Thursday, 27 January 2011

Reversal of fortune - how Kutch turned an earthquake to its advantage

Don't get me wrong - I am not for a minute suggesting that an earthquake can be a good thing. But in one region of India it seems that it has been a catalyst for sweeping economic reform that in the end has brought enormous benefit.

In 2001, the Kutch region was devastated by an earthquake that killed around 15,000 people and injured more than 150,000. Houses, schools and hospitals were destroyed in an area which already suffered from poor infrastructure and lack of employement opportunities. But 10 years on, Kutch is enjoying a boom. The city of Anjar has become a global pipeline hub, with capacity of 1.5 million tonnes per year and expected to double. Steel mills have sprung up to cater for the pipe industry and the area's plentiful supplies of limestone and lignite have led to the establishment of cement plants. It is home to Welspun India, one of the largest textile factories in India. And at Mundra a new port has been established that rivals Mumbai.

The road network is excellent, and there is finally a railway station at Bhuj. The ports at Mundra and Kandla enjoy links to the Delhi-Mumbai line. Shops, restaurants and service industries have come up to serve the new industries and wages are high enough to attract migrant workers into the area. Arid farmland has become attractive real estate, turning impoverished farmers into wealthy men who have invested their new-found wealth in shops and other businesses.

The industrialisation of the area may not be an improvement from an environmental point of view, but it has brought previously unknown levels of opportunity and prosperity for its residents. What seems to have brought about this transformation is a five-year exemption from excise duty and sales tax, announced by the Central and State governments for new industrial investments in Kutch commencing production by July 2003. It was initially claimed that the tax breaks could bring in Rs 25,000 crore ($ 5.5 billion) of new investment, a figure that was first dismissed as wishful thinking, but is now estimated to have exceeded Rs 20,000 crore.

Kutch suggests that providing tax breaks for a disaster-hit district can instigate a virtuous circle of investment and growth that is sustainable, with the potential to not only rehabilitate victims but improve their quality of life.

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