1985; M. Singh, 1990; District Industries Center,. 1989, 1991). ...... Humphrey and Schmitz (1996) and the literatures cited ...... George Allen and Unwin, London.
World Development Vol. 26, No. 8, pp. 1387-1411, 1998 0 1998 Elsevier Science Ltd All rights reserved. Printed in Great Britain 0305-750)(198/$ - see front matter
Pergamon
PII: SO305750X(98)00091-6
Intersectoral
Linkages and the Role of the State in
Shaping the Conditions of Industrial Accumulation: A Study of Ludhiana’s Manufacturing
Industry
MEENU TEWARI” Massachusetts Institute of Technology, Cambridge, U.S.A. Summary. This article traces the historical and institutional sources of small hrm competitiveness in Ludhiana’s manufacturing sector. Four features emerge as salient: the indirect historical links and dynamics between the region’s industrial and agrarian sectors; past policies and the key role of the state in indirectly transforming the local skill base and creating the conditions for small scale accumulation among skilled metal workers; demand surges early in the region’s industrial history; and complex ties among firms of different sizes that created a capital-conserving, interdependent production network in the region. These processes together help explain why, despite being located hundreds of miles from any mineral or resource base, firms in this region outcompeted others in the country to dominate national markets in the sectors in which they specialized: bicycles and parts, sewing machines and woolen hosiery. 0 1998 Elsevier Science Ltd. All rights reserved. Key wordy India, Asia
organization
of production,
state,
1. INTRODUCTION
small
enterprise,
skill formation,
agriculture,
M. Singh, 1990; District Industries Center, 1989, 1991). Second, in sharp contrast to the marginal and dependent role of small firms portrayed till recently in much of the modernization and development literature, Ludhiana’s small and medium-size firms are noted for their dynamism, 1985;
Ludhiana District in Punjab, India, is widely regarded as the star performer in India’s “Green Revolution.” Its spectacular success with agricultural modernization is held up as a model, even today, for other states and regions to emulate. Less well known is that Ludhiana has also experienced quite sustained and dynamic industrial growth led by small and medium-size firms. Ludhiana’s industrial structure is distinct from the picture of small firm-led regions in the development literature, and the experience of other industrialized regions in India in three key ways. First, unlike the more industrially sophisticated states such as Maharashtra and Gujarat, Ludhiana’s industrial growth is dominated by small and medium-size firms even in sectors which tend to be characterized by large and hierarchical firms in other regions.’ Industrial surveys conducted by state and federal agencies (for example in 1973-74, 1979-80, 1989, and 1991) have consistently shown that over 99% of Punjab’s registered firms continue to be small in scale’ - so much so that Ludhiana has been dubbed the “small industries capital” of India (Pathak, 1970; Sandhu and Singh, 1983; Pandit,
*This study is based on field work conducted in Ludhiana, India, in the summer of 1990, fall of 1991, and in spring 1992 with funds from the Resource Systems Institute of the East-West Center, and the John D. and Catherine T. MacArthur Foundation, via the Center for International Studies at the Massachusetts Institute of Technology. I am grateful to Gillian Hart for all her advice and comments. For helpful suggestions and critical comments I thank Judith Tendler, Charles Sabel, Hubert Schmitz, Michael Piore, Lauren Benton, Lance Taylor, Lisa Peattie, Bina Agarwal, D.B. Gupta, Mark Holmstrom. Morris D. Morris, Satish Saberwal, Madhura Swaminathan, and two anonymous reviewers. I am also grateful to members of the Department of Development and Transformation Studies at the Ifo Institute of Economic Research in Munich, for providing me a supportive year within which to conduct the final revisions. All errors of fact and interpretation are my own responsibility. Final revision accepted: April 18, 1998.
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and incorporation into national and export markets (Singh, 1990; Singh, 1990; Dasgupta, 1989; Pandit, 1985; Sandhu and Singh, 1983; and Pathak, 1970). For example, small firms accounted for 77% of the state’s total industrial output in 1970-71 compared to nearly 40% in the nation, and 52% in 1980-81 compared to about 30% in the country as a whole (Sharma, 1989, p. 80, and Sandhu and Singh, 1983, p. 134).” These figures are for Punjab state, but as Punjab’s industrial core, Ludhiana district - one of 12 districts in Punjab - accounts for 21% of the state’s small firms, 22% of its large firms, and 26% of its total industrial output (See Table 1. Table 2 shows the rate of growth of Ludhiana’s small and large firms over time - from 1950-51 and 1990-91). Furthermore, as Table 3 and Figure 1 point out, Ludhiana has long accounted
for over half of Punjab’s total industrial (overseas) exports (Government of Punjab, 1992, District Industries Center, 1991). In addition to contributing significantly to Punjab’s industrial output, Ludhiana’s firms also dominate national markets in the sectors in which they specialize. Ludhiana city alone, with its 40,164 registered small firms4 and 109 medium/large firms, produced 95% of the country’s woolen hosiery: 85% of its sewing machine parts and over 60% of its cycles and cycle parts” in the early 1990s (Dasgupta, 1989, p. 63, Pandit, 1985: S. Singh, 1990, UNIDO, 1996). Even more significant, small firms in Ludhiana and Punjab more generally contribute more to exports than do large firms. For
example,
as Table
firms in Punjab
4 shows,
accounted
in 1988-89,
small
for 61% of total
Table 1. Distribution of small and large industrial firms, employment, output, and exports in Ludhiana und Punjab in 1991 Ludhiana 2.4 3,176 83 209,277 45,495 Y8, I23 4,538
Population (in millions) No. of small firms No. of large firms Employment of small firms of large firms Industrtal Employmentoutput” Industrial exports (overseas)” Source:
Government
of Punjab
Ludhiana
Punjab 20 160,368 373 668,1(45 187,311 377.396 8,663
(1992). pp. 82-83, 402-403,
579; District
Industries
as % of Punjab 12 21 22 31 24 26 52
Center
(1991)
Table 2. Growth rate of Ludhiana ‘J small and large firms’
No. of small firms in Ludhiana
Growth over previous period (%)
Average annual growth rate (%)
1950151 1960161 1970/71 1980181 1990191
391 2,440 7,835 12,019 33.176
524 221 53 176
52 22 5 18
1986187 1987188 lY88/8Y 1989190 199019 1
23,948 25,722 27,995 30,409 33,176
7 Y 9 9
7 9 9 Y
Year
Growth over previous period (%)
Average annual growth rate (%)
4 13 29 52 83
225 123 79 60
23 12 8 6
65 69 70 80 83
6 1 14 4
6 1 14 4
No. of large firms in Ludhiana
Source: Wall (lY73); Pathak (1970); Government of Punjab (1992); District Industries Center (1991) (typewritten office documents). “Small firms in India are defined in terms of investment levels rather than number of workers. Up to the 1980s firms with investment in plant and equipment below Rs. 3.5 million were defined as small firms. In 1991 this limit was increased to Rs. 6.0 million by the government of India, and in 1997, the limit was raised to Rs. 30 million.
INTERSECTORAL
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LINKAGES AND INDUSTRIAL ACCUMULATION
Table 3. Ludhiana and Punjab’s industrial export performance over time: 1979-80 to 1990-91 (expori values are in millions of cuwent rupees)”
Year
Ludhiana exports
Punjab exports
Ludhiana’s exports as % of Punjab’s exports
Growth rate of Ludhiana’s exports
575.8 740.0 1120.1 1096.0 827.2 1090.0 1397.0 1420.3 1788.0 4537.5
1254.5 1622.0 2248.0 2287.1 1972.0 2036.0 2452.0 2749.0 3415.0 8663.0
46 46 50 48 42 54 57 52 52 52
29 51 -2 -25 32 28 2 26 154
1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1990-91
Source: Directory of Exporters of Punjab (1989); District Industries Center (1991). “The governments of Punjab and India introduced an aggressive export promotion policy in 1990-91.
79
80
81
82
83
84
05
86
87
90
80
81
82
83
84
85
86
87
88
91
Years Figure 1. Industrial exports (overseas) from Ludhiana and Punjab: 1979-91.
Table 4. Export of industrial goods in Punjab: (in millions of cuwent Rupees) Year
Small-scale
Large/medium
Total
1.
1985-86
2.
1986-87
3.
1987-88
4.
1988-89
5.
1990-91
1571.8 (64.1)” 1740.8 (63.3) 2339.4 (68.5) 2842.8 (61.0) n.a.
880.2 (35.9) 1008.0 (36.7) 1077.2 (31.5) 1817.2 (39.0) n.a.
2452.0 (100.0) 2748.8 (100.0) 3416.6 (100.0) 4660.0 (100.0) 8663.0
Source: District Industries Center, Ludhiana, Punjab. “Percentage shares in parentheses.
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Table 5. Average unnual industrial growth rates in Punjab and hdia (in percentage per annum) Base
Period 1965-66 1968-69 1973-74 1979-80 1985-86
to to to to to
1968-69 1973-74 1978-79 1983-84 1989-90
(Annual Plans) (Fourth Plan) (Fifth Plan) (Sixth Plan) (Seventh Plan)
@ 1960-61 @I,1960-61 @ 1970-71 @I 1970-71 @ 1980-81
prices prices
prices prices prices
Punjab
India
6.7 5.3 9.95 6.5 8.6
2.9 3.7 6.9 3.4 6.8
Source: District Industries Center, Ludhiana, Punjab: Government of Punjab (1992) p. 59.
