Even before the fanfare and jamboree over the Global Investors Meet oraganised by the ADMK regime and the noise of the accolades to Chief Minister Jayalalitha for its ‘grand success’ subsided, the World Bank report on ranking of States on the ease of doing business in India ripped apart the tall claims of Jayalalitha & co about their regime making Tamil Nadu the preferred destination for investors around the world.
The regime and its supporters and the servile media in Tamil Nadu so far were willfully sneering at critics who disputed the unsubstantiated claims Jayalalitha regime on industrial development, economic progress, infrastructure building etc., But now with the authentic report of the World Bank relegating the State to the 12th place in ranking of States on the ease of doing business in India, they are dumb-folded.
Gujarat has topped the list of states in rapidly implementing business reforms, a study conducted by the World Bank and the government’s Department of Industrial Policy and Promotion has shown. Key states such as Maharashtra, Karnataka and Tamil Nadu have been slow in making progress and even lag less developed States such as Jharkhand and Chhattisgarh. Tamil Nadu is ranked 12 on the report and listed as a State which needs to speed up reforms.
The study assessed the States on various key parameters such as ease of setting up business; allotment of land and obtaining construction permit; complying with environment procedures; complying with labour regulations; obtaining infra-related utilities; registering and complying with tax procedures; carrying out inspections and enforcing contracts. The assessment shows that none of the States could achieve distinction or cross the 75% mark (dubbed as leaders category in the survey) in the overall assessment on business reforms. The top seven states emerged in the aspiring leaders’ category and these were Gujarat (71%), AP (70%), Jharkhand (63%), Chhattisgarh (62%), MP (62%), Rajasthan (61%) and Odisha (52%).
Former Financial Commission member D K Srivastava said TN’s poor ranking could be because of the State’s power crisis. “Expectations from businessmen on infrastructure, especially power, could have made TN rank low. Delays in getting permission may also be a factor,” he said.
The investors, especially the MNCs have long term perspective on infrastructure facilites when they choose the place for investment. On the power front, though the State government has managed power cuts for long durations, thanks to the generation of power from the projects started during the DMK rule, commissioning of Koodankulam nuclear power plant and willful purchases from private power firms at exorbitant rates, no new power project has been started in the last four and a half years.
On developing infrastructural facilities in ADMK regime, the least said the better. Not only any major infrastructure projects such as widening of roads, construction on flyovers etc., were taken up but also they hampered the ongoing works on vital infrastructure facility such as Rs. 1815 crore Chennai port-Maduravoyal elevated expressway stated during previous DMK rule, which facilitated container movement to and from the port without any hassles in traffic congestion.
In the past, Tamil Nadu did not need an investor summit, said L. Somasundaram, economic analyst. Things have changed, he said, with the State facing stiff competition from other States.
Nokia, an iconic mobile handset maker, shut down its India plant at Sriperumbudur near Chennai in 2014 and Foxconn, the world’s largest contract manufacturer of mobile phones and electronics, closed its unit in Sriperumpudur in February last.
United States carmaker Ford set up its second car manufacturing facility in Sanand taluk near Ahmedabad in Gujarat. Nearly two decades after setting foot in Chennai, Korean car major Hyundai has decided to pump in fresh investment of over Rs 4,500 crore for a new factory to boost its production capacity to over a million vehicles. States lobbying with the Korean company include Gujarat, Rajasthan and Andhra Pradesh. The lobbying has been hectic after Hyundai Motor Group’s global chairman Chung Mong-koo said in May that the company is “reviewing” plans for a new factory in India. He had said this after meeting Prime Minister Narendra Modi at Seoul. The company is said to be reluctant to expand around the existing location in Chennai considering that it faced a lot of problems and no help from the government in Chennai.
Mahindra and Mahindra is said to be ready to invest Rs.4,000 crore but the State government is indifferent, Isuzu is shifting to Andhra Pradesh, the expansion of Saint-Gobain shifting to Rajashthan, Ramco Cements has signed pact for starting its 2.5 metric ton unit at Curnool in AP.
The Special Economic Zone developed in collaboration with private sector at Sricity in A.P over 7000 acres has so far attracted investments of over Rs.6,000 crore. Even Alstom which has to supply 168 Metro Rail coaches has selected Sricity for its unit.
Data shows how investment promises only trickle down into actual investments on the ground over years. That too, not fully. The Centre plays only a 10 per cent role by framing policies and the remaining 90 per cent of attracting investments depends on the state government.
“One needs to be careful about over promising on investments and not delivering, which might give a bad publicity.” Partha Mukhopadhyay, Centre for Policy Research, said, “When a State announces investment proposals, we need see in what time frame. A mere statement alone would not mean much. If an HCL says it is going to investment $1 billion or Rs. 6,000 crore in next five years, such an investment depends on a lot of factors like their demand from the clients.” The MoUs are a mere expression of interest to invest. Converting into reality depends on lot of factors including the time it takes to take clearances.
And, he said, most of the clearances depend on the state government. Also, Dr. Sinha said, the ground situation matters — factors such as stretched balance sheets and bank not wanting to lend also plays a part in investment not converting into reality. This is particularly true of big-ticket riskier investments like power.
It is still difficult for foreign companies to invest in Tamil Nadu due to bureaucratic hurdles. The slow pace of the Chennai Metro Rail is also a matter of concern, Muneo Kuruachi, Chairman of the Standing Committee of Japan-India Business Co-Operation Committee told The Hindu in an interview on the sidelines of the Global Investors Meet. He said, “Our mission is to be in three cities - Mumbai, Bangalore and Chennai. Tomorrow, we are to going to Bangalore. Our investors are mainly small and medium companies. They want to increase their knowledge of India. That means no financial commitments to GIM. Of course, there are many challenges, especially for newcomers. When they try to start business, it is not so easy. Even now it takes time… too many bureaucratic processes. Japan has invested so much money in Chennai Metro Rail. But the the progress is a concern. Bank of Tokyo-Mitsubishi and Mizuho already have their branches here. Remaining is Sumitomo Mitsui Banking Corporation (SMBC). They are proposing to the Central Bank to set up shop here but I am not sure whether it is in Chennai”.
This is the reality of the much publicized GIM and the World Bank report flies in the face of Jayalalitha gloating over the success of the GIM! r
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