Assam’s MSME Ordinance: Just the opposite of what is needed

The government of Assam, in its recently held Cabinet Meeting, passed an ordinance allowing setting up and operation of Micro, Small and Medium Enterprises (MSMEs) just by submitting a self-declaration, without requiring to obtain any permission and/or license for the same. While the details of the ordinance are still not known, the Minister for Industries, government of Assam Chandra Mohan Patowary in his social media account has claimed this as the “historic and far reaching decision to ease out the process of setting up industries in Assam”. He further said “now any one will be able to set up industry in Assam just by submitting one self-declaration. No permission, clearance or licence will be required for three years. Land will also be deemed converted for industrial purpose. Such bold and advantageous change is expected to accelerate the industrialisation process in Assam”. Evidently, the government’s announcement has caused much concerns and wide-spread resentments among various organisations as well as among general public.

The decision of the government has been termed as “anti-people” as it goes against the interests of the indigenous people of the state. The Minister, however, given the public irks has clarified that the “MSME ordinance approved by Assam Cabinet is only for Micro, Small & Medium Enterprises, not for Large Industries. This will largely help Local Entrepreneurs. This ordinance will not be applicable for hazardous industries and no industries will be allowed in Eco Sensitive Zones.”

Photo - Sushanta Talukdar

Clearly, for Assam, the question of land is not only a “development issue”. It is more a question of identity and self-security for the people of Assam. For a long time, the issue of land alienation has remained at the core of political discourses in the state and consequently, the issue of protection of rights over land for the people of the state has emerged as a consensus. In fact, the Assam’s Land Policy of the 2019 specifically acknowledges the necessity of the same. Moreover, the question of land was also an integral question of the “safe-guard” of the people of the state as envisaged under the Clause 6 of the Assam Accord; and the High Power Committee’s (constituted by the Union Home Ministry) recommendation on the issue was eagerly awaited. Given this backdrop, the decision of the government of Assam facilitating automatic conversion of land for industrial purposes bypassing all existing provisions of protection certainly emerge as most insensitive and blatantly outrageous.

Barring all other aspects, one has to realise that the very economic rationale of the decision seems to be grossly flawed. The proposition that industrialisation at any cost, even at the cost of agriculture and agricultural land will bring about general development and prosperity in the long run is based on the out-dated idea of two-sector growth model which invariably assumes that any dispossession resulting from such attempt will eventually prove to be good since the modern industrial sector is expected to accommodate all those dispossessed by the process itself. This idea is neither empirically and historically valid nor is theoretically feasible.

Empirically, it is now well-documented that this is far from being true as the rate of dispossession has always been found to be much greater than the rate of absorption in the modern industrial sector. Also, such attempts hardly make any sense when there is already massive unemployment in the state. Theoretically too, modern industrial sector’s capacity to create employment is limited by the steady increase in the technological progress and productivity of labour since the rate of growth of employment is the difference between the overall growth rate and rate of growth of productivity of labour.

Photo : Indukalpa Bharali

The proposed decision is also based on the flawed assumption that MSMEs in the state are constrained only by regulations and licensing requirements. While this may be one of the issues for some MSMEs, the major constraints faced by the MSMEs in the state entail lack of adequate infrastructure including power and other logistics, access to low-cost finance and above all, access to an assured market. These are the areas where the Government – both state and central should have focused if some substantive change was expected. One might wonder what might have happened to much hyped government land-bank for industrial purposes. Why not those parcels of land are developed for industries with single window clearance? Without addressing these fundamental constraints, blanket removal of regulation and licensing in the name of reform and ease of doing business is not going to encourage MSMEs to develop and expand. At the end, this will only result in massive rent seeking by some relatively bigger MSMEs rather than real industrialisation for the benefit of the state’s economy, since already definitional change in MSMEs have brought lot of relatively bigger sized units to the fold of MSMEs. Most importantly, the measure will not facilitate a recovery as anticipated rather, it will only worsen the state’s economy even further as the rent-seeking itself will adversely affect the income distribution suppressing aggregate demand.

It is high time that state’s economic vision is clearly articulated. Till now enough of ad-hoc trials and experimentations have been tried with no substantive outcomes. Need of the hour is to strengthen the agricultural economy of the state through a series of substantive policy interventions aiming at land augmentation, modernisation and increasing productivity. The MSME ordinance does exactly the opposite. It will only result in large-scale land alienation and a process of accelerated primitive accumulation in the state. At this hour of crisis, government’s focus should be on saving peoples’ life and livelihood rather than bailing out so-called “businesses”.

Joydeep Baruah

( Joydeep Baruah is an economist and the Lead Author of the Assam Human Development Report, 2014. He is an Associate Professor of the Omeo Kumar Das Institute of Social Change and Development. He can be reached at [email protected])