industrial exports in value terms compared to 39% by large firms. In addition, since the mid-1980s according to some estimations, Ludhiana has accounted for 20% of the non-communist developing world’s export of cycle parts (Dasgupta, 1989, p. 65). Third, in contrast to the dependence on local input markets that one usually expects of small enterprises, small and medium-size firms in Ludhiana’s fastest growing sectors rely almost entirely on regions outside the state for For example, raw-materials and resources. Ludhiana’s hosiery industry depends on wool imported from Kashmir and Australia; metalworking firms and the region’s light engineering industry as a whole depends on steel and coal imported from the country’s Eastern iron-ore belt located more than 1500 km away; and finally, rubber for the cycle and auto industries comes from Kerala, more than 1800 km away (Dasgupta, 1989; Sharma, 1989; Pandit, 1985; National Council for Applied Economic Research, 1962, 1967; ILO, 1961 cited in Pandit, 1985). Moreover, over 90% of Punjab’s output is sold outside the state (District Industries Center, 1991). Rather than being built off local demand and resources, Ludhiana’s small firms are firmly tied into regional and international input and output markets. In addition to their integration into national and international markets, Ludhiana’s small firms have shown impressive resilience in the face of an important episode of industrial deceleration in the country since the mid-1960s up to the late 1970s.’ Although there is considerable debate over the periodization and regionally differentiated impact of this deceleration (see 1989) Ludhiana’s growth rate of Weiner, manufacturing has been consistently higher than the national average throughout this period. Taking Punjab’s rates of industrial growth as proxy for Ludhiana, manufacturing in the state registered a mean annual growth rate of 6.9% during 1966-78 and 9.4% during 1971-78 (Johar and Kumar, 1983, p. 184) compared to the 5%
mean annual growth prevailed nationally
rate of manufacturing that during 1966-82 (Weiner,
1989, p. 134). Similarly, from 1970-71 to 1983-84 Punjab’s industrial sector grew 1.67 times faster than the Indian average (Bhalla et al., 1990). Table 5 summarizes this trend and shows that the annual growth rate of income generated by the industrial sector in Punjab was higher than the national average in each of India’s Five-Year Plan periods, and nearly double the Indian rate during the purported deceleration years. This episode of resilience, moreover, is not an isolated one. Most recently, Ludhiana’s productive structure has weathered relatively successfully the intense political turbulence of Punjab’s decade-long secessionist movement that began in the early 1980s and waned only in 1993. During 1985-90, for example - despite the ongoing instability and violence at that time - Punjab’s secondary sector grew at an average annual rate of 10.3% compared to 6.5% nationally (Government of Punjab, 1991-92). Throughout this adverse period, Punjab continued to lead the country’s 22 states in per capita income - a lead it has maintained without interruption since the late 1960s. Given that small firms dominate Punjab’s industry, this growth is especially remarkable because it is so contrary to the view in the literature that although small firms are the repositories of employment during boom times, they are also the first to die during times of adversity (Brown et al., 1990). What, then, explains this region’s impressive industrial performance and resilience? Is Ludhiana’s spectacular agricultural performance in any way linked with, or responsible for its small-firm led industrial growth? Finally, what lessons can we draw from studying Ludhiana’s industrial pattern regarding the way we think about regional development, industrialization and its relation with agrarian transformation? As I will show more fully in the next section, the existing literature on industrial growth in
INTERSECTORAL LINKAGES AND INDUSTRIAL ACCUMULATION
Punjab fails to provide convincing answers to these questions. This, I would argue, is chiefly because most existing studies tend to dichotomize the economy into industry vs. agriculture, rural vs. urban sectors, and even when focusing on the industrial sector alone, they set polarities such as small vs. large firms. In so doing these studies miss out precisely those connections within and among firms and between agriculture and industry - which help explain how small and medium firms defray costs, spread or share risks and hence cope with uncertainty in product and input markets. Using Ludhiana’s industrial regime as an illustrative case, my argument in this paper is that a useful approach to explaining the dynamics of production in a growing region like Ludhiana, is to build an historically embedded understanding of how work is actually organized in the region. This approach involves understanding the key forces - local as well as macroeconomic and institutional - that have set the conditions for accumulation, investment and profitability in this region. Given the salience of agriculture in Punjab’s economy, this also involves tracing through some of the key ways in which industry and agriculture are connected and how and why these connections change over time. Specifically, in this paper I focus on the direct and indirect role that the state government of Punjab historically played in setting the conditions for industrial growth in Ludhiana. The paper will try to show for example, how the state indirectly set the conditions first for skill acquisition by an artisanal class of rural metal workers, and later for their absorption into industry; how it acted strategically during key conjunctures in the region’s history to create institutions that helped boost industry - partly because pressures in its environment forced it to - and how it creatively, but controversially, channeled restrictive rules and regulations (e.g., the country’s import substitution regime) in ways that indirectly helped produce a capital conserving, largely private industrial structure. Finally, the paper will show how changing sources of pressure on the state and local institutions shaped the way in which the state got involved in facilitating (or not) the access of different economic groups to resources. In Section 2 I briefly lay out, and critique the debates in the literature about Ludhiana’s smallfirm bias. Section 3 summarizes the argument. In Sections 4-10 I trace more concretely how the state government of Punjab helped shape Ludhiana’s industrial trajectory. Section 11 concludes.
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2. DEBATES IN THE LITERATURE (a) The late-start argument Some historians of Punjab argue that the region’s small and medium-sized firm bias comes from its late integration into the sphere of capitalist accumulation under the British. Punjab was the last province to be annexed by the British (in 1849). By the time British efforts at extending irrigation and infrastructure into Punjab began transforming its industrial and agricultural base in the late 19th century, Punjab had already missed out on the commercial opportunities offered by the mid-century (1860s) boom in cotton trade which had substantially enriched the bourgeoisie of coastal Bombay (Khanna, 1983, pp. 91, 99). Punjab’s agriculture began to commercialize at a brisk pace only in the late 19th and early 20th centuries. Punjabi capital therefore “did not grow big enough because of this late start, to take up large-scale manufacturing” even though some capital did flow towards “small-scale manufacturing processes closely allied with agriculture” using available skills and existing markets (Khanna, 1983. pp. 99, 101). Khanna and others such as Darling (1947) also attribute small (and slow) capital accumulation and investment in Punjab to the practice of usury prevalent in pre-independence Punjabi agriculture and commerce. Citing the rapid growth of agricultural debt in the early 192Os, and the importance of money-lending in the region, these authors argue that agriculture and commerce absorbed capital which might otherwise have been invested in large scale industry (Khanna, 1983; Darling, 1947). While providing important insights into Punjab’s industrial history these accounts do not clarify why capital did not flow more readily into industry as agriculture became commercialized and transportation networks linked the region with other major trading centers. Nor do these analyses discuss the precise mechanisms through which the agrarian surpluses that did flow into small industry got there. Unravelling these mechanisms is an important task because a bulk of the small entrepreneurs in Ludhiana are of artisan stock, former traders, or to use Piore’s term, “hyphenated” peasants who perhaps had some land but were not mainstream farmers. How, and through what channels, then, did these rural and urban groups get access to investible surpluses? Finally, such accounts do not explain why the small-firm bias in manufacturing has continued to persist in this region. Nor do they
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explain the consistent ability of these small and medium firms to compete quite successfully in national, and even international, markets.”
(b) The “crisis” and “culture” of autonomous entrepreneurship argument Another side of the debate about the persistence of Punjab’s small and medium-size firm based industrial organization involves writers who invoke cultural explanations about the “innate” innovativeness, industry, and enterprise of Punjabi entrepreneurs, in combination with the economic and social pressures imposed on many of them by their “refugee” status at the time of India’s partition in 1947 to “make it” (Pandit, 198.5, pp. 107, 115-145; Keller, 1970; National Council for Applied Economic Research, 1962; and Pritam Singh, 1963, pp. 122, 124)” These researchers argue that the partition of Punjab in 1947 represented a “crisis” or conjuncture for the immigrants who were uprooted from their local support networks in West Punjab. In building new networks these immigrant-refugees were willing to take risks and innovate so that, in conjunction with incentives from the state government, this process of economic reinsertion created conditions for the emergence of a broad-based class of small, autonomous entrepreneurs. In addition, Punjab’s transition into a border state, as many rightly argue, inhibited the government from risking heavy parastatal investments in the region. Large private capital from outside the state also stayed away for similar reasons, thus leaving the field open for small local firms to thrive. Although the occupational composition of the immigrants - possibly comprising a high proportion of manufacturers, traders, and skilled workers - may have influenced their entry into industry in substantial numbers, this argument does not, in and of itself, adequately explain the persistence of Punjab’s small-firm dominated industrial structure, nor its nature. For example, there are other regions in India which, like Punjab, experienced the conjuncture of partition tg.iuryFst Bengal), or are known for their of entrepreneurship and indigenous capital (e.g., Gujarat), but have developed very different industrial structures. West Bengal, like Punjab, suffered the upheaval of partition, became a border-state, and also received large groups of immigrants, including artisans. Apart from a small group that went into industrial selfemployment, many Bengali immigrants opted for white collar jobs in the public (and private) sector, or became absorbed as workers in the
service sector. Indeed even those who set up metal-working shops in thriving small-firm based parts of Bengal such as Howrah, declined in prominence exactly at the same time as their competitors in Punjab were rising.“’ Thus, the conjuncture of partition, and the impulse of refugees to work harder to “make it” does not go very far in explaining the nature of Punjab’s small-firm based industrial structure. Similarly, Gujarat - like Punjab - is a state known for its historical tradition of “individual largely indigenous capital, entrepreneurship,” and robust small-firm based growth (see Spodek, 1969, 1974; and Myers, 1958). Like Punjab it is also a high agricultural growth region. But under changed conditions of accumulation since the late 194Os, it has developed highly integrated, diversified corporations in many of the same sectors in which Punjab’s small and medium-size firms thrive. What then explains this difference? Clearly there are factors other than hard-wired tendencies for entrepreneurship, or historical conjunctures per se that shape and influence regional industrial trajectories. It is these forces institutional and historical that we will identify and attempt to understand later in the paper.
(c) Connecting the growth-linkage and industrial district literatures At a more theoretical level, of the several competing debates one might invoke to explain Punjab’s industrial trajectory, I want to focus on two potentially promising strands in the literature on regional industrial development. One is the growth linkage debate (after Mellor, 1976, Bell and Slade, 1982, and Hazel1 and Roell, 1983) which has been developed for Punjab by Thaper (1971), Gupta (1980), Deolalikar (1985) and Bhalla et al. (1990).” The other is the, by now voluminous, industrial district and flexible specialization literature (Piore and Sabel, 1984 is the classic statement, also see Sabel, 1993, 1994a,b)” which Schmitz (1989, 1992, 199.Q Holmstriim Humphrey (1994), (199% and Schmitz (1996), Kaplinsky Humphrey (1994), Nadvi and Schmitz (1994) and others have applied to industrializing countries. While neither of these debates, taken individually, succeed in fully explaining the character and history of Ludhiana’s decentralized productive regime, parts of them are useful in framing the debate about what processes make for dynamism in the region.
