The World Bank says it takes an average of 10 years to close a business in India, compared with 3.6 years in the rest of Asia and 1.4 years in the rich countries. Data such as this makes a complete mockery of claims that India will soon have a rational exit policy.
Bajaj Auto Ltd is not trying to close the company: all it wants to do is to shut one plant at Akurdi, near Pune. It is understandable when the unions protest, because it is their job to try and protect the interests of the workers. But, what is unwarranted is the manner in which politicians have jumped into the fray. A healthy investment climate means the freedom to both put in and pull out money. If you create obstacles in one, the other suffers as well.
The Bajaj Auto imbroglio also points to another flaw in India’s industrial policy. The Akurdi plant is said to have been shut because of tax breaks for investment in backward states. It is time opportunities for such tax arbitrage are shut.