The Indian company will shift product of its $2,500 small car. At consequence in West Bengal was to what extent Tata acquired the land for its Nano factory

by Nandini Lakshman

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Ratan Tata, chairman of Tata Motors (TTM), maker of the in a great degree anticipated $2,500 Nano scanty car, finally called it quits in Singur, in the east Indian grandeur of West Bengal, to which place the car was to be manufactured. For some time now, topical politicians and farmers in the state have been protesting against the land acquired by Tata for its residence of factors to production the Nano (BusinessWeek.com, 8/27/08). On Aug. 29, those demonstrations stalled work at the Nano engender, barely three months before its scheduled launch. Finally, on Sept 2, a Tata compel statement reported "the company is evaluating alternate options for manufacturing the Nano at other company facilities." Tata hasn’t divulged where it will relocate, but possible locations hold Pantnagar in the northern state of Uttaranchal; Ranjangaon, 125 miles off Mumbai, where it operates a joint-venture manufacturing facility with Fiat India; and the new plant coming up in Dharwad in southern India.

The implications of Tata’s relocation are severe. Industry observers believe the politicization of the Nano project will most likely ground fresh investments in the Communist-led state of West Bengal. "Surely companies will think twice before going to the state. India be able to do without West Bengal," says Arun Maira, a senior advisor at Boston Consulting Group. The state received an estimated $20 billion in investments between January and June of this year.

Nor does it augur well for India’s image as some investment destination, singly when the auto sector has been at its greatest number stalwart. Over the years, foreign investors have found it tough to do business in India befitting to its politics. For example, familiar activists love picking on global cola makers Coca-Cola (KO) and Pepsi (PEP), which have been accused of selling products containing pesticides. The tough environment has led to many Indian businessmen flying overseas at the primary opportunity.

Now they are voicing their concerns as being in favor. There’s been an unusual show of solidarity through corporate India, with numerous company of the country’s top business leaders rallying around Tata. "Seeing India’s most born in wedlock and respected business group stymied by some politicians has shocked us," says Venu Srinivasan, chair of Chennai bike maker TVS Motors (TVSM.BO). "There can’t be a better human face of the industry than Ratan Tata."