INTERSECTORAL
LINKAGES
AND INDUSTRIAL
(d) Linkages in Ludhiana: indirect, historical, and intertemporally significant
The stylized industrial district model isolates and focuses on key features which scholars looking at “dynamic industrial clusters” have found to have been historically present in most such regions. These common features include: a predominance of small firms, sectoral specialization, spatial proximity between firms, little separation between conception and execution in the labor process, active local institutions and the presence of trade or sectoral associations that mediate interfirm relations of cooperation and within these networks.” Some competition researchers have highlighted the important role of institutional patterns and practices that “embed” these firms within local ties of trust and reciprocity.‘4 Several of these features exist in Ludhiana, but the historically specific way in which these and other intersectoral features evolved as a result of the region’s political and economic trajectory and how they transformed over time, needs to be accounted for. More important, with the exception of a few scholars”, the industrial district and much of the workreorganization literature has so far been an industrial sector debate that does not fully important intersectoral accommodate the connections between the agricultural and industrial sectors in regions such as Ludhiana. The growth linkage literature, in taking explicit account of the connections between agriculture and industry, gets around this problem. But the pure growth linkage argument that Ludhiana’s rapid agricultural modernization and rising per capita incomes created conditions, via production and consumption linkagesIb for the emergence of a small-firm based industrial structure geared toward the local market,” does not quite fit the historical pattern of the region’s industrial and agrarian growth. Not only do Ludhiana’s small firms produce for markets well beyond the local economy, but most of the raw-materials for industrial production come from outside the state. Most important, in many ways a substantial proportion of these firms started out by working on large defense orders for the state during WWII much before agrarian incomes rose during the 1960s to allow consumption effects to dominate production patterns. Moreover, several authors have shown that the first major (post-independence) spurt of growth in Punjab’s small and and diversification medium-size firms occurred in 1950-60 (most sharply between 1955-56 and 1960) - i.e., in a
ACCUMULATION
1393
period prior to the introduction and adoption of “Green Revolution” technologies which were adopted in the mid-1960s (for data on growth see Ghosh, 1977; Pathak, 1970; Pandit, 1985: Singh, 1990, p. 81).” The second turning point in Punjab’s industrial growth occurred in the late 1970s well after the period of peak agricultural growth had passed (Pathak, 1970; Dasgupta. 1989; Gosal and Krishan, 1984). Indeed. although the decade of the 1970s ( 1971-78) displays impressive figures of mean annual growth in manufacturing in Punjab (over 9%). some authors point to a relative slow down of industrial growth in Punjab during 1966-69 - a period that coincides precisely with the heart of the Green Revolution in this region (Johar and Kumar, 1983, pp. 180-182; Pathak, 1970; Ghosh, 1977). At the same time, industrial output in Punjab grew at a mean annual rate of 9.8% during 1979-81 while agriculture expanded by a mere 1.5% during that period (Government of Punjab, 1983, cited in Zarkovic, 1987, p. 96). Thus, both the timing of agricultural and industrial growth, and the interregional flows of capital (i.e., “leakages” in the form of raw materials imported from outside the region as well as consumption demand coming mainly from outside the state) call into question the robustness of a pure growth linkage explanation for Ludhiana’s industrial structure. Similarly Ludhiana’s pre-independence history, as we will see in more detail below, reveals that some agrarian policies put in place by the colonial state in an even earlier period - the turn of the century - played a significant role in shaping the conditions under which a large group of the region’s rural artisan metal workers turned to small-scale industrial work. Table 6 and Figure 2 document the cycles of industrial expansion in Ludhiana’s in periods before and after the Green Revolution began in 1966-67. The figures clearly show that there was an important spurt of industrial growth in Ludhiana prior to 1966-67 that cannot be explained by the standard growth linkage argument. In other words, while the growth linkage literature provides many useful insights into the relation between industry and agriculture,19 its emphasis on the feedback effects of consumption (and production) links on local industrial growth does not fully capture the important role of other factors - such as state intervention over time, macroeconomic conjunctures (including the economic and social impact of partition), and lagged effects of agricultural growth - in setting the conditions for industrial accumulation and investment in the region. The impact of these
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Table 6. Growth of Ludhiana’s industrialjims Year
Firms created
Pre-1947 1948-50 1951-55 1956-60 1961-66 1967-70 1971-81 1981-85 1987-91 Source:
in each period
DEVELOPMENT
in thepre- and post-Green Revolution period: 1947-66 and 1967-91 Total number
of firms in Ludhiana
220 171 577 1304 2695 1469 4184 7475 8696 Pathak
(1970)
% Change
220 391 968 2272 4967 6872 12019 21699 32644
p. 1093; Wall (1973)
pp. 102-107;
District
in total firms
78 148 135 119 38 75 81 50
Industries
Center
(1991).
Pre-Green Revolution Expansion of Industrial Firms in Ludhiana: 1947 - 1965 5uJo ,4mil z-2 3omf =d =_z 1=% rclm~ 500 0 Pre-
46-
51-
56-
61 -
1947
60
66
6u
86
~finnsCreatedinEucttPdad --cTotal
Number of Fftww-in LwJhtana
Year
Expansion of Industrial Firms in Ludhiana During and After the Green. Revolutioosl9S7 - 1980
~FlnnsCreatedinEshPeriod 67-70
71 -61
61-65
67-91
-+-Total
Year Figure 2. Cycles of industrial expansion in Ludhiana: 1947-90.
numkr
of fm
in Ladhha
INTERSECTORAL
LINKAGES
AND INDUSTRIAL
forces can only be clarified if one takes a longer, historical view of how production was in fact organized in Ludhiana over time, while being attentive to any intersectoral transfers of people and resources that might play an important role in inthrencing how the region’s productive structure and its labor process took shape.
3. THE ARGUMENT Based on my work on Ludhiana’s metalworking and light engineering industries,“’ this paper is an attempt to draw upon Ludhiana’s industrial history to trace some of the historical and institutional forces that explain how and why the region’s industrial structure evolved the way it did. My specific argument is that four elements are central to understanding the pattern of industrial growth in Ludhiana: (a) the key role of the state government in - directly and indirectly - shaping the region’s industrial trajectory; (b) demand stimulating conditions early in the region’s industrial history; (c) institutional arrangements (e.g., the crucial role of intermediaries and brokers) at several levels and across sectors, which together with the conditions set by the state’s credit and other policies, enabled some agricultural surpluses to be channeled into industry in quite productive ways”; (d) entrepreneur-worker relationships that over time produced a capital-conserving, interdependent structure of production which has allowed even small producers to enter national and international markets. This involved not only small and medium-size firms that had learned to economize on capital, but also a differentiated and quite skilled work force which, for several reasons, had highly complementary paths of skill acquisition and upward mobility. This paper presents the four elements of this argument through the lens of the state’s direct and indirect role in shaping the conditions of accumulation and investment in Ludhiana’s industrial regime.
4. LUDHIANA’S INDUSTRIAL REGIME: PATTERNS AND CHIEF CHARACTERISTICS A surprising characteristic of Ludhiana’s industrial environment is the presence of a large number of skilled workers of artisan stock. For example, up to the early 1980s the percentage of skilled workers to total industrial workers in
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1395
Punjab’s small firm sector was over 60%, relative to 44% nationally. Moreover, only 20% of Punjab’s industrial work-force was unskilled compared to 38% in the country as a whole (Pandit, 1985, pp. 151-152). These skilled workers are not only supervisors/foremen and skilled machinists, but a bulk of them are proprietors of small businesses, job shops and factories in the region’s light engineering, metalworking and machine tool industry. Before elaborating on the significance of skills in Ludhiana’s industry, let me first ground the distinctive role of Ludhiana’s skilled workers within the region’s other key features. The six traits sketched out below highlight the central elements of Ludhiana’s productive environment.
(a) Small size and connectedness Concentrated in two spatially contiguous industrial districts and a series of “focal points” on the fringes of the city,** are scores of small, medium and a few large firms which are highly interconnected through chains of job-workers, outworkers, layers of contractors, labor teams, intermediate goods producers and a variety of government institutions23 engaged in research and development (R&D), human resource development, export assistance, monitoring and incentive provision to small and medium-size firms.
(b) Active manufacturers’ associations Operating throughout these industrial districts are several remarkably active manufacturers’ associations organized by trade, and often specialized by task. There are also three regionwide federations and chambers of commerce.‘4 Among other things, these associations organize buyer-seller meets with the assistance of local government agencies, who act as brokers between the associations and other government departments (such as the Railways, who are large buyers of local goods), and in other ways pressure the provincial government for resources and training. These associations circulate trade journals, newsletters, and also loosely regulate prices in their particular subsector to prevent excessive undercutting. They appear to have a strong public voice and their opinions and debates are regularly featured in local newspapers and news journals.
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(c) Local arrangements that minimize wastage and allow for innovative use of raw materials
A set of institutional arrangements exist in the city since the early 1970s that allow small, medium and large producers to use scrap in highly efficient and innovative ways, passing on punched/stamped metal sheets to other firms for downstream usage. For example, a component producer (say of Bottom-Bracket cups and axles) who purchases a steel sheet at say Rs. 10 per length, sells the punched sheet to a downstream producer (say of washers or bicycle accessories) at two-thirds the price or, Rs. 6 per length. The latter extracts the material it needs for its parts from the left over sheet and sells the rest to another downstream component producer and so on, until the final bits of scrap are sold to the local scrap dealer who then sells it to the local steel re-rolling mill. This system of minimizing wastage enables Ludhiana’s small component producers (especially of nuts and bolts, and other simpler parts) to sell some of their products at prices lower than what their competitors in other Bombay) pay to procure raw regions materialSg. (d) Low production costs The “middle-class” industrialists of Ludhiana regard themselves as “Peons-to-Proprietors.” They work long hours, as do their workers (typically 12 to 14 hours a day, and most firms run several shifts). The proprietor handles most of the banking, tax, procurement and sales responsibilities himself - i.e.,there is a degree of self-exploitation that also results in very low overheads compared to larger firms. They generally accept low profit margins (ranging on average from 6-lo%‘“), that lower production costs, in addition to substantial cost savings through widespread lateral subcontracting among firms in the region2’ At the same time there is a surprising concern for continuous improvements in products, and an emergent concern for quality, although the typical small firm caters mostly to the low-to-mediocre quality ends of most markets. Most of the small firms are fairly independent - in that while they supply to large customer firms they also sell their products directly in the open market (especially in the replacement and export markets), or to other small and medium-size assemblers, and therefore are not dependent on any one firm for all their demand. Consequently they retain a degree of bargaining power and an ability to diversify their customers as well as products.
