Growth in India's industrial hub leaves many behind

Corruption, overregulation, and lack of jobs contribute to the wide gap between India's rich and poor.

from the May 3, 2007 edition

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In this way, Korba is a portrait of the emerging industrial India. Sitting on the country's richest coal seam in the remote state of Chhattisgarh, it is a Pittsburgh of the subcontinent – a thicket of smokestacks amid a landscape of rice paddies.

Earlier this year, seven power companies agreed to establish new plants in state of Chhattisgarh, where Korba is located. Two of India's largest conglomerates – Tata and Essar – are building new steel mills. In all, Chhattisgarh attracted more foreign investment than any other state in India during the first half of 2006.

This will surely bring jobs. By 2015, investment in India's coal belt – comprising Chhattisgarh, Jharkhand, and Orissa – could create jobs for 700,000 people "the majority of whom would be from the rural and small town population," according to a survey by McKinsey, a consulting firm.

But the gap is enormous. Nearly two-thirds of the country is still caught in the agricultural sector, which is growing at a negligible 2 percent annually. Moreover, more than half of all Indians are aged 25 or younger, meaning the country will need to add as many as 8 million jobs each year just to keep up.

"It is very misleading to justify heavy investments in capital-intensive projects on the grounds that they will create employment," says Jean Drèze, an honorary professor at the Delhi School of Economics, in an e-mail. "This is unlikely to do much for the rural poor."

Rajendra Mishra, a local labor leader, would like to see the government play a more active role in helping the rural poor find employment.

"The first responsibility is with the government," says Mr. Mishra. "The regulations are all there."

Indeed, India does not lack for regulations. There are 47 national labor laws and 157 state laws, by Mr. Narain's count, creating an almost impenetrable tangle of rules. "It's extremely difficult for anyone to know what their rights and responsibilities are," he says. "Part of the problem is the complexity."

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Korba: A cyclist skirts a coal-processing plant in the center of Indias new industrial heartland. Mark Sappenfield