Bad business: how Maoists are hurting the economy

Tuesday, June 23, 2009 |

New Delhi: The growing Maoist insurgency in India over large swathes of the mineral-rich countryside could soon hurt some industrial investment plans just as the country suffers an economic slowdown.

The government banned the Communist Party of India (Maoist) on Monday, bracketing it with Islamist militant groups, but experts said the ban would have little impact in the battle against the rebels.

On the ground, police fight Maoist insurgents with outdated weapons and are often outnumbered by rebels, who are skilled in jungle warfare and are armed with rocket launchers, automatic rifles and explosives.

Last week, hundreds of Maoists declared the town of Lalgarh about 170 km from Kolkata as a "liberated zone", sparking unease among investors.

While the economic impact may be small compared with India's trillion dollar economy, the insurgency and the sense that it is worsening signals that India does not fully control its own territory and adds to risks for companies mulling investments.

The Lalgarh incident worried the country's third-largest steel producer, JSW Steel, which is setting up a $7-billion, 10-million tonne steel plant near Lalgarh.

"We are waiting and watching, so are the others," Biswadip Gupta, chief executive officer of the company's West Bengal operations, told Reuters on Tuesday.

"On top of the economic woes, you have the problem of Maoists now. It is very jittery," Gupta said by telephone from Kolkata.

Prime Minister Manmohan Singh has described Maoists as the biggest internal security threat since independence, and this year more than 300 people, mostly police, have been killed.

The Maoists started their armed struggle in West Bengal's Naxalbari town in the late 1967, and have expanded their support among villagers by tapping into resentment at the government's recent pro-industry push.

GANG OF THUGS: Maoists gather in a Bihar village. The rebels have become a parallel force.

The rebels, estimated to have 22,000 fighters, operate in large parts of the eastern, central and southern countryside, and officials say they are now spreading to cities and bigger towns.

The Maoists, who are fighting for the rights of poor farmers and the disenfranchised, regularly attack railway lines and factories, aiming to cripple economic activity.

"It is still a law and order problem, but it has not been taken seriously and can have serious consequences if not dealt with properly," said Anjan Roy, analyst at the Federation of Indian Chambers of Commerce and Industry, referring to growth of industry.

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