(e) A growing group of brokers and intermediaries
The region’s middlemen come in several guises, e.g., raw-material dealers, sales dealers, dealers who provide small firms with connections into export markets, finance and accounts consultants who help small firms prepare project reports that are now increasingly required by most lending institutions and banks which have been mushrooming in this region since the mid-1970s software experts and programmerconsultants who provide the hosiery industry designs, wire-drawing with computerized “barons” who peddle steel and subsist on the government’s quota regime structured around raw materials marketed through government controlled monopolies - but who also indirectly finance small producers through elaborate supplier-credit networks; and a new breed of white-collar service establishments who help small and tiny (first generation) firms attain incentive schemes, access to government subsidies, and loans. These service firms also help rural and urban educated-unemployed youth to apply for special government benefits. In addition to these “new” intermediaries, are the older varieties such as grain merchants and wholesale traders who have traditionally financed entrepreneurs, seed merchants who lend their seasonal surplus to producers in need of start-up loans or working capital, and coldstorage owners who do the same. (f) A highly differentiated, but skilled, labor market
The labor market comprises of a largely skilled local workforce dominated by Punjabi male workers; a diverse and stratified group of primarily unskilled and semi-skilled male migrant workers from states such as Uttar Pradesh, Bihar, Rajasthan, and even Kerala; local women homeworkers who are heavily involved in the industry woolen knitwear especially in embroidery work; and teams of migrant (“nomadic” groups such as Banjaras) men, women and children who circulate between seasonal agricultural work on the edges of the city and temporary factory work. The labor force also includes factory workers who live in and commute from villages located in a 1.5 km radius around Ludhiana. Finally, the workforce includes those factory, service and construction industry workers who also continue to be engaged in agriculture as a secondary occupation. Yet, central to the dynamism of Ludhiana’s light engineering and metal-working sector are
INTERSEmORAL
LINKAGES
AND INDUSTRIAL
the skilled metal worker cum entrepreneurs mentioned at the start of this section. These skilled small/medium-size firm-owners typically rise from the ranks or are second-generation industrial workers of artisan stock, whose parents were small contractors or manufacturers of agricultural implements and/or producers of simple industrial machinery and tools. Not only are these entrepreneurs capable of working on the shop-floor, but most significantly they manufacture their own machinery, tools and dies. Known for their ability to replicate and “copy” existing machinery, these firm-owners are able to cut costs by reconditioning and adapting used machines so that they typically start out with rented or second-hand machinery, and then produce their own. This access to skill, and a traditionally honed understanding of production engineering, allows these artisanal entrepreneurs to start out, and successfully sustain their shops on much less capital than would be required by an entrepreneur who had to depend on hired skilled workers alone.28 Therefore, by virtue of their ability to modify base machinery and hence “manufacture” their own machines, tools and dies, as well as innovate on product design, these skilled entrepreneurs minimize their need to hire skilled workers upfront and therefore combine the advantage of low start-up costs, a low wage bill and low fixed costs, with the ability to improve on product quality.” If skills are so central to cost-cutting strategies of small firms in Ludhiana’s metal-based engineering industry, and because this phenomenon is so contrary to the experience of most regions in the country where artisans did not take to modern industrial work;” we need to explain where these skills come from.
5. THE STATE’S KEY ROLE AT CRITICAL JUNCTURES IN LUDHIANA’S INDUSTRIAL HISTORY To understand how this skill-base came to be constituted we need to go back to the role of the state in Punjab in the 1800s. (a) The colonial regime and skill formation The first way in which the state played a crucial role in setting the conditions of industrial accumulation in Ludhiana was by inadvertently helping to constitute a class of skilled metal workers out of the region’s artisanal blacksmiths and carpenters (Ramgarhias and Viswakarmis). This transformation goes back first to Maharajah
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Ranjit Singh’s early 19th century practice of rewarding craftsmen with skills that were valued to (e.g., metal workers for their contribution armaments and marble workers for civil works) and subsequently to the colonial regime - i.e.. when the British laid their famous infrastructure across North India in the mid-1800s (Pandit. 1985, pp. 163-164; Saberwal, 1979, chapters 6, 8: Kessinger, 1974). While laying the railroads in Punjab and Assam (even East Africa). building the celebrated canal colonies in west Punjab (now in Pakistan) and constructing roadways across the north, the British found it cheaper to recruit groups of local blacksmiths and other rural artisans, especially the Ramgarhias, to forge, cast, repair, and manufacture the simple parts and tools they needed in bulk instead of importing them from England at a premium. Huge railway workshops were also set up in cities such as Lahore (now in Pakistan) to maintain and repair the wagons, locomotives, rolling stock, and other equipment for the 2000-odd mile railroad network being laid across the North West. One historian, for example, estimates that employment in the Lahore Railway Workshop alone reached a total of 4000 employees by the early 1890s (Kerr, 1991, p. 67). Through contractual arrangements with the British, skilled Ramgarhias also made highquality furniture, cutlery and fine metal work for specialized consumption (Baden-Powell, 1872 cited in Saberwal, 1976; Latifi, 1964 cited in Pandit, 1985). This exposure to new manufacturing experiences in products and processes beyond the simple implements which they formerly produced, enabled these rural craftworkers to upgrade their technological base, diversify their skills, and learn how to adapt them to new production tasks and environments. Insofar as this process occurred under the patronage of the colonial regime, the colonial government indirectly helped transform the skill base of a whole group of rural blacksmiths formerly engaged in the repair and manufacture of ploughs and agricultural implements. Possessing new skills, and with the help of contacts established in the course of their travels, several of these metal workers managed to accumulate some capital. Many of them either set up small metal-working shops in rural areas or became drawn into independent contract work inside and outside the region, producing and repairing simple tools, mechanical equipment and performing other operations. The roots of the metal-working skills that we find in Ludhiana’s workers and firm owners of artisan stock who today are the backbone of Ludhiana’s light
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engineering and machine tool industries - were thus laid during the late 1800s. But what pushed these skilled rurul workers into urban industrial work?
(b) The Punjab Lund Alienation Bill of 1900 A second crucial piece to the story of this artisan groups’ transformation from agrarian crafts-persons to urban metal workers, then, is the Punjab Land Alienation Act of 1900. This piece of legislation by the colonial state indirectly reinforced the historical conditions under which this group’s urban, industrial incorporation occurred. After Punjab’s annexation into the “empire” in 1849, British investments in irrigation and transportation, accompanied by their attempt to constitute and enforce private legal rights in land, vested, for the first time, tremendous value in land. On the one hand, the colonial government, aided by buoyant food-grain prices encouraged owner-operators to intensify food production. But on the other hand rising land values and a more rigorous drive by the government to collect taxes led to increased peasant indebtedness. Ironically, given their new legal rights in land, this indebtedness was fueled by borrower confidence in their own worth (Siddiqui, 1984). In this process, (and given the prestige tied to owning agricultural land) many agriculturalists lost their land to non-farming traders, money-lenders and/or urban professionals. During 1866-74, for example, 231,000 acres of land were alienated or mortgaged on average per year in Punjab, to the extent that by 1878, 7%, of the province was “pledged” (Nair, 1979, pp. 81, 82; Siddiqui, 1984, p. 294; Khanna, 1983, p. 104). Fearing that this takeover of prestigious and valuable agricultural land by non-farming “classes” would severely impair agricultural productivity, output, and hence net revenues, the colonial government legislated the Punjab Land alienation Bill in 1900.1’ Aimed at “protecting” the traditional peasant (and landowners) from being preyed upon by “non-agricultural” castes and classes, this (non-retroactive) bill divided Punjab’s agrarian structure into “agriculturalists” and “non-agriculturalists,” and legally barred the latter from owning agricultural land. Rural artisans, craft-workers and the metal workers we discussed above were all categorized as non-agriculturalists. These groups were thus effectively denied access to upward mobility through the purchase of agricultural land.
