India has been gaining an unusually good reputation this past decade?we are a democratic market economy which offers opportunity for all and we respect private contracts. How often have you heard the phrase ?Deal is Deal? on the streets, in offices and in films?quite often one imagines. India?s economic and political freedom, coupled with institutional strength?like in enforcing contracts?are often highlighted as reasons to argue why India will eventually overtake China. But there have been dreadful exceptions. And the most recent one is the state government of Goa. It?s order to ?stop work? at the three notified SEZs in the state flies in the face of contractual obligation. The aggrieved private parties went to the high court in protest. A division bench of the Bombay high court in Goa has asked the state government to take a decision on its ?stop work? order within two weeks.
The counsel for the Union government, also a party to the case, has already conveyed the view of the Centre?there will be no denotification of any of the SEZs. The Centre has thus intervened in favour of maintaining its contractual obligations even under pressure from various interest groups and opposition parties. This is eminently sensible, and is the right decision. While the activists have every right to protest, it does not make sense for a government to give in just because not everyone is happy. After all, the state government, now wanting to denotify the three SEZs, was a party to the initial consultations and notification along with the Centre. It is a sign of fatal weakness if a government succumbs to the pressure of interest groups so easily and reverses its decisions. The government in Goa must, therefore, tell the high court that it will allow work to proceed in the SEZs that were notified. Or else, Goa will send out absolutely the wrong signal to investors. That will not be in the interest of the people of Goa, who will miss out on the opportunities that come with industrialisation. What is worse, from a national perspective, is the very real possibility that private investors will take the Goa government?s volte face as a larger political malaise. Let the Goa government rethink its SEZ policy as a whole and decide that it doesn?t want any more SEZs. But a policy change is different from violating contractual obligations.