Firm Location Decisions and Their Impact on Local Economies: Evidence from India’s Growth Centres

Abstract

One theme that recurs throughout this book is the consideration of whether tax incentives have some impact on firm location decisions, when compared to the impact of infrastructure incentives. As we have discussed in earlier chapters, the GC approach is a test of the alternative to the tax war, and competition in providing infrastructure and public services, among the states. As stated earlier, there is considerable scepticism in policy circles regarding India’s GCs and their effectiveness in attracting firms. Commentators’ views have varied from a perception of the programme having been a colossal failure in attracting firms to one that strongly believes in their effectiveness because of the infrastructure incentives available to firms that locate there. Chapter 6 presented empirical evidence, based on secondary data, regarding the effect of GCs on the unemployment rate and their impact on firm location, where they exist in India. In this chapter, I attempt a qualitative assessment of the impact of GCs, based on primary data collected from field visits to several GCs, discussions with state governments, and visits to agencies administering the programme and to several firms located in the GCs. In this way, I account for factors and observations that might be missed in a purely quantitative approach which has been the focus of the previous chapters.