You could dub them item songs of the political economy. Every few months, India’s state governments arrange alluring alliteration, hype and hope to hog headlines and attract the attention of moolah moguls and corporate CEOs to invite investments into their state.Advantage Assam, Credible Chhattisgarh, Magnetic Maharashtra, Happening Haryana, Progressive Punjab, Resurgent Rajasthan. Not every state is endowed with alliterative possibility. The others deploy ‘global’ to convey local aspirations. There is Madhya Pradesh Global Investors Summit, the Bengal Global Business Summit, Momentum Jharkhand Global Investors Summit, Invest Karnataka Global Investors Meet, Tamil Nadu Global Investors Meet and Uttar Pradesh Investors Summit. And then there is the Vibrant Gujarat Global Summit.
The choreographed carnival of supply side economics has all the optics of a T20 match—the festoons, the hoopla, the cheerleaders, the big hits and neon-lit scorecards. Consider the five-day Magnetic Maharashtra show. It saw 4,106 MoUs (translating into 35 every hour or one every two minutes) being signed, signalling investment intent of `12.10 crore. In an earlier avatar, the Make in India summit, the state signed proposals worth `8 lakh crore. On Thursday, the UP government declared that 1,045 MoUs were signed during the two-day event, signalling investments of over `4.28 lakh crore—including the setting up of one of the two “defence industrial production corridors” announced in Budget 2018, in Bundelkhand.
This weekend, N Chandrababu Naidu flagged off Sunrise Andhra Pradesh Investment Meet and the score card will follow. Earlier, in January, West Bengal announced that it had received proposals worth `2.19 lakh crore. This was in addition to `2.35 lakh crore in 2017, `2.5 lakh crore in 2016 and `2.43 lakh crore in 2015—very simply `9.4 lakh crore in four years. In 2017, Jharkhand got investment proposals worth `3 lakh crore. Madhya Pradesh signed proposals worth `5.62 lakh crore in 2016 and over `6 lakh crore in 2014. In 2016, Happening Haryana had wooed proposals worth `6.41 lakh crore, and Karnataka received proposals worth `3.08 lakh crore. Resurgent Rajasthan in 2015 saw MoUs worth `3.3 lakh crore.
If all these proposals, by no means an exhaustive list, are added up, it would seem the states received investment proposals worth nearly `40 lakh crore—and if one includes this month’s MoUs, it could well cross `50 lakh crore. So what is the strike rate, rather what is the conversion rate of the big hits? Fact is, while there are announcements aplenty, the conversion of intent into investment is enveloped in a fog of definitions, generalisations, rationalisations and politics—the Amarinder Singh government in Punjab, soon after taking over, said three of four proposals signed by the earlier regime had remained on paper. There are claims and counterclaims.
The macroeconomic data on investments put out by the government year on year does not reflect a surge or substantive conversion, particularly when mapped to the magnitude of investment proposals received by the state governments. While MoUs are rising in volume and value, Capex tracking by the Centre for Monitoring the Indian Economy shows new investment proposals have slipped lower in 2017-18, lower than previous years and the lowest since 2004-05.
The Economic Survey says, “The ratio of gross fixed capital formation to GDP climbed from 26.5 per cent in 2003, reached a peak of 35.6 per cent in 2007, and then slid back to 26.4 per cent in 2017”, and that the twin engines that propelled the economy’s take-off in the mid-2000s—exports and investment—are continuing to run below take-off speed. Indeed, the RBI Governor described the slide in investments memorably as “retrenchment of investment demand”.
There is no disputing the need for focus on investments to ramp up growth—even if through mega meets or summits. Equally, the fact that states are compelled and are competing to do so is a recognition that much needs to be done to improve ease of doing business—say in days taken to start a business or clearances required. Even in Maharashtra, arguably an investment-friendly state which has created single-window options, an investor in a non-MIDC area must get 59 clearances—ten from labour, nine from urban development and eight from energy—to set up an industry.
To infuse credibility into the idea of investor summits there is a need to showcase improvements, audit and transparency in outcomes. It would be worth the while of either the Niti Aayog or the Industries Ministry to catalogue and track the translation of intent into investment across states. Greater conversion rates will enhance the ability of states to attract investment. One sure-fire way to spur confidence would be to list conversion of proposals of the previous edition at the inauguration of the next summit—this and data on job creation would enhance the political dividends for the regime in power.
In fact, the current template of investor summits needs a drastic redesign. It can and must be more than a jamboree. There is a need to bring themes into play to underline the priorities of societal and hence political imperatives. The recently announced National Health Protection Scheme sits on a confluence of inadequacies and state incapacity. Why not focus on investments in health care—or indeed, on education services in a state like Uttar Pradesh? Barely a third of waste is treated in cities. Why not seek proposals to solve the problem of waste management?
This government has unveiled a plan for the 100 most backward districts. How about creating a special compliance dispensation for investment in health, education, services or industry in the worst districts?An item song need not necessarily be a fuzzy appendage. It could be a bridge in the narrative, between supply side economics and demand side politics.shankkar.aiyar@gmail.com