Modi's Job Deficit: India's Largest J & J Plant Inactive Three Years After Completion

PENJERLA / NEW DELHI, India (Reuters) – It was supposed to be Johnson & Johnson's largest manufacturing facility in India. Ultimately, it was expected to employ at least 1,500 people and contribute to development in a rural area near Hyderabad in southern India.

Yet three years after the US health care company completed the construction of the 47-acre cosmetics and baby products facility, they remain unused.

Two sources close to J & J's operations in India and a government official told Reuters that production at the Penjerla plant in Telangana State had never started due to slower growth demand for these products.

One of them said that the request had not increased as expected due to two shocking measures by Prime Minister Narendra Modi: the ban on the circulation of high-value banknotes outstanding and the nationwide introduction of a Goods and Services Tax (GST) nationwide in 2017.

J & J spokespeople in Mumbai, India, and its New Jersey, New Jersey, global headquarters refused to answer a Reuters list of questions.

Modi's office did not answer a call or an e-mail with questions.

Intended to eradicate corruption and streamline the tax system, the double setbacks of "demonetization" and the GST – were two of Modi's signature policy changes. But instead of encouraging economic activity as expected, they did the opposite, at least in 2016-2018, by undermining consumer demand, according to some economists.

Many companies, especially small and medium-sized businesses, have publicly complained – some in their financial statements – of a decline in their orders. The suspended J & J project is one of the most striking examples of the impact on investment as a whole.

In the first month after demonetization, some business surveys showed that sales of products such as shampoos and soaps had dropped more than 20%.

Lack of job growth and the crisis in farm incomes due to low crop prices affected Modi during the current general election, according to several political strategists.

Even so, Modi and his ruling Hindu nationalist party, the Bharatiya Janata, should, according to many strategists, be able to run for a second term – probably with the support of some other parties – when votes are counted on Thursday, in part because of its strong position. on national security issues.

GREAT INVESTMENTS, GREAT EXPECTATIONS

A range of Modi's trade policies, such as limiting the prices of medical devices, forcing technology companies to store more data locally, and tighter e-commerce regulations have, in the last two years projects of American multinationals such as J & J, Mastercard, Amazon and Walmart. Flipkart owned.

The inauguration of J & J's facilities in Penjerla, the third in the country, took place with fanfare in 2014, in the presence of Telangana's chief minister of state, Chandrashekar Rao, who welcomed the foreign investment as a great victory for local communities. A document dated April 2017 that lists the products that the company was planning to manufacture locally, submitted to the Telangana government and reviewed by Reuters, named baby oil, baby shampoo, baby lotion, hair oil for baby, facial cleanser and creams.

Shaukat Ali, manager of a tea shop under a bamboo stand on an arid land outside the factory, said local workers regularly check the availability of job vacancies on the site from J & J, but nothing has been done for years.

Satyanarayana Reddy, the member's secretary, told the local office of the Pollution Control Commission that the J & J plant had all the required approvals and that he did not really know why she had not started production. .

"It's unusual for such a large plant to remain idle for so long," he said. "But there is no problem on our side."

Chandrasekhar Babu, another director of the Telangana Industries Department, said a J & J company official told him that the plant had not started because of lack of demand.

The GST and demonetization were two of the main reasons why the plan did not start, said one source, adding that the lack of consumer demand since has damaged the company's plans.

The second source familiar with J & J's plans said the company had miscalculated demand in the Indian market.

During a recent visit by a Reuters reporter to the J & J factory, the conference rooms and furnished and furnished cabins were inactive; Sairam, who said he is responsible for the site, told Reuters that the production areas with machines were also inactive.

EXPECTED EXTENSION

Local officials had hoped that the initial installation of J & J would only be the beginning. After the inauguration of the works in 2014, Pradeep Chandra, Telangana's chief industrial secretary, told Business Today magazine that "based on the extent of the lands (J & J) have been acquired, we believe that 'they are planning a much bigger expansion here'.

Local media reported at the time that J & J's facilities would employ about 1,500 people.

A J & J official, who was not identified by name, was later reported in December 2016 in India's Business Standard that the plant has a budget of $ 85 million. , would be operational by 2018, once procedural delays have been overcome. The official reportedly said the company had allocated an additional $ 100 million to the expansion.

Vikas Srivastava, the managing director of J & J Consumer (India), who was at the 2014 revolution, did not respond to the calls for comments.

Reuters also spoke with two workers outside a sprawling Procter & Gamble facility that manufactures detergents and diapers for baby, next to the J & J factory. They stated that they were part of the P & G plant's production team and that it was operating at the limit of its capacity.

A spokesman for P & G denied this, saying the plant was operating at full capacity, in accordance with our commercial plans. "India is a priority market for P & G worldwide and, in recent quarters, P & G's India business has consistently strong double-digit growth," the company said.

The weak rural economy, where most Indians work, has also hurt the growth of sales of basic necessities such as detergents and shampoos over the past year.

Hindustan Unilever Ltd., a company that competes with J & J and P & G in certain categories, said its volume growth dropped to 7% in the quarter ended March 31, down from double-digit growth. five quarters.

The company warned that the consumer goods segment in India was "resilient to recession … not recession."