States Of Lethargy

Why does it seem that the states have stopped competing for investment? Remember the 90s when Andhra Pradesh and Karnataka fought tooth and nail to upstage Maharashtra and Gujarat? How the Chennai region managed to get all the auto sector investment even though Pune region had a legacy advantage.

The continuing sense of gloom among investors has been fed largely by the increasing lethargy of state governments to push growth.

State governments and chief ministers make half hearted attempts to hold investor conferences. More effort is spent on organizing a summit than in clearing hurdles for projects.

Chief ministers hold the occasional photo-op meeting with business leaders to show their commitment for growth. But soon after the flash bulbs move away, the chief minister and the government turns its face away from pending problems.

Frustrated by such behaviour business groups are getting specific about project clearances. The Confederation of Indian Industry recently sent a list of 62 large projects to central government that are waiting to start operations. The total investment in these projects is over $13 billion. Of these most are in power and petroleum sector while the rest are in transport and township.

The clearances they are waiting for are mostly from the state governments. While the central Ministry of Environment has held up a few, the local approvals are proving to be more frustrating. A project management group set up at the central government is trying to push states into getting the clearance done.

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In another time and era, state governments would have fallen over each to provide the clearances. Today, investors have to struggle. Part of the reason for this is the sheer increase in number of proposals. States are running out of land but they are also severely short of innovative ideas to resolve issues. Generous compensation, structured employment in projects and removal of archaic rules will automatically speed up the approvals. But the local political leadership is loath to take the effort or to give appropriate direction to the bureaucracy.

Not surprising then that an increase number of investors are planning life without India. Even as the central government relaxes foreign direct investment rules, domestic investors are flying away.
Much hope is being placed in Raghuram Rajan, the governor designate of Reserve Bank of India. Low growth, falling rupee and high inflation can’t be controlled by the central bank alone. Nor can the central government alone shoulder the responsibility. States will have to pull their weight to ensure that job creation and fund generation for welfare schemes is enabled.

Where the central government has failed is to creating a positive sentiment of growth and action. Even if the central ministries don’t control state level issues, they can be proactive in chasing clearances. Political parties must push their Chief Ministers to focus on improving growth. States have to be able to convince citizens that if land and other resources are being allotted for projects, the returns will be better jobs and wealth for all.

India needs a fresh batch of chief ministers in states who are eager and hungry for growth and development. Tough to say when this batch will graduate and take charge.

(Pranjal Sharma is a senior business writer. He can be contacted at [email protected])