According to some historians (e.g., Van den Dungen, 1972, and Kessinger, 1974), having been blocked from the land market and from access to an instrument of accumulation and social prestige, the artisan metal workers in particular the Ramgarhia community and more broadly the Viswakarmis - turned to urban industrial work (Saberwal, 1976). They also set into motion processes of constructing for themselves a “corporate” identity based on their specialized skills, rather than their caste. They did so in three ways -first, they mobilized the community through journals and a network of organizers to forge a common identity. The wealthier entrepreneurs served as a resource and role-models for others, encouraging them to invest in urban manufacturing, or at least build upon and diversify their rural shops if they had any. Second, they built a series of educational institutions schools, colleges, educational and vocational centers to banks, training upgrade, preserve and pass on their skills to the next generation in a systematic way (Saberwal, 1976, chapters 6, 8). Finally, they formed several professional associations (quasi-guilds, or quasicraft unions) cutting across firms of different skilled contract sizes, and often including workers, to pressure the state to grant them access to land, credit, and markets (Saberwal, 1976). All of these strategies helped establish a base for further skill acquisition, dissemination, investment and the sharing of risk. While some of the institutions set up by these groups are robust and active around Ludhiana even today, their community-based character has been enriched by the inclusion of other castes and classes: skilled Ramgarhias have over time collaborated with traders who lacked skills, but had capital and knowledge about interregional, national and international markets. These intersectoral and interoccupational alliances between firms of different sizes put in place in a previous period, have been central to the interconnectedness that characterizes Ludhiana’s industrial environment today.” In sum then, a prior opportunity to acquire new skills and adapt old ones (e.g., through work on colonial infrastructure), and exclusion from socioeconomic mobility through landownership - both of which were indirect outcomes of the colonial state’s agricultural policies - together created conditions that pushed skilled, rural craft workers into industrial metal work. A failure to look historically at the specific ways in which people and resources have flowed between Ludhiana’s rural agricultural and urban industrial sectors in response to state policies and
INTERSECTORAL LINKAGES AND INDUSTRIAL ACCUMULATION
other conjunctures, then, would obscure some of the early intersectoral roots of the region’s contemporary industrial regime. 6. WARTIME LEGACY: INTERFIRM LINKAGES AND THE DISTRIBUTION OF STABLE DEFENSE DEMAND WWII was another juncture when the (colonial) state played an important role in shaping interfirm and interindustry linkages through its defense contracts. Episodes of firmlevel or even regional growth fueled by wartime defense demand are not uncommon phenomenon? What makes Ludhiana’s defense-driven industrial growth during WWII distinct is the particular way in which this demand was transmitted across firms in the district. As we will see below, the way in which defense contracts were handled by the region’s larger firms is significant because of the specific relationships it helped forge, not only within and between large, medium and small firms, but also across sectors. For example, as reported to me by a medium sized, Ludhiana-based machine tool producer who started out as a hosiery manufacturer in the 1940s the colonial government floated a massive tender for knitted army socks during WWII. This 20,000-socks-a-day tender was nationwide, but the informant firm won it, having underbid by a wide margin the only two other large hosiery syndicates of that time (both located in Bombay). In order to deliver the order on time and yet make a modest profit on the very low bid, the firm recruited dozens of households in the region as its “ancillaries.” The parent firm gave its new ancillaries “advances” to purchase sock-knitting machines and yarn which it bought at bulk rates. To finance these up-front costs the firm in turn borrowed credit from adtiyas or grain merchants who have seasonal (agrarian) surpluses to lend at interest (Soni, RKMT, field interview 1990). At the end of the defense contract there were, according to the informant firm-owner, at least 500 new small and tiny hosiery units in Ludhiana. These units initially drew upon each other and their medium-sized “benefactor’s” connections to first build an understanding of the industry, and then to produce directly for the market. One other factor crucially helped these fledgling firms stabilize, grow, and consolidate their own position in the market. This was stable demand during the period of their initial growth. Continued military presence at Ludhiana generated sustained demand for vests, belts, laces and other products which provided these new, smaller firms with unfluctuating demand and a
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ready market just when they most needed it early in their lifecycle when they were trying to establish an independent toehold in the industry. As the hosiery industry became consolidated in Ludhiana, metal-working shops took to manufacturing hosiery machines, tools and equipment. Foundries similarly were drawn to this growing industrial hub. Many of these same metal-based firms also diversified into the production of cycles, cycle parts34 and sewing machine parts whose supply was also restricted due to curtailed wartime imports (Pandit, 1985; Government of Punjab, 1970). The significance of Ludhiana’s hosiery industry, then, lies not merely in its own expansion, but also in the way it stimulated the growth of the engineering and other metal-based industries in the region. The above example illustrates at least three key points about the organization of work in Ludhiana and its small-firm bias. First, the mushrooming of a large number of small and tiny firms during this period occurred not merely because of defense contracts, but because of the way in which the region’s large/medium firms organized production. Instead of choosing to produce the entire order of socks in-house3” which on the part of the contract winning firm would mean investing in vast amounts of dedicated machinery and adding to permanent capacity - we saw that the winning firm, even though it was big, opted to subcontract parts of the order out to many new, small firms. The impetus behind this way of organizing production, it is important to recognize, was the large volume of production and most crucially, a low bid and hence low profit margins. The low bid helped the Ludhiana firm wrest the prestigious contract from bigger, more established Bombay producers. But at that low quoted cost the firm could not conceivably produce the order in-house and still make a profit. Low profit margins, and (the pledged) low end-product prices then, led to cost cutting strategies such as ancillaries. This linkage engaging smaller between low profit margins, low costs, low end-product prices and ancillarization (or specialized, contract work) is a pattern which prevails in Ludhiana up to the present day. Second, to understand why production in this sector continues to be organized in a highly decentralized fashion we need to look at the nature of the tasks and production technologies in the sectors that dominate production in the region. Much of the technology employed in the region’s metal-working firms and hosiery sector is highly divisible. If located within reasonable proximity, and given an institutional infrastruc-
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ture that can coordinate these tasks at low cost, the production process can be divided up into discrete operations that can be carried out in separate but interrelated units, with specialty firms (e.g., those producing tools and dies or other complex processes) serving the various production units. For example, in the woolen hosiery industry, in contrast to activities such as spinning which have significant economies of scale, knitwear can be divided into components and each can be handled separately. There are firms that do only dyeing work, others that only knit, and yet others that embroider and so 0n.j’ Ludhiana has both a spatially compact organization of work - where firms from several key industries are located in close proximity - and an infrastructure of brokers and intermediaries who facilitate labor exchanges, job work and shops. among specialized subcontracting Moreover, as several informants pointed out, firm owners prefer to maintain a decentralized productive structure because with “every kind of service available in the market,” it is cheaper to get several of the processes done outside. A single firm does not have to invest in all kinds of ancillary tasks, and equipment in-house (such as heat treatments, electroplating, even grinding, and other precision tasks that require a far higher threshold of demand to justify investment in-house), the costs are instead “shared” among other firms. There is also the issue of labor cost and management. Having access to well developed subcontracting networks helps cut the cost of hiring skilled labor, apart from keeping labor “management” problems low.” The third point this example illustrates is the way in which agricultural surpluses flowed out to finance capital formation in industry via a key set of intermediaries who straddled both the agricultural and industrial sector. Grain brokers or adtiyus have played a significant financier-role in Ludhiana’s small-firm development since 1906 when an important grain-market was established in a suburb of Ludhiana (Jagraon). This grain market was set up to handle huge surges in agricultural production in Ludhiana district following the colonial government’s aggressive efforts to boost output in light of a series of “scarcities” or near-famine conditions in the late 1800’” (Government of Punjab, 1970, pp. 241-245). The apparent success of these efforts is attested to by the fact that during 1898-1914 wheat production in Punjab increased by roughly 60% and that of cotton by 77.3% (Nair, 1979. pp. 78, 128):’ The salient point here, then, is that agriculture-industry linkages may have an
important lag element that deserves greater investigation. The above example suggests that instead of the post-independence agricultural modernization in Ludhiana, which is usually considered to have induced the rise of small firms in this region, it may have been this much earlier period of agricultural growth4” that in part stimulated small industry, and influenced the relationship between large and small firms - not through consumption and expenditure multipliers - but rather through indirect investment Post-independence production links.” links between industries (e.g., hosiery, machine tools, cycles etc.) and changing demand conditions, in turn, seem to have reinforced these earlier patterns, not generated them. This leads to a second point. Rather than assuming that surpluses from an agriculturally dynamic region will necessarily inlhtence local industry, it is more useful to understand the mechanisms by which this may happen and under what conditions. For example, in the case cited above it was not peasants who were themselves investing across sectors, nor the state or the banking sectors distributing rural revenues indirectly, but rather it was the non-farming grain merchant usually thought of as an exploitative middleman - who proved to be the crucial connection between agricultural surpluses and local industrial investment. But it is also important to note that a central reason why agricultural resources could flow into industry in the absence of any direct state intervention is (a) because the state had indirectly transformed the skills of local metal workers in a prior period, and (b) because production was organized in such a way that the bigger firm - with the collaboration of a large number of small firms could successfully capture and capitalize on the region’s intersectoral investment potential.” In other words an institutional environment conducive of generating inte@ypn relationships that allow for risk-sharing as occurred between the large and small hosiery firms in our example, are illustrations of some of the key mechanisms of intersectoral resource transfer that the standard growth-linkage theory fails to capture. Finally, as we saw above, it was not consumption links resulting from rising per capita incomes that induced local industry in Ludhiana’s hosiery sector, but rather the bulk of these small firms started out producing for the govemment. The state, through its defense expenditures, played an important albeit indirect role in generating the demand and thus setting the conditions for attracting investment and enabling
INTERSECTORAL
accumulation in a number Ludhiana during this period.
LINKAGES
AND INDUSTRIAL
of small firms in
7. FORGING COOPERATIVE TIES: THE CONJUNCTURE OF PARTITION AND REVITALIZED INDUSTRYGOVERNMENT LINKAGES The period during and after the partition of Punjab in 1947 was the third key juncture at which the state played a critical role in shaping Ludhiana’s industrial regime. As we will see below, the roots of the surprisingly close relationship between Ludhiana’s industry and the state government can be traced back to this period. In the short run, the Partition crippled east Punjab’s economic base. In addition to coping with mass displacements and social trauma throughout the state, the Punjab government had to rehabilitate 45% of undivided Punjab’s population in a third of former Punjab’s area using only 31% of its income. A region that had long enjoyed a central location with respect to key input and output markets in Northwest India, suddenly became a border state. Cut off from its most vibrant urban centers (Lahore, Wazirabad, Sialkot), ports (Karachi), markets and its lucrative cotton and oil-seed producing regions, Punjab’s industries lost some of their local sources of supply and demand and in general were forced to seek new markets in other parts of India. Since a large proportion of Punjab’s metal-working, tanning, and textile firms employed skilled Muslim labor, their emigration to Pakistan disrupted East Punjab’s supply of skilled labor in certain sectors (Ghosh, 1977, chapter 6; Pandit, 1985).J” Moreover, some of undivided Punjab’s best institutions of higher learning and professional/technical training went to Pakistan. New institutions would therefore have to be put in place to train new workers. Finally, several Banks, facing a severe liquidity crisis due to the erosion of economic activity in the state and illiquid assets frozen in Pakistan, either moved out to “safer” (Indian) provinces or drastically reduced industrial and agricultural lending (Luthra, 1949; Government of Punjab, 1970; Ghosh, 1977; Pandit, 1985; Singh, 1983; Rai, 1986; Singh, 1990). Faced with this environment of economic chaos, a severely depleted labor force, collapsed transportation links, isolation from the country’s key markets and ports (e.g., Bombay and Calcutta) and disadvantaged by a border status, many of the region’s firms began moving out of Punjab to other parts of India (Luthra, 1949;
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Government of Punjab, 1970). A 1948 survey conducted by Punjab’s Board of Economic Inquiry found that over half the sample firms in border districts like Amritsar, Gurdaspur and Ferozepur wanted to leave the state or move to less threatening locations within it (Luthra, 1949, p. 71). Already constrained for funds and burdened with the task of reconstruction, the state government could ill afford to lose its best firms (Luthra, 1949). To prevent an industrial exodus, the state government resorted to legislative means of stopping local registered firms from deserting the state. In March 1948, with immediate effect, the state government of Punjab passed the East Punjab Factories (Control of Dismantling) Bill. This Bill legally barred any registered firm from liquidating or removing any part of its plant or equipment to locations outside Punjab. Industrialists throughout the region thoroughly deplored this move by the state (Luthra, 1949, p. 73). Closed plants and alienated entrepreneurs, however, would not serve the state’s purpose either. To enlist industry’s help in rebuilding Punjab’s economic base, the state government therefore had to help industry overcome its bottlenecks and regain its competitiveness as rapidly as possible. In other words, then, legislative action taken by the state in service of the “greater good” of the region, became, at another level, a source of pressure on the state to help industry. Its own action therefore, obligated the state to work collaboratively with industry. Apparently cognizant of this pressure, the state government systematically and strategically helped Punjab’s industrialists regain their footing nationwide (Luthra, 1949; Government of Punjab, 1970; Ghosh, 1977; Pandit, 1985). As part of its initial strategy the state government focused on reconstituting the region’s labor forceJ” and rebuilding its institutional base. It set up cells to retrain the immigrants directly in their refugee camps by circulating teams of government trainers and demonstrators throughout the state. Placement officers helped these trainees connect up with firms looking for specific kinds of labor (Ghosh, 1977, p. 116). But the government also behaved strategically in the way it handled this process of re-inserting the immigrants into the regional economy. In order to expedite resettlement and discourage families from becoming dependent upon government dole, the government automatically de-rationed families who failed to find employment for at least one work-eligible member after a stipulated period of time (Government of Punjab, 1970).
