Case Study: Tea companies and tourist operators face losses amid new unrest in India'ss Darjeeling

The picturesque hill city of Darjeeling is in turmoil. Its tourists have been evacuated and its tea gardens are on lockdown. The reasons why illustrate some of the stability risks that come with operating in India.

Tongue twisters

The latest unrest began in June when the state government of West Bengal announced that the Bengali language was to become a compulsory subject in schools across the province. Bengalis are the majority in West Bengal, where they are led by Mamata Banerjee of the Trinamool Congress party. Banerjee is seeking to shore up Bengali identity against the Hindu identity politics peddled by her rivals in the national government led by Prime Minister Narendra Modi's BJP. Bengali identity politics are problematic in West Bengal, however. The far north of the province impinges on the Himalayas. There, Gurkhas form the majority, an ethnically Tibeto-Burman community which overlaps into neighbouring Nepal. Darjeeling is their de facto capital city, and their sense of ethno-linguistic difference has for years driven a campaign for a separate Gurkhaland province to be carved out of West Bengal, while remaining part of the Indian union. The consequences of Banerjee's language announcement for Darjeeling were entirely predictable. The Gorkha Janmukti Morcha (GJM), which leads demands for Gurkha statehood, immediately launched a series of protests and an indefinite bandh, a lockdown-strike that paralysed business across the city and wider area. The GJM ignored the state government's hurried insistence that the language rules would not apply to schools in Darjeeling. Tourists had to be evacuated from the city's high-end hotels; no easy task, given that access to Darjeeling is via steep, narrow roads that often let only one vehicle cross at a time. An array of military and paramilitary units deployed to the city's streets, mingling with local veterans of the British army, which recruits Gurkha regiments, and whose veterans enjoy great prestige in the hills and often sport their former berets. Gurkha grievances extend far beyond the latest language law. On 27 June GJM activists burnt copies of the Gorkhaland Territorial Administration (GTA) accord, a 2011 deal which created an elected semi-autonomous local authority to administer the hills, but which stopped short of the GJM's demands for full statehood. The GJM has now announced that it will no longer participate in elections to the GTA, and was resuming its campaign for a Gorkhaland state. On 28 June a GTA building in Darjeeling was set ablaze; the GJM denied responsibility. Darjeeling is economically significant as a global tourist attraction and as a centre of tea production. International supply chains have already been adversely impacted as tea picking during the peak 'second flush' season (May-July) has ground to a halt. Marcus Wulf, a German tea importer, told Kolkata's Telegraph newspaper that such unrest could prompt buyers to shift to suppliers elsewhere in India. The Darjeeling Tea Association has appealed to the GJM to exempt the tea plantations from the strike.

A hydra-headed beast

When India declared independence from the British in 1947, it had 29 states and territories. This number has since risen to 36 and is climbing, and it is quite possible that the GJM will prove successful in its demands for a separate Gorkhaland, just as in 2014 the TRP party finally succeeded in its campaign to carve the state of Telangana out of the southern state of Andhra Pradesh. The TRP now leads the government of that state. The logic for more states is clear, given India's enormous population and huge levels of ethnic and linguistic difference; the U.S. comprises 50 states, despite its population being less than a third the size of India's. However, the fact that such new provinces are indeed likely to materialise one day creates a persistent source of risk for companies operating in India. It gives parties such as the GJM and TRP a strong incentive to rabble-rouse and to take their campaigns onto the streets rather than attempting to make their case institutionally, as was the case in the latest instance, which appears to have been a deliberate overreaction to the Bengali language issue.
The logic for more states is clear, given India's enormous population and huge levels of ethnic and linguistic difference...
GJM members know that once they've achieved their demands and a new state is established, as is ultimately likely, their party is very well-placed to run the state government for decades afterwards. In India, this usually translates into great wealth for the politicians concerned. In the meantime, tea buyers and tourism operators are left wondering how to respond. Read the full article