What’s the story behind Kerala government’s Rs 3,500-crore investment dispute with Kitex Garments?

New Delhi: Kitex Garments, the world’s second-largest producer of children’s clothing, has decided to shift a Rs 3,500 crore project out of Kerala. After Telangana rolled out the red carpet, the corporation will invest Rs 1,000 crore in the state. The company’s top officer openly lambasted the Kerala government for “hounding” it, raising concerns about the state’s ease of doing business.

Here’s a look at the dispute, the political factors that may have influenced the company’s decision to leave the state, and what the Kerala government plans to do to re-establish investor confidence in the state. Kitex has been subjected to several inspections by various Kerala government authorities in recent weeks; with group chairman Sabu Jacob openly accusing Pinarayi Vijayan’s Left government of hounding the company.

After being exposed to “11 inspections in a month” in June, Jacob announced the group’s decision to move its intended investment of Rs 3,500 crore to set up three garment parks out of Kerala. A Congress MP and a Congress MLA, as well as a female staffer, have filed complaints against the organisation. The charges ranged from polluting a neighbouring waterway to harassing employees.

The Kerala government has denied targeting Kitex on purpose. The inspections were carried out in response to particular complaints and rulings from courts and the state’s human rights commission, according to state industries minister P. Rajeev. Kerala’s chief minister also stated in a tweet that the state is and will remain one of India’s most investor-friendly states. Jacob, the founder of the Kitex Group, is an industrialist who has also dabbled in politics. Jacob launched Twenty 20, a one-of-a-kind political experiment that won seats in panchayat elections in 2015 and then built on that success in the 2020 elections by winning seats in new panchayats.

Kerala ranks lower than many other states and union territories when it comes to the ease of doing business. Based on improvements that states were asked to undertake in 2019, it was ranked 28th out of 36 states and UTs in the ease of doing business rankings. Kerala was judged to have failed to implement some labour reforms, such as single-window clearance and measures to ensure smooth information flow and transparency.

The Kerala government is now preparing a bill aimed at making it easier for manufacturers to do business. As the state attempts to rebuild its reputation as an investor-friendly state, the law recommends eliminating redundant inspections by several departments and minimising production cycle delays. It also envisions keeping industries informed about such inspections ahead of time.

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