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This process of helping the new immigrants get absorbed into suitable private jobs quickly, also served the state government’s own interests. Burdened with an influx of immigrants and depleted resources the last thing any government would want is burgeoning unemployment. And the Punjab government would have been unable to generate enough employment in its own bureaucracies to accommodate this influx (Field interviews, 1990, 1992). Having been a relatively lean government historically - in part because Punjab had never been a key seat of national political or commercial power - Punjab lacked the extensive state apparatus found in places like West Bengal where the colonial government and commerce were initially based, or Bombay which was always the commercial capital of the country, or Delhi, where the colonial government shifted eventually, and which became the country’s capital after independence. The Punjab state could not absorb large numbers of immigrants within its own agencies4’ The government of Punjab therefore encouraged private industrial absorption and self-employment in both industry and agriculture (Field interviews: Ludhiana, July 1990, 1991). One manifestation of the state’s policy of encouraging self-employment was the government’s role in financing skilled workers and artisans to start their own shops. This involvement of the state - credit constrained as it was - in extending “minimalist” credit to those who had basic skills helped generate a large number of small private firms in sectors such as metalworking, hosiery, machine-tools, cycle components in “safer” parts of the state - such as Ludhiana. Not only did the government extend modest credit to new firms in this region, but it also helped the more established firms who wanted to move out of border districts to relocate in Ludhiana by building industrial estates and cheap housing. In other words, the government of Punjab looked to private enterprise rather than nationalization as a strategy for bringing about the state’s economic and industrial revival (See Ghosh, 1977). Ludhiana’s regional division of labor - of firms specializing by task or operation (e.g., separate firms auto-blackening, handling heat treatment, grinding etc.) - in turn, allowed these new, capital constrained firms to tie into an existing infrastructure that helped economize on capital, lower production costs and hence enabled them to survive and grow on small amounts of capital. By the 1960s Ludhiana was one of Punjab’s three largest industrial centers, dominated by a large
number of small private firms. In 1987, Ludhiana had the largest number of firms (30.3% of all the province’s firms) and the largest share of industrial employment in Punjab (29.6%) (Government of Punjab, 1988). In fact, Ludhiana’s large private industrial and commercial sector has today become one of the chief features that attracts out-of-state migrants to the region in large numbers. According to several migrant factory workers, non-Punjabi migrants prefer to come to Ludhiana compared to other parts of Punjab because it is not a “border region” like Amritsar, but mainly because it has a large private industrial sector where they can get unskilled, casual, temporary, or permanent jobs. Unlike government factories where “no one would give us jobs” because of inflexible procedures of hiring and firing, Ludhiana’s network of small private firms allows for both mobility and acquisition of skills on the job even for unskilled workers. This inflow of semiskilled and unskilled migrants, and their mobility across the region’s firms has in recent years reconfigured Ludhiana’s work-force in important ways, and is one of the factors that has contributed to the region’s rapid diversification with many migrants moving into service or trading positions over time.
8. THE STATE’S REGIONAL INSTITUTIONS AND TRADE ASSOCIATIONS RESPONDING TO CONSTRAINTS In the period following the partition, the state government laid the basis of two other features that today play a central role in Ludhiana’s productive regime. First, with the assistance of the central government, the government of Punjab established key institutions in the region to help local firms improve their productivity. For example, it established quality marking centers in Ludhiana (1956-60) to provide small textiles, light engineering and machine tool firms with free access to testing equipment needed to facilitate precision work, and to standardize and improve product quality. To meet the shortage of trained technical personnel the state government started several vocational schools and ITIs - industrial training institutes. Some of the other key institutes it set up were a local Productivity Council, a mechanical engineering R&D center and a Small Industries Services Institute (SISI), all in Ludhiana. Each of these institutes has developed its own style and position in the
INTERSECTORAL
LINKAGES AND INDUSTRIAL ACCUMULATION
region’s industrial structure today, but it is through their collaborative relationship with local firms that “the state” remains close to “industry.“46 At the same time the state government provided other “real services”47 - it developed two industrial estates and several “focal points” in Ludhiana and towns near it, equipped with cheap sites and extensive infrastructure to accommodate new firms and re-settle those relocating from other parts of the state.48 In order to streamline its extension services, and make the task of managing the distribution of services such as cheap land, credit, R&D and marketing assistance to old and new firms easier for its staff, the state government encouraged firms to form associations by trade/sectors. Dealing with the leaders of these associations would be far less cumbersome than keeping track of and negotiating individually with hundreds of small firms (Field interviews: Ludhiana July, 1990). Further, the government strongly urged all members of a trade association to have their products certified by the Ludhiana quality marking center if they wanted marketing assistance from the state. The formation of associations, thus, was an institutionally easy way for the state to standardize product quality across a large number of small member-firms in each key sector. This assurance of quality, in turn, made it easier for government agencies engaged in helping local firms find markets inside and outside India, to vouch for their clients’ product quality - even if today many firms dismiss the value and credibility of these quality marks (Field interview, Ludhiana, 1990,, 1991). Over time these very associations have become the chief instruments through which the region’s key industries pressure the state for benefits and information. For example, the metal-based engineering firms demand R&D centers, import of costly equipment that small firms cannot individually afford, but which they could copy and manufacture indigenously if the government made such machines available for these skilled proprietors to see and study. They demand liberal quotas of basic raw materials, lower sales and excise taxes, access to selected trade fairs held abroad (two of the most popular industrial fairs are those held in Hanover and Cologne), seminars, job-training and cheap electricity. Ludhiana’s brand new and highly sophisticated Bicycle and Sewing machine R&D center, and its new dry (container) port are recent results of successful lobbying by trade associations4’
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9. MORE ON DEMAND: IMPORT RESTRICTIONS AND NEW DOMESTIC MARKETS As we saw above, the preponderance of small private firms in Ludhiana dates back to the adjustment process in the aftermath of the country’s partition in 1947. But it is important to note that this inflow of a large number of displaced immigrants from Pakistan, many of whom the government had itself assisted in becoming entrepreneurs, did not in and of itself translate into a mushrooming of “dynamic” small and medium-size firms in Ludhiana. Rather, it was the simultaneous opening up of massive domestic demand that allowed these emergent firms to stabilize and grow. Import restrictions in some sectors after partition, and the importsubstitution regime which the central government put in place nationally soon after, were key macroforces that provided the impetus - from the demand side - which allowed new firms to find markets for their output relatively easily. In other words, the fact that an influx of immigrants into Ludhiana, many of whom took to industrial self-employment - i.e., an increase in the supply of entrepreneurs in this region - coincided with the opening up of huge domestic demand, was an important condition that provided an environment of stability to the post-independence growth of small firms in Ludhiana. 10. CREATIVE USE OF A DISTORTIONARY MEASURE: MANIPULATING THE IS1 REGIME The import substitution industrialization (ISI) regime not only helped new firms flourish in Ludhiana’s key sector because of the protection it provided, but it also inadvertently became a mechanism which the capital constrained government of Punjab used in highly creative ways to generate funds for industrial production in the region. The Punjab government’s handling of steel and other basic raw material quotas and import licenses in the 1960s is a case in point. For example, Sardar Pratap Singh Kairon (who was first agriculture minister and then Chief Minister of Punjab in the mid 1950s and early 1960s) openly announced in the chamber of commerce in the early 1960s that his government would allow entrepreneurs to “sell” their steel and coal quotas in the black market provided they used this money to buy plant and machinery to set up shop. The state would allow such speculative gains to be made a second time to enable the firms to finance their start-up and
1404
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DEVELOPMENT
working capital costs. Thereupon the state government’s department of industries would monitor the firms’ performance - if they made good they would get access to the state government’s lean line of concessional credit; but if the firms failed to take off, the state would not bail them out. In other words the state would use its scarce resources and limited capital to back only the “winners” - or those who “made it” (Field interview: Ludhiana, August, 1990). Although there are several controversies surrounding this move by the Punjab state e.g., the chief minister’s friends (who could be monitored more easily according to one sympathizer of Kairon) were picked as the “winners”S”; speculative gains were made by firms not in especial need for concessional credit - there is substantial consensus among the older industrialists of Ludhiana that several of the firms that are performing well today emerged and grew because of the government’s creative use of this “loophole” in the ISI legislation (Personal interviews: Ludhiana, July-August 1990). Another category of current entrepreneurs in Ludhiana who benefited from this move by the government were skilled workers (some belonging to the artisan groups we discussed previously) who engaged in petty production in rural areas or worked in small factories and who in general lacked capital but were averse to taking substantial loans from the government or from banks for fear of falling into debt. Possessing skill, with access to “easy” capital through the above mentioned channel, some of these skilled entrepreneurs managed to mobilize equipment, labor and other resources critical to establishing themselves as independent producers. But the noteworthy point is that the state government used restrictive quotas and import licenses just the elements of ISI that are considered highly distortionary to the advantage of private industry and by extension, to the benefit of Punjab’s economy. Another aspect to the government’s - or specifically Pratap Singh Kairon’s - efforts to encourage industry in the 19.50s and 1960s was that this period coincided with crucial changes in agriculture. For example, soon after independence local farmers increasingly switched to diesel pumps from other forms of irrigation. In 1961 Ludhiana was picked as one of the 1.5 Intensive Agricultural Development Program districts by the central government. With the establishment of institutions such as the Punjab Agricultural University (PAU) in Ludhiana around the same period tremendous ferment occurred in the
design and development of new agricultural techniques, processes and equipment. As some informants explained, however, skilled entrepreneurs had to be encouraged with funds and technical assistance to break into these new but uncertain markets. Pratap Singh Kairon’s use of restrictive quotas in an innovative way was part of a larger pattern of creating an enabling environment to encourage private industry to assist agriculture. For example one of Ludhiana’s best known agricultural implements firm - the Standard Agricultural Engineering Company (SAECO) was established during the early 1960s through an active collaboration between PAU’s agricultural engineering department and a highly skilled rural agricultural manufacturer (Field interview, equipment Ludhiana: August 1990). Similarly, Saberwal (1976) reports how Kairon who was agriculture minister in 1960 personally visited skilled artisan workers in villages urging them to “come to Ludhiana where the government would help them develop” various agricultural implements (1976, p. 134). Over time, this incorporation of skilled rural producers into industrial work has had its spillovers into the production of other goods e.g., cycle parts, auto-parts, machine tools and so forth through a process of intertemporal diversification. Occasionally, there are spillovers in the other direction as well. For example, in the early 1960s a rurally based irrigation equipment producer was compelled to switch over to farming his land when his customers switched to diesel pumps. He subsequently switched back to industrial production, manufacturing threshers, the technique of producing which he mastered while making one for use on his own farm. Similarly in more recent times the state government’s energy policy of the late 1970s requiring peasants to install capacitors to economize on the consumption of powers laid the basis for the region’s first condenser and capacitor producing electronics firm (TOPCON Condensers). This small-scale, but highly technically sophisticated firm has now successfully diversified into the production of ceiling fan and automobile condensers. The ability to hook into Ludhiana’s metal-working and light-engineering infrastructure helped the firm to not only lower costs but to also build connections that provided access to the district’s emergent auto industry for new markets as well as information about new products (Personal interview: Ludhiana, 1990). The state in turn has continued to strategically back industry on occasion by shaping the region’s incorporation in the global economy. The state government’s (and central government’s) efforts
INTERSECTORAL
LINKAGES
AND INDUSTRIAL
to encourage innovation, production and exports of cycles and cycle parts since the Japanese have began to move production overseas to other cheaper East Asian countries during the 198Os, and its more recent efforts to promote the local sewing-machine industry and help it acquire a niche in the international market (after both Japan and Taiwan began to face rising production costs in this sector in the early 1980s and 1988 respectively) are examples that illustrate this role (Field interviews with local officials, Ludhiana: July, August, 1990).
