The Umbrella Corporation of India

The other day, in a TV debate between Mani Shankar Iyer and Swapan Dasgupta, a question was raised from the audience about why employment focus was missing in today's economic policies

Iyer, true to his credentials as a Nehru family acolyte , said  something about how pre-1990, before 'economic reforms' were unleashed, small industry was nurtured precisely for this reason and how unfortunately the current discourse on economic reforms is bereft of such humane considerations.

The audience were young people who were unaware of what passed off as economic policy & planning, the ill effect of which we are still suffering from , with about 700 million people barely eking out a living.

There is plenty of statistics to prove that the growth that we are seeing in the last decade is not job-less as leftists and their apologists would claim.  There is for the first time in the history of India, the poor and the unorganized have had a semblance of economic justice and participation.  But I want readers to understand how we practised self-flagellation in the name of  economic policy thru a story.  Let take a ride in a time machine and travel back to 70's , the days of garibi-hatao. 

The Planning Commission in its infinite wisdom one day came up with a policy note that India required 17 million Umbrellas during 'the current 5-year plan period'. ( It was the fashion of those days to talk with respect to  5-year plan periods.)  Umbrella making, as it was in the 'A List' of Industrial Policy, was reserved for the Public Sector and there was no significant production of Umbrellas within the country, so much of the demand was met by and some small manufacturers with Haji Mastan and his colleagues of the smuggling underworld of Bombay making up for the rest. The mandarins of the Planning Commission, Industry Ministry and the DGSND initiated a note to the Cabinet with a recommendation to set up a Manufacturing unit in the Public Sector with  4 million pieces as annual capacity. Thus 'The Umbrella Corporation of India' was born.  The site for the factory was identified in Bundelkand based on a complex criteria of backwardness and the need for 'dispersal of industries'.  Machines were ordered from Germany and Japan and a housing colony was built to staff about a 1000 employees.  By the time the machines arrived and the factory was commissioned 3 years had passed and owing to mismatch between German and Japanese machines, the factory could never reach its rated capacity.  The per unit cost of ' Janata' Umbrella was Rs.800/- and it was loss-making from day one of its operation. Since umbrella was an  'essential commodity' and the 1000+ employees' future could not be sacrificed at the altar of economic logic, the factory was run at half capacity with huge subsidy from the exchequer. In the meantime there was rampant black marketing in 'Janata' umbrellas and the demand was seen as  much higher than the estimates of the Planning Commission.

The think tanks of the JNU and Delhi School of Economics were reverberating with the need for a   'comprehensive policy' on Umbrellas.   Articles were written in the Economic & Political Weekly by esteemed economists* stressing the need for such a policy and its dovetailing with the proposed National Policy on Wages, Incomes and Employment. In response, the Government appointed a Committee with members from all economic ministries under the chairmanship of  Prof. Bhattacharya. The committee after 6 months of deliberations came out with a report that recommended inter alia;

1.      The approval by the Government of the investment proposal for 300 crores pending with it for more than 2 years for de-bottlenecking the plant at Bundelkand.

2.      The setting up of state level Umbrella Corporations with equity participation from the Centre. These Umbrella Corporations will receive kits from “The Umbrella Corporation of  India” and assemble and distribute Umbrellas in the respective states, the main plant restricting itself to the manufacture of these kits.

3.      That the import of Umbrellas be moved to the 'Restricted List'  from the 'Banned List' in the new Import/Export Policy with appropriate protection to the domestic industry, with government owned State Trading Corporation appointed as the canalizing agency.

4.      That Umbrella production be allowed in the Joint-Sector with centre or state governments holding at least 51% share in the equity  capital with the proviso that 60% of their production be reserved for sale to small-scale sector in the form of kits.

The government accepted the report and after careful consideration of its recommendations and after taking full cognizance of the need to protect the fledgling domestic industry, called as 'Infant Industry Argument' in the corridors of JNU/DSE, and the need to conserve ‘scarce foreign exchange’ allowed for import of Umbrellas in the subsequent year’s Import/Export Policy with 300% Customs Duty, 30% Additional Customs Duty and 10% Special Customs duty + surcharges.

The states saw the ‘employment potential’ of Umbrella making and promptly set up state-level Umbrella Corporations with states like Kerala solely reserving the sales and distribution of Umbrellas to the public distribution system.  The Industry Minister at the centre, the chief fund-raiser for the ruling party, was literally having his hands full with applications to start Umbrella Manufacturing Units in the Joint Sector.

Before long the Umbrella Corporation stopped all production. You only hear about them in the newspapers when once in every few years the employees agitate for increase in salaries or bonus.

The net result of all of these is that there was neither growth in employment nor availability of goods. Only rent-seeking thrived and it is strange that there are still influential people in Congress who are apologetic about economic reforms that were unleashed by Narashima Rao and Dr. Manmohan Singh. 

It is said those who forget history are condemned to repeat it. It also includes economic history.

* Profs. Partho Ghosh, S. Sarkar, D. Sen, et al