West Bengal used to be one of the richest states in the country at the time of independence and Kolkata was an economic powerhouse till the 1960s. However, five decades of Communist and pro-Islamist rule has turned it into one of the poorest states of the country with abject poverty and unemployment in Western and northern regions of the state.
Kerala, another state that has a long history with Communism, is now paving through the same path. The state was saved from being an economic disaster so far due to two reasons – first being the fact that a business-friendly Congress came back to power alternatively in the state and the second is that it was helped by flourishing oil economy in Gulf states where Keralites went in large numbers for jobs and sent billions of dollars back home as remittances.
However, now both factors have been nullified. Congress is at its weakest in the state and more or less has succumbed to the Muslims league, thus the Communist party came back to power in 2021 and the Gulf economy has crashed due to low oil prices and massive job losses during the Covid wave. Many Gulf states have imposed stringent rules on the import of labour to ensure their citizens have jobs during these tough times.
Now Communism has started taking over the business environment of the state and the exit of the Kitex group is best example of this. Kitex Group, the world’s second-largest manufacturer of kids garments and largest private-sector employer in Kerala, decided to exit from the state. A few months ago Sabu M Jacob, the head of the group, has promised to invest 3,500 crore rupees in the state to open factories at various locations. Now, after the witch-hunt against him by the Communist government, he will locate in these factories in Telangana and other neighbouring states.
“In case of project cost, my entire expense will come down by 30 per cent, if I am invest in Telangana, Andhra Pradesh or Tamil Nadu,” Jacob said. “We needed 200 acres for the project. In Kerala the per-acre cost was around Rs 3.5 crore, whereas in other states it is as low as Rs 15 lakh. Our land cost is halved straightaway,” he added.
After the Kitex group decided to scrap the investment in communist Kerala, its stock prices registered around 20 per cent gain within a day. Investors know very well that moving out of Kerala means the group would be able to post better profits and operate peacefully because nowhere in the country do industrialists face such humiliation for creating thousands of jobs and supporting the state’s economy.
The primary reason behind the witch-hunt against the Kitex group was the fact that Twenty-20, a CSR wing of Kitex Group, has become politically active in the area that is its base. The major factory of the group is based at the outskirts of Kochi and in the 2015 local election, Twenty-20 decided to contest and won all seats. In the 2020 local election, it won a few neighbouring constituencies too and contested in the 2021 assembly election. In the assembly election, it did not win any seats but bagged a significant number of votes in six constituencies.
Since then, its factory is repeatedly being raided by health and labour ministry officials of the Kerala government based on false complaints of labour law and pollution law violations.
Last year, PepsiCo, one of the biggest soft drink manufacturing giants, decided to shut its manufacturing unit in Kerala. The soft Varun Beverages, the PepsiCo franchise that ran the bottling plant in Kanjikkode, Palakkad had issued a closure notice in the midst of a combined trade union agitation demanding a wage hike.
The closure notice revealed the level of toxicity against private enterprises in the state of Kerala. It read, “Even after the order of the Honourable High Court of Kerala granting police protection, the situation is very grave and the threat of criminal assault is looming large. Permanent employees who are to operate the production line are on illegal strike since they are not doing the work as directed by the management. The management is incurring very huge loss due to the present situation and there is no hint of any improvement in the situation in the near future.”
PepsiCo’s decision to shut its manufacturing unit had come amidst the Kerala government’s refusal to reform the archaic labour laws that run against the profitability of private enterprises.
The largest private-sector employer has already ditched the state and if the political vendetta by the Communist government and trade union activism continues, very soon Kerala would become the next West Bengal.