11. CONCLUSIONS The central objective of this paper was to show that in order to understand the logic of production and industrial investment in regions that have exhibited sustained growth in the face of changing political and macroeconomic conditions, one needs to look historically, longitudinally and intersectorally to see how work is actually organized in these regions and how and why it changes over time. In this paper, I chose Ludhiana as an example of such a “dynamic” region. My argument regarding Ludhiana’s industrial regime was that the state (provincial) government historically played a central, although often indirect, role in shaping the conditions of industrial accumulation and growth in this region. Through its actions and policies the state helped set some of the conditions which directly or indirectly fostered labor, skill, and investment flows between Ludhiana’s industrial and agrarian sectors. This suggests that (a) while intersectoral linkages play a significant role in influencing an agriculturally advanced region’s industrial trajectory, the precise shape of these linkages can only be understood by looking at the specific conditions of access that different groups have to resources in the region. In facilitating this access
ACCUMULATION
1405
the state can play a crucial role in fostering industrial growth, as it did in Ludhiana. (b) Lags and issues of temporality are possibly crucial in transferring the effect of increased incomes into consumption or savings, and then investment demand. As we saw in Ludhiana, earlier periods of agricultural growth - prior to the region’s experience with the “Green Revolution” crucially influenced investment possibilities and skill formation in industry - but in indirect ways. (c) Furthermore, while there are many paths to economic growth, this study suggests that issues of sustained regional growth demand an understanding of how the growing region is inserted into national and international markets and what kinds of institutions mediate this global incorporation over time (e.g., in the case discussed here, the state and locally constructed intermediaries and productive arrangements that cut across large and small firms played a key mediating role). The bigger point, however, is that a cluster of small firms in a “district” or “region” will not in and of itself generate flexible or dynamic growth. Indeed often the issue does not even hinge so crucially around the smallness (or otherwise) of firms per se, but rather on the nature of the relationship - explicit and implicit - among firms of different kinds and sizes.” We therefore need to look dynamically - over time and across sectors - to see how and under what conditions key institutions are created in certain regions that produce a growth generating environment. But this environment is not static - it changes as the pressures on it change as we saw in the Ludhiana case. In sum then, it was not simply a matter of understanding how the state and macro economic forces set the conditions of growth and accumulation in Ludhiana, but also recognizing and recording how local institutions have put pressure back on the state, resisted some of its policies in possibly undramatic but important ways and “forced” it to respond creatively.
NOTES 1. These sectors include machine tools, auto-parts, woolen hosiery, bicycles, sewing machines, and parts. 2. Throughout the 1970s a firm was designated smallscale in India if its fixed investment in plant and machinery was Rs. 3.5 million or less. Currently this limit stands at Rs. 6.0 million (7.5 million for ancillaries). Although most small firms have 50 or less workers, the number of workers is not a defining characteristic of small firms. The federal government
also allocates sole production rights of certain products to small firms (e.g., nearly all components of cycles, except rims and chain wheels, are designated as smallfirm products). But this does not restrict small firms from producing goods not specifically designated for small producers. 3. These numbers have changed in the 1980s and 1990s as a growing number of large firms (mostly state owned enterprises) have located in Punjab. For
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DEVELOPMENT
example, with the installation in the late 1980s of five Thermal Power Plants, and a Railway Coach and Diesel Engine manufacturing factory (all government owned), the output of Punjab’s large firms has exceeded that of small firms for the first time. In 1991, large firms in Punjab accounted for 64% of total industrial output compared to 36% for small firms (Government of Punjab (1992) p. 40).
in Ghosh (lY77). Both Gosal and Krishan (1984) and Ghosh (1977) however, find no systematic patterns regarding the impact of the Green Revolution on industrial development emerging from the data available. Recent work by Bhalla et al. (1990), however, makes a more complex argument that takes into account Punjab’s “open economy,” and is an advance over these earlier views.
4.
18. Pandit (1985), however, records 1941-50 as the first important period when small firms boomed in Punjab, and particularly in Ludhiana (pp. 35-38).
And many more that are unregistered.
5. Indeed, nearly 92% of the country’s small-scale woolen knit-wear firms are located in the Ludhiana region (Pandit, 1985, p. 30). 6. This figure is for the northern “cycle-producing belt” concentrated in Ludhiana, but stretching south up to the fringes of Delhi. 7. For Bardhan
the debate on industrial deceleration (1984) and Ahluwalia (1985).
see
8. See Taub and Taub (1989) for a three-state comparison of small firms in Punjab, Orissa, and Tamil Nadu. The study illustrates the greater resilience and dynamism of Punjab’s small firms relative to the others. See also I.J. Singh (1990) pp. 244-250. similar 0. Incidentally, several authors make arguments to explain - partially - the robustness of Punjabi agriculture, and the aggressive and hugely successful adoption of green-revolution technologies in Punjab and Haryana. See M.S. Randhawa cited in Keller (1970) Nair, 1961 cited in Pandit (1985) among others. 10. Personal communication with Abhijit Banerjee of MIT; and Reserve Bank of India (1964); Rangnekar (1966) and Tewari (1996). This, of course, is aside from the fact that given its own distinct colonial and institutional history, Bengal - in contrast to Punjab - has evolved into a major hub of large-scale and concentrated industrial capital in the country (Little et al., 1987; Singh, 1990). Il.
See also Singh (1990)
pp. 235-250.
12. Others are Brusco (1982) Pyke et al. (1990) Sengenberger and Pyke (lY92), Saxenian (1994) Locke (1995) Herrigel (1990), Best (1990), Gerefti (1994). For a critique of the flexible specialization literature see: Harrison (1994) Amin and Roberts (1990) Schoenberger (1988) Gertler (1988) and especially Hart (1997). 13.
For example
see Schmitz (198Y, 1995).
14. See Granovetter (1085) Sabel (1992, 1994a,b), Humphrey and Schmitz (1996) and the literatures cited therein. 15. See for example, Amsden (1989) Chari (1998) Hart (1993, Kristensen and Sabel (1993).
19. Indeed, Deolalikar (1985) shows quite convincingly the positive production and backward linkages between the modernization of agriculture in Punjab during the mid-1960s and the rapid mushrooming of a locally tied agricultural implements industry.
(1991) Capecchi 1996, 1997) and
16. For example, demand for agricultural implements, machinery and repair services on the one hand and for consumer goods such as clothes, bicycles, sewing machines and electronic goods on the other. 17. See, for example, Gosal and Krishan (1984); Ghosh (1977); Thaper (1971); and Thapar (1972) cited
20. Most of the field work on which this study is based was carried out in the summer of 1990. During this time I conducted semi-structured and open-ended interviews with 20 small and three large firms in Ludhiana, about 35 skilled, unskilled and migrant workers, three local unions, and several government officials in Ludhiana, Chandigarh, and New Delhi. A longer follow up round of field work in 1991-92 when I interviewed 102 firms supplemented this early information. For more details see Tewari (1996). 21. It must be noted, however, that several authors argue that one of the reasons why industrial capital remained small and fragmented in the region was precisely because agricultural surpluses did not flow into industry in any significant way. See for example Johar and Kumar (1983) and others in Johar and Khanna (1983). 22.
As well as thinly spread
throughout
the city.
