Large-scale job losses in the diamond polishing sector and loss of output and exports pose many questions on economic policy. Why is diamond polishing important? When I landed in Gujarat in June 1968,leaving a national management institute to literally buy the tables and chairs of a national economics research institute,the meter gauge side of the Kalupur railway station was still carting raw cotton from Rajasthan,Malwa,north Gujarat and Saurashtra for the cotton mills around it,the first one set up about a hundred years earlier by Bhikhabhai. Surat in those days was a sleepy town,having lost the glory of its port and its work force was less than a lakh. In the 2001 Census its work force was 11 lakh. It had created a million jobs. There were more Oriya industrial workers in Surat than in the state of Orissa. It was the fastest growing city in western India,had overcome the plague and was on the brink of becoming a metro. The size of its industrial work force was comparable with metropolitan Singapore,although,given Indias unlimited labour supply,wages were much lower.
In the 80s,some local chambers of commerce asked us to study the industry to which they belonged. Study to us means walking the vadis,asking questions,going back and understanding,rather than bang-bang reports on art paper for a million rupees,thank you sir. S.P. Kashyap and Rohit Desai were to produce the understanding on the art silk looms and diamond polishing cottages,later to share in the World Bank publications and others. I was to only accompany them. They said that diamond polishing was expanding rapidly and was an export success. More important,it was succeeding so on its own strength. Small-scale industry sarkari policy had nothing to do with it. The industry was organised on trust. A very expensive passa could be given by the seth to a worker and he would bring it back the next day,polished. There was no paper work,no surety. It gave the diamantaires the power to quickly respond to fashion and demand changes the world over. Costs were low and later I was to cite it as a lean manufacturing example outside Edo Japan. With the IT revolution,modern technology was possible with the small guy. There was great mobility. If you did well you hired a few workers,if not you became a worker yourself. It was an intensely competitive and organised game,where the Suratis could hit anybody. Antwerp couldnt hold out and by then they had tasted blood and were well on their way as a global entity based on their own caste and artisan skills.
There are many such clusters in India. This was the first one we labelled so. I was to attend meetings in the governing board of the International Institute of Labour Studies in Geneva and met Michael Piore there. He had discovered the Second Industrial Divide by then with fashion garments in Emilia-Romagna in Italy and shoes in southern France. I insisted that,with our long cultural history of artisanship,we had the same potential. They would not bite. We organised a road show in which Frank Sengenberger,who was discovering clusters everywhere,came to India and I took him on a chamber of commerce lecture circuit. Frank Pyke had by then discovered the complex relationship between clusters and regional growth. Its a small world for as I write this close to my nature park I have an e-mail from him after two decades querying on diamond polishing. In 1992,I was to take P.K. Laheri,then industry commissioner,to Valencia and study with me gold jewellery and he came back and reorganised NIFT on a regional basis and the fashion story was to follow.
Meanwhile,the diamantaires were going global with a vengeance. They were integrating forward with the value-added chain. In the last few years,they went into the high-value segments and linked up with the designers globally. They then bought diamond retail chains in America,now closed,and in any other country would have been the jewel in the crown. In China,the US or Europe they would have led to sleepless nights for policy-makers and long since the tax and financial packages would have been in position; but they are on the wrong side of regional politics and national policy is not to be disturbed in its global neutrality. It takes a long time to build,but much less to destroy. At the Amartya Sen Festschrift there were two differences. One was on the depth of the crisis with some of us arguing that a business-as-usual story next year was around 5 per cent with halving of the average growth meaning misery for many,and our most senior policy-maker saying growth prospects were good still,adding nonchalantly that around it some would suffer. I suppose as long as the other guy loses his job its okay. But s/he is now dying. It happens only in India.
Delhi and Gandhinagar went further and at this time decided that enforcement of labour laws on this largely unorganised sector is the major policy response needed and sent the generally sensible labour secretary to play the big boss on the diamantaires. A few weeks earlier,Arjun Sengupta had in his report declared that many new clusters are to be created. But clusters are not created by plans and fiats. They emerge from historical skills and policies which nurture the competitiveness behind them. They are strengthened by governments,nationally and locally sensitive to supporting those who help themselves. Standards matter for that is all the modern world is about and the diamantaires train their workers. Their technology is the best,with computer skills all along,but you cant throw the baby out with the bathwater. Getting them to be socially creative in partnership will have to be a slow business. CSR sounds good but only goes so far.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand firstname.lastname@example.org