#dnaEdit: Competing states

The competition between states in trying to attract investment, evident in the manner in which various Chief Ministers made lofty promises to investors at the 13th Pravasi Bharatiya Divas, bodes well for Prime Minister Narendra Modi’s promise to ease the difficulties in doing business in India. Not content with mere marketing pitches, the event was marked by the curious sight of various Chief Ministers even resorting to gamesmanship. When Punjab CM Parkash Singh Badal claimed his state has moved from “single window” to “single person” clearance, Madhya Pradesh CM Shivraj Chouhan compared his state’s “single door” policy to Punjab. Andhra CM Chandrababu Naidu who followed, pitched for computerised clearances quipping that he was no match for “single windows, doors and persons”. Gujarat’s Anandiben Patel promised a smart state, smart economy and smart governance while Maharashtra vowed to invest in digitisation and infrastructure development. With Narendra Modi’s rising popularity and the quantum of industrial investment invited into the state becoming the barometer of a state’s and its Chief Minister’s mettle, these CMs were obviously pulling out all the stops to project their business friendliness. Yet another reason could be that actual investment as against MoUs and commitments have been flagging, making states wary of others stealing their pet projects. Last year, Naidu’s and Patel’s pitch to Bengaluru and Mumbai-based businesses to invest in their respective states had unnerved politicians in the host cities.

The Vibrant Gujarat summit, on the first day itself, witnessed investment commitments of Rs10 lakh crore being made and MoUs worth Rs50,000 crore being inked. The 2011 and 2013 Vibrant Gujarat summits saw investment commitments of Rs20 lakh crore and Rs10 lakh crore, respectively. While the Vibrant Gujarat summits between 2003 and 2013 have led to cumulative investment commitments of Rs51 lakh crore, the actual FDI inflow into Gujarat during 2000-2013 was only Rs39,000 crore, which pales before national FDI inflows of Rs9.1 lakh crore in this period. However, FDI inflows may not paint a true picture as Indian businessmen have made some of the most ambitious commitments at these summits. There is also scepticism that many of these commitments are mere political gestures by industrialists eager to please state governments at such conclaves. Even on MoUs, the execution rate of projects on a national scale is just 30 per cent. Realising that MoUs do not translate into seriousness of executing projects, Gujarat is debuting with a Letter of Intents process at this year’s summit.

However, it is Rajasthan’s business friendly measures that are attracting much attention. Rajasthan has not restricted itself to reforms related to clearances at the executive decision-making levels like the others, but pressed for legislative changes at a pace that has even the Modi government desperately playing catch up. Rajasthan has already amended the Factories Act, Industrial Disputes Act, Contract Labour (Regulation and Abolition) Act and Apprentices Act. It even made an abortive attempt to amend the Land Acquisition Act. The results are evident with the industry apparently beginning to respond. Hyundai, Saint-Gobain, Vedanta are reportedly planning significant investments in Rajasthan. A huge publicity machine is already in overdrive for the state government’s flagship initiative, Resurgent Rajasthan-2015, slated to be held in November. Even the President’s nod to Rajasthan’s Apprentices Act ties into a crucial requirement for the state, of fostering home-grown labour, in an ambitious plan to create a 15 lakh skilled workforce. With India dropping to a low of 142 in the World Bank’s ease of doing business, it is important for both the Centre and states to sustain this momentum.