Unravelling the Punjab paradox
Shinder S. Thandi

The Giant Awakens: Punjab Industry and Growth
by Dr Gurpreet Maini. India Research Press, New Delhi. Pages 279. Rs 690.

THE basic economic challenge for a developing region is that of undertaking a successful structural transformation from a predominantly agricultural-based economy to a diversified, modern, industrial one. Historical experience suggests that this structural change follows soon after the successful modernisation of the agricultural sector. In Punjab, however, this structural change has been slow. Consequently, jobs have failed to emerge in the non-farm sector, adding further to high unemployment caused by modernisation. The Punjab paradox provides an interesting case study: how can we explain the co-existence of agricultural prosperity and lack of industry, especially of the larger scale variety, sufficient enough to absorb surplus labour arising in the rural areas? What has slowed the structural change?

Over the years, scholarship on Punjab’s economic history has identified many constraints that may have contributed to its relative backwardness in industrial development. Some of these range from explanations that emphasise the lop-sided development inherited from colonial rule to constraints imposed by the unequal Centre–state economic relations which work to the detriment of states like Punjab and to the specific form of the post-Independent nationalist project which implied a deliberate attempt by the Indian State to perpetuate the status of Punjab as the granary of India.

None of these and other explanations, although inter-related, have been weaved together, synthesised and placed in their proper historical context. The book provides a refreshing and convincing narrative in achieving this objective. Maini employs a multi-disciplinary approach in understanding the Punjab paradox and argues that the central explanation for the relative industrial backwardness needs to be related to the absence of the prolonged economic and political stability in Punjab. Through meticulous use of documents and data, she takes us, chronologically, through different "speed-breakers" in Punjab’s industrial trajectory.

In Chapter 1, the author assesses the relationship between colonial rule and industrial development. As the Punjab was primarily perceived as an agricultural region, British policies and investment further enhanced agricultural production and exports, but industrial development lagged behind and Punjab began to fall behind other states.

However, industry was not totally absent, as we see the emergence of thriving, albeit on a small-scale, textile and woollen industries in Lahore, Amritsar and Ludhiana. Further growth of these nascent industries was, however, shattered with the partition of the Punjab. During the pre-and post-partition periods, supply chain networks were disrupted, skilled labour and markets disappeared and East Punjab emerged as a border state with long-term implications for industrial growth. Chapter 2 discusses the impact of political instability in holding back industrial development. The Punjabi Suba movement of the 1950s and 1960s, wars with Pakistan and China, the further re-organisation and partition in 1966 and the protracted period of militancy contributed to the downfall. Maini provides a persuasive case in linking the rise of militancy with lack of creation of employment for the rural youth. She also provides evidence of capital flight and why companies preferred to expand outside Punjab. Industrial development in larger districts like Gurdspur, Ferozepore and Amritsar suffered because these were both border districts and hotbeds of militancy.

The impact of Green Revolution and liberalisation on industrialisation has been assessed. Much of the Punjab economy is still rife with inter-sectoral dualism and a lack of strong inter-linkages, especially through the development of higher value-added agro-processing industries.

Whatever growth there has been in agro-processing and other supporting industries, it is mainly at a small scale. There is also limited development of an industrial entrepreneurial culture, especially amongst the well-off rural cultivators, who prefer conspicuous consumption, and to invest in real estate or leave their surpluses as idle bank deposits. No wonder then that Punjab exhibits low levels of credit-to-deposit ratios given its level of per capita income.

Despite the coinciding of end of militancy with the economic reforms, it took over five years for Punjab to develop an industrial policy. A lag in policy response further eroded the state’s position. It still remains one of the slowest reforming states.

Institutional discrimination by the Centre, especially in allocating so little investment and projects to Punjab, is also demonstrated. The book dares the political leadership to arrest Punjab’s relative decline.

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