The Tatas at the gates of Singur

So, Mamata didn't croak after all. If memory serves me right, I haven't heard about any career politician in independent India dying from a hunger strike.

The Tatas had a mixed year in 2006. On one hand, they captured headlines all over the world for their ambitious gambit to acquire Corus, on the other they made a very surprising move to establish their "peoples" car factory in Singur, WB, of all places.

Looks like their first gambit may have failed, while the car factory might just take off after all.

Needless to say, the Singur fiasco has created a colossal dilemma for bloggers of all persuasion. The leftist/socialist bloggers can not wholly welcome the move because although launched by their political darlings, it is a direct anti-thesis to their basic script of oppression and anti-globalization. The right wing bloggers meanwhile got thrown into a state of confusion. The general direction seems right to them, but is it really? There were such right wing issues as right to property etc. to be examined. The holy grail of economic development could not be ignored.

Slowly and surely, most bloggers are starting to welcome the move. Ravikiran gave a thumbs up to the deal, although I must say the point of emphasis was something wholly different. Sandeep, in his terse post, seemed to laud the deal. GreatBong weighed in with a history of West Bengal's economic demise and at the end seemed to give his support for the deal. Some comrades got so excited by this deal that they wrote about how the New Left will chart India's modern history in ways we could not imagine!

Not only do we strongly condemn the deal, we think this project is a colossal blunder in the making.

No, we are not just saying this for adopting a fashionable contrarian point of view.

The basic idea that a particular state needs to be developed in order for its residents to enjoy the fruits is utterly perverse. One wonders why even folks who seem to understand economics tend to buy this. Why couldn't this project be launched in Vidarbha? Heck, some farmers there were in fact even attempting to sell their land to the Tatas. No one questions this idea because India remains, psychologically, the multitude of nation states that it always was. A Tamil won't feel comfortable if they built a factory in WB and vice versa. There are strong rallying cries of restricting employment to locals. We have heard it in Maharashtra. We will soon hear it elsewhere. Indeed, the implicit promise to the ex-farmers of Singur is that they will be provided employment in the new factory.

Basic economics suggests that the states should specialize in things they are best at. By this I am not alluding to the mythical fertile lands of Singur. Agriculture as a provider of mass employment is doomed. By trying to build factories, WB is going against the grain of its cultural strength and heritage. People from Bengal used to be and perhaps still are culturally superior to the rest of the nation. Heck, even the whole Hindu Nationalism thingy was scripted exclusively in West Bengal, by Bankim Chatterjee. Bengalis do not like working in factories and their climate does not help either. The extreme humidity makes one lethargic. It makes Bengalis even more lethargic. If you look at youth from Calcutta, they seem to be sapped from all energies, merely surviving and forever smoking cigarettes. Menial work is practically looked down upon in Bengal. A Bengali youth would rather live off his parents than take up a factory job. That is why you will see the most demanding physical tasks are being done from folks from neighboring states, especially Bihar.

Bengalis however make excellent office workers. They learn fast and in general exhibit an unusual curiosity for scientific stuff.

Buddha, instead of expending his own energy and that of his people, should have done the obvious. He should have asked Tatas to get the hell out of Bengal, others too. He should have welcomed with open arms the software and BPO giants. This was already happening, and the reason it has not happened more is because of the notorious reputation of poor infrastructure. Budhdha should have welcomed the Ambanis to build satellite townships that are livable and welcoming to the populace from outside. Indeed, WB itself could provide the skilled workers it needed. West Bengal could take the retail lead along with the small goods/electronics and ITeS sector. Softer sectors such as advertising, finance and perhaps even film production would follow. All it needed was a goddamn basic city with reasonable roads and habitable suburbs.

But Buddha had to go all out and try and trump other chief ministers. After all, how could he miss his 15 minutes of fame on the pages of history?

Finally, we must analyze the economic logic behind this factory.

The first trials of the new car took place last month at a test track in Pune, near Mumbai. It is not a cut-down version of an existing car, but is an entirely new design. With a rear-mounted 30bhp engine, four seats and a choice of four- and five-door models, it is a "good-looking car which is comfortable to drive," according to Ravi Kant, the boss of Tata Motors. Most ambitious of all is the price. The car is known as the "one lakh" car - one lakh is 100,000 rupees, equivalent to around $2,100 when the car was first conceived four years ago. Material costs have since increased, but Tata still hopes the price will be less than $3,000 before tax. (from The Economist).

It looks like the Tatas and everyone else too is taken up with a fantastic idea that there is a strong cutoff line between people who can afford cars and who can not. In other words, if a car is introduced at a certain magical price point, hundreds of millions of people will suddenly jump across that cutoff line and line up to buy a car from the Tatas. Even a kid could blow holes in this theory. Quiz: Name a people's car that was launched in India with the very same premise in the late 80s.

Looks like for about a lakh and a half rupees, the Tatas will sell you a box smaller than the Maruti 800 with donut tires. Why would you not buy a much bigger second hand car with lot more features? Indeed, all companies will launch competing basic model cars. They will price them a bit higher but offer a lot more features. It is not that the Tatas can't make decent cars, but this project is not going to bring an economic miracle that will turn WB into say Gujarat.

Mamata will not go away, not so easy. She will breath down the necks of Tata management. Worst still, if the project turns into red, we might see protectionism creeping back into the auto sector. Because the project has gone beyond sane economic argument and firmly entered a political match whose success will become a key issue in the next general elections.