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Chandrakant Naidu
Industry: Condemned to play catch-up
Posted: Monday, 18 June 2012 at 6:32 PM
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Madhya Pradesh’s claim of being the favourite destination of foreign investors remains a cry in the wilderness. This, despite the annual foreign junkets of successive chief ministers over the last decade. Chief minister Shivraj S. Chouhan’s nine-day trip this year takes him to Tokyo, Seoul, and Singapore. Predictably enough, how much came out of his European tourney in 2011 has never been much a talking point.

Extravagant promises to quicken the pace of industrialization have repeatedly proved hollow. Even after the nation opened up to global competition, overseas investors have singularly failed to warmed up to MP as they have to other states. Industrial growth rate has flip flopped between 4-6 per cent in the the last few years. The sector contributes only eight per cent to employment and about 23 per cent to the state's gross domestic product (GDP) as per the figures of the Central Statistical Organization.

According to the Planning Commission, Bihar and Chhattisgarh, two NDA ruled states, have in comparison seen a sharp turnaround, figuring among the five fastest growing states. Bihar has overtaken Delhi to top the list with a 13.1 per cent growth. National Institute of Public Finance And Policy professor N R Bhanumurthy, however, is right in saying that Bihar's progress looks better because it is against a low base.

Snapping at the heels is Delhi at 11.3, Puducherry 11, Chhattisgarh 10.8, and Goa 10.7. Gujarat, which attracted maximum domestic and foreign investors, was at 9.1 in the last financial year. Data from MP could not be considered for analysis since it was handed over much too late. That the state is a laggard cannot, however, be doubted. The tumbling rupee and growing inflation have compounded the problem. MP, Tamil Nadu and Karnataka have amassed huge foreign exchange debts, that of MP being the largest.

Media hype and fanfare marked the global investor summits at Indore, Gwalior, Jabalpur, Sagar and Khajuraho with memoranda of understanding (MoUs) worth several hundred million rupees signed with prospective investors. Very little trickled to the ground. Indore, which hosted the  first global summit in 2007, is being readied for the next one around October-end this year. Of the 102 MoUs worth Rs 1,20,541 crore  signed during the previous summit only 11 have materialized. Many were scrapped.  An MoU signed on a hundred rupee stamp paper has proved to be just that.

The reasons are not far to seek. For example most MoUs pertaining to cement projects lacked basic information on the availability of mineral resources. Players signing the MoUs were not put through a background check; their balance sheets or profiles went unassessed.

Says Indore Industry Association chief Gautam Kothari: “Older industrialists with existing businesses are wary of sharing the state’s shrinking resources with newer players.” MP hitherto has been luring investors with “three aces” of power, manpower and industrial peace. Power shortages are now endemic; most of the skilled manpower is already absorbed in existing industries, leaving the newer players to spend in acquiring trained hands. Now only industrial peace continues to be the state's USP, he laments. Besides existing industries complain that while the government opens its arms to foreign investors, the interests of the old reliables are not being protected.

Five years ago, says Mr Kothari, the state government claimed it was 19-30 per cent more profitable to set up industry in MP.  Cost advantage was the mantra. Dangled before captains of industry were the sops of cheaper land, manpower, logistic advantages, and a liberal industrial policy. Most have paled with the passage of time. Power bills for industry in MP are a virtual scam. They are so absurdly high. And the gambit of winning over the confidence of industry by allowing more power plants in the private sector has not exactly worked miracles.

Cement, textiles, mining, and edible oil continue to be the state’s mainstay. Several automotive and pharmaceutical majors have offered to establish or acquire units. The US-based John Deere will set up a new manufacturing facility near Dewas with an estimated investment of $80 million which promises to create 1,000 jobs - comprised largely of locals. Volvo has already taken over the Eicher facility to start a Rs 350 crore plant to manufacture Euro IV-compliant truck engines that will be supplied to the company’s European units and other global heavy vehicle manufacturers.

Again, MAN Nutzfahrzeuge AG of Germany have decided to invest in Force Motors in the manufacture of new LCVs, utility vehicles, state-of-the-art tractors, and a new range of heavy commercial vehicles. On the IT front, Infosys is planning a Rs 600 crore investment in Indore that will create 13,000 jobs. This could spur Tata Consultancy Services to set up shop in the state. These are mere straws in the wind. Too little too late! From the look of things, MP seems destined to play catch-up for ever. And even the speed of this is achingly slow.

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