sought after type of employment. Manufacturing or industry is the only sector that can provide large scale employment. This is also the basis of Make in India programme of GoI.

Migration can be stopped/reversed by manufacturing/industry

The touchy issue of migration in Uttarakhand led to formation of Migration Commission. The commission found in its report that the biggest reason for migration in Uttarakhand is unemployment. More than 50% migrated because they could find no jobs. Industry/manufacturing can solve this.

jobs biggest reason for migration
Jobs biggest reason for migration

This is an opportunity!

Uttarakhand’s hill areas have enough land for establishment of industry. Unlike other places, there are no insurgencies, resistance from local people against industry etc. We also have a large educated population. This is the time to leverage that.

Social progress

Industrial development also leads to metropolitan culture and lessening of social inequalities. It is a well-known secret that untouchability still thrives in Uttarakhand’s hills. A few years ago a sitting MP was assaulted by locals when he tried to open temple for Scheduled Castes. The assaulters were apparently from Scheduled Tribes!

Over-dependency on tourism

As of now Uttarakhand is overly dependent on tourism sector. Its hotels, transport services, small dhabas are all geared towards tourists, especially during Char Dham yatra. We need diversification in state govt revenues as well as in employment of people. The current crisis is an example how dependency on a single sector can damage the economy. This year there are very slim chances of Char Dham Yatra. The impact on hoteliers, dhabas, travel agents, drivers etc. would be devastating.

Suitable industries for Uttarakhand

I had promised to provide a list of industries that may be suitable for hill areas of Uttarakhand. The same have been discussed below. It is not an extensive list and there may be other suitable industries. These include footloose industries like smartphones assembling to agri and horticulture based industries.

Agro-based industries in Uttarakhand

Agriculture based industries that can be established with small capital are already in Uttarakhand. Their promotion by credit expansion, marketing, infrastructure etc. is much needed. These can leverage unique agri-products of Uttarakhand{e.g. Madua, Jhangora etc. } An inspirational example in this is Lizzat Papad, which has become a brand. Efforts can also be made to pursue getting Geographical Indicators for such unique products so that these may become premium and well known worldwide. Horticulture based food processing industries on lines of Himachal are also good option.

Ayurveda based industries in Uttarakhand

Uttarakhand also has a conducive climate for growing Ayurvedic herbs. The government claims it has increased focus on certain ayurvedic plants. Factories for processing and packing them can also be established. Although 2 parks are already there in plains, hill areas should also have such herbal parks. These can complement religious tourism and focus on Yoga. In this context manufacturing of Tibetan medicines can also be explored. Fortunately, we have a large Tibetan population to guide us for that.

Footloose industries.

There are certain industries that are non-polluting e.g. assembling of electrical and electronic items, CFL, solar modules, smartphones etc. Some or all of these can be established. These are also footloose industries i. e. they do not require any raw material, water etc. These only need some land, electricity and transport infra. These can be established in hill towns near railway heads. The extension of railway to Karnprayag is a massive opportunity for these industries.

IT industries

IT and ITES industry especially Hindi call centres can also be established in hills. For the start, government should give its own call centre contracts to companies situated in hills. These do not require even much of infrastructure. Uttarakhand has no dearth of educated youth to work here. In time, even international/English call centres can be established in hill areas.

Hydropower

One of the premises of Uttarakhand movement was that the state will exploit its hydropower potential and earn revenue. The state has more than 50000 MW of potential and the generation is hardly 3500 MW. Projects like Pancheshwar are stuck for years. Efforts to restart them and to provide employment to local youth in these should be made. I will discuss its environmental impacts etc in a separate post.

Garments and Leather products

Uttarakhand needs to generate jobs that are formal and productive, provide bang-for-buck in terms of jobs created relative to investment, have the potential for broader social transformation, and can generate exports and growth. The apparel and leather and footwear sectors meet many or all of these criteria and hence are eminently suitable candidates for targeting. These provide job opportunities specially for women. These also provide most jobs for the given investment. China is vacating this sector due to rising wages, Uttarakhand should capture it rather than places like Vietnam, Bangladesh etc. These industries are markedly less polluting than say textile and tanning. With our disciplined labour, we could invite bigger firms to shift manufacturing in plain areas and smaller ones{or their vendors} to nearby hill areas.

Leather goods and garments industry is provides jobs
Leather goods and garments industry is provides jobs

Conclusion

This post delineated in brief our current state and future opportunities. Of course it needs appropriate policy response in factor markets {e.g. land and labour}, tax reforms and maybe most importantly, push on infrastructure. As stated above, I will discuss these separately in another post. You can give your opinions in the comments below. Having discussed industry in Uttarakhand, we will discuss agriculture, policy responses needed etc. in coming posts.

Pawan
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2 Replies to “Industries in Uttarakhand : Uttarakhand in 20 years #2”

  1. The same precise..to the point… write-up… in continuation to the previous article in this series. The comments of writer on current common approach towards setup of industries in hills are very good. Also, this article not only discusses the challenges but also suggest the remedies. Really impressed…waiting eagerly for the next article in this series….

    1. Virendra sir,
      Thanks for the high praise. I hope to do justice to your expectations.
      With regards,
      Pawan

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