23. Some of the key institutions are the (a) District Industries Center (federally funded but comprising of local staff), (b) the Small Industries Services Institute (federally constituted network of regional institutes; set up in Ludhiana in 1956) (c) Ludhiana Local Productivity Council (one of 47 such councils in the country; set up in 1958), (d) Mechanical Engineering Research and Development Organization (one of three in the nation; set up in 1965) (e) Quality Marking Centers (by trade; state government funded; operational in Ludhiana since 1956) (f) Central Tool Room (UNDP/ West German funded; set up in the late 198Os), and (g) the Bicycle and Sewing Machine R&D Center (1988). 24. One of these federations, the PHD-Chamber of Commerce, is widely regarded as one of the more dynamic and innovative regional associations in the North, with a particular interest in restructuring and modernizing small suppliers. 25. The institutional arrangements that support these recycling practices in Ludhiana emerged in the early 1970s when local firms sought to cut production costs in response to one of Ludhiana’s few, but most successful industrial strikes in 1972 where labor unions won significant increases in wages, bonuses, and piecerates. Although few of Ludhiana’s small firms are unionized, each trade and subsector (metal-working,
INTERSECTORAL
LINKAGES AND INDUSTRIAL ACCUMULATION
bicycle parts) is represented by unions that work to protect labor rights. In this instance, unions across the board in metal-based trades formed an alliance to fight for higher wages, and won. Small firms in other places, such as Bombay also employ some of these recycling practices, but sporadically, and in small, circumscribed pockets (Interviews with local unions, several local firms, and the PHD Chamber of Commerical and Industrial Undertakings, 1990, 1991-92). I want to thank one of the anonymous reviewers for pointing out that Dawson (1992) also describes similar practices in Ghana. 26. Despite low profit margins on many of the standardized goods produced in this region, most firms in my sample, once they had established themselves, diversified into at least a few “monopoly” items complex, expensive, high quality parts, or import competing products - that are imported but not yet produced in India on a substantial scale (such as highspeed industrial sewing machines). Profit margins on these items were as high as lOO%, even though volumes were initially not that large. 27. I have not included “cheap labor” here because although labor costs for some tasks are low in Ludhiana, wages in the sectors that dominate Ludhiana’s industrial structure - woollen hosiery, bicycles and parts, auto-parts and other transportation equipment, sewing machines and parts, machine tools, machinery and metal working - are higher than the national average (see Government of India (1992) Report on the Second All-India Census of Small Industrial Units in India - All India and Punjab Volumes, pp. T-79 and T-33 respectively). Similarly other researchers have found that even as far back as 1975, Ludhiana’s manufacturers paid their workers three times as much as their counterparts in some other industrially developed states such as Tamil Nadu (Taub and Taub, 1989, p. 110). The labor story is more complex than just wages it involves widespread occupational mobility among the local labor force. This issue is linked to several factors: to the effects of the Green Revolution over time; to the easy availability of basic wage goods - food, vegetables, milk, transportation; to the “effectiveness” of some of the government’s programs targeted toward agricultural laborers and urban- and rural-based artisans; the outreach of other industrial training institutes; expatriate worker remittances; and how the changing economic structure influenced and was impacted by changes in the occupational structure. 28. See also Dasgupta (1989), Taub and Taub (1989) and Pandit (1985) pp. 146-179, for a related discussion on the skills of Ludhiana’s metal-workers. 29. Apart from skills, and some capital, central to the ability of these firms to produce their own machines is the availability in Ludhiana of an industrial infrastructure where they can get most specialized jobs such as grinding, heat-treatment, forging, casting, done from “the market.” Locational proximity to these specialty shops keeps the cost of sending parts out low, and the presence of a large number of skilled workers who work in factories by day and do specialty subcon-
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tracting during evenings and weekends, means that the manufacturer does not need to install all requisite machinery in-house to start production profitably. 30. See Rao (1990). Sharma and Singh (1980) explain that Rajkot (Gujarat) is the only other region in India where artisans constitute a significant (31%) proportion of local entrepreneurs. 31. Addressing the fuller controversy in the literature surrounding the issue of rural indebtedness in Punjab and British response in the form of the Land Ahenation Bill is outside the scope of this paper (see Darline. 1947: Thorburn. 1886: Banneriee. 1982: and Barriec 1966). Fox (1985), however, presents an ahernative explanation about the politics behind this Bill. The “agriculturalists” being protected were mostly Muslim petty producers from among whom the colonial government recruited its soldiers, and the better-off Muslim and Sikh peasants. Appeasing this latter group was politically more important to the British compared to the “non-agriculturalists” who were mostly from non-farming Hindu communities. Fox argues that the Bill thus supported the colonial government’s objective of maintaining “cheap recruits, loyal landlords, contented soldiers and inexpensive rural policing.. ” (pp. 49-50). 32. Several authors show how these skilled workers (especially the Ramgurhias and FI.swakarmis) are found chiefly at Ludhiana, in addition to Batala, Phagwara, Patiala and a few other centers in Punjab. Moreover, as scholars like Pathak (1970) show, metal based industries, from their inception in the mid-1800s became localized mainly around Ludhiana, pulled in by the prior growth of the hosiery industry in that region. Ludhiana’s hosiery industry is believed to have originated in 1830 when a severe famine in Kashmir led large groups of displaced skilled weavers to relocate in Ludhiana; local traders apparently commercialized their skill in the mid-1890s (see, for example, the Government of Punjab (1970) Disfrict Gazetteer of Punjab, Ludhiana).
33. See Pandit (1985) and Singh (1990). Defensedriven demand durine WWII shaned interlirm relationships in several, quite-different industrial environments. See for example the work of Saxenian (1994) for a discussion of California’s Silicon Valley. For the non-war time demand-generating role of the state and its impact on local industrial growth see Tendler and Amorim (1996). 34. Of course there were older firms in these sectors too. For example, some firms had been manufacturing cycle parts in Ludhiana since the 1930s. Reduced imports and a well-developed engineering industry during the 1940s gave a boost to this nascent industry (see Vakil, 1949, 1950 cited in Pandit, 1985). 35. As the large, integrated Bombay-based firms were proposing to do. 36. Also see Cawthorne (1990) for a similar break-up of the components involved in knitted hosiery in Tirrupur, Tamil Nadu, India. The same is true for the cycle and sewing machine industry. Bicycles have over
WORLD
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DEVELOPMENT
in
to any state government, should they desire them. What is different about Punjab is that it is among a small subset of states (such as Gujarat, Maharashtra) that have aggessively tried to take advantage of any federal policies that become available. Other institutions, such as Ludhiana’s Central Tool Room, and its Mechanical Engineering R&D center, are among 3-5 such institutions in the country; they are set up by the state government with central and/or multilateral funding in regions that are recognized as important regional hubs in key sectors or industries.
39. It is also striking that during this period about half of the colonial government’s investments in Indian irrigation were made in Punjab (Fox, 1985; Nair, 1979; Siddiqui, 1984).
47. A term coined originally in the early discussions of Italian industrial districts by Brusco. See Schmitz and Musyck (1994) for an excellent review of the salience of these and other services provided by local governments to small firms in industrial districts.
300 distinct parts, and each requires several operations, many of which are carried out in separate units. 37. For those employing less than 10 workers, of course, access to subcontracting networks also alleviates the cost of paying provident fund and medical insurance and loosens the grip of other labor laws, as has often been pointed out. Also see Harriss (1986) for an analogous argument for Coimbatore’s small-firm sector. 38. Specifically 1877-78.
in 1860-61,
40. And subsequent in the 19.50s.
periods
1869-70
and
of agricultural
finally
growth
as
41. See Hart (lY89a) and Harriss (1987) for the crucial role of investment in engendering (or not) linkages between a dynamic/modernizing agricultural sector and regional industry. See also Hart (1993. 1997). 42. Contrast this situation with the case of the Muda region in Malaysia described by Hart (198Yb) where she shows how the region’s political economy together with the Malaysian government’s macropolicy created just the opposite conditions that failed to retain the effects of Muda’s enhanced incomes within the region. 43. After partition, the average number of skilled workers in Punjab fell by 34.9% in a single year (between 1946-47 and 1947-48 skilled workers in East Punjab fell from 15,022 to Y,784) and the average wage rate of skilled labor rose by 31.2% during the same period (Luthra, 1949, pp. ix, 39). In several industries (in the region that became East Punjab after partition, over 50% of the skilled workers were Muslim (Luthra, 1949. pp. 41, 42). 44. Private industry shied away from training new workers within their factories because in many cases, despite such investments by firms, skilled workers soon left to seek their “scarcity value” - the highest return they could fetch (Luthra, 1949, pp. 59, 60).
48. Ludhiana’s industrial estates today are regarded among the most vibrant and “successful” of all similar experiments carried out by other states at later times (Dhar and Lydall, 1961; Fisher, 1968; and Alexander, 1963 cited in Fisher, 1968; For a general discussion see Taub and Taub. 1989). 49. Another example of trade associations serving as effective mechanisms for lobbying the state is the way in which interindustry associations jointly bargained with the state government over ways to deal with the problem of severe power shortages in the early 1980s. Through an industry-wide campaign local associations succeeded in getting a five-year program to install several thermal power plants in Punjab onto the state’s agenda. Sustained pressure by these associations resulted in the successful completion of all the targeted small-to-medium scale thermal plants power throughout the state before the five-year deadline was up. Today, in contrast to the situation six years ago, no one complains about power shortages in Punjab. Also see Taub and Taub (I 989) and Tewari (1993) for other examples of the strength and solidarity of producers’ associations in Ludhiana.
45. According to some estimates, nearly 4.3 million Hindus and Sikhs moved into East Punjab after partition, while 4.2 million Muslims moved to Pakistan (Ghosh, 1977, p. 38). The bulk of the Muslims were craftsmen, and small farmers, working in private factories, small workshops or small farms - not in the public sector.
50. Indeed, one of the ways in which the state “monitored” these sales of quotas and the subsequent investments was to allow firms that were well known to the minister to first sell the quotas. Because they were known to chief minister Kairon, and hence visible, it was “easy” to monitor them. But it was precisely this fact of allowing “friends” of the minister to sell their quotas that led to chief minister Kairon’s eventual dismissal from office on charges of nepotism and corruption. Pratap Singh Kairon had to resign as chief minister in 1964 in the face of charges of corruption and favoritism. See Nayar (1966, 1968).
46. Many of these industrial support institutions are part of Central government programs that are available
51. Some of the Tendler (1987).
others
who
suggest
this
include
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