Indian States Reach Out To World: Chinese Example Could Be Salutary – Analysis


By Tridivesh Singh Maini*

Madhya Pradesh (MP) held the 5th Global Investors Summit on October 22-23, 2016 in Indore, the commercial capital of the central Indian state, one of the country’s largest. The first GIS was held in 2007 and since then MP has come a long way, exhibiting double-digit growth, while the industrial sector grew at 8 per cent, agriculture sector grew at 20 per cent during 2014-15.

Union Finance Minister Arun Jaitley and Madhya Pradesh CM Shivraj Singh Chouhan both highlighted this point, with the former asserting that MP can no longer be classified as a ‘BIMARU’ (sick) state. He also made the point that MP would benefit immensely from GST and emerge as a supply chain hub. Jaitley said: “After the GST regime is implemented next year, there will be a flow of goods across the nation and Madhya Pradesh will become the supply chain hub for companies.” The finance minister also pointed out that Indore is emerging as an important educational hub.

The partner countries for MP this year were South Korea, the UAE, Singapore, UK and Japan with about 4,000 CEOs attending. The prominent individuals present at the summit included United Kingdom’s Parliamentary Under-Secretary of State in the Foreign and Commonwealth Office Alok Sharma and Singapore’s Parliamentary Secretary Muhammad Faishal Ibrahim.

Commitments of investments worth Rs 5,62,847 crore were made during the summit and the key investors to make such commitments included Aditya Birla Group Chairman Kumarmangalam Birla.

CM Shivraj Singh Chouhan has been quite pro-active in attracting foreign investors and has visited a number of countries, including China, in this endeavour. However, in spite of the efforts of the MP government, the state is lagging behind in terms of job creation. The state has also not been successful in converting MOUs into actual investments.

A recent report by ASSOCHAM, titled ‘Analysis of Madhya Pradesh: Economy, Infrastructure and Investment’, has reiterated these points. Besides, in August 2016 over 85 percent of new investment commitments worth about Rs 53,000 crore that the state attracted during 2015-16, remained still in announcement stage. Also, as of 2014-2015, over 70 percent of investments were made by the Public Sector and not the private sector.

While the MP government needs to be commended for aggressively reaching out to foreign and domestic investors, there is no escape from resolving a number of issues.

First, states would do well to study turnarounds by laggard provinces in China, rather than only flocking to the coastal states. While some efforts are being made to rekindle ties with Chinese provinces, the focus tends to be on the coastal provinces while we need to look at the case studies of the more progressive provinces there also.

Second, states could consider joint summits. While states have started participating in investors summits held by other state governments with an eye to attracting domestic investors, only north-eastern states have followed this approach. This is all the more important, since a number of key infrastructural and industrial projects pass through more than one state and cooperation is needed between them. Thus while competitive federalism may be relevant at one level, states also need to work together. A clear instance where a mega project passes through more than one state, and emphasises the need for cooperation between different states, is the Delhi-Mumbai Corridor. There is thus a need for zonal/regional summits, for instance Rajasthan and Madhya Pradesh could jointly organise joint investors summits.

Thirdly, states should not just bank on FDI in manufacturing, but seek to learn from experiences of other countries in areas like skill development, tourism and research & development, which will contribute to the Indian growth. States like Rajasthan have already taken the lead in learning from Singapore in both these areas. FDI in manufacturing is important, but is not a panacea for all economic problems.

Lastly, there is a need to enhance air connectivity. Rajasthan, for instance, has benefited from a direct flight between Singapore and Rajasthan. A decision to introduce this flight was taken during last year’s Resurgent Rajasthan Partnership Summit and has given a fillip to cooperation between the south-east Asian country and the north-western Indian state.

Investor summits are a good beginning and clearly show that Indian states are keen to reach out to the world, but state governments, especially those which have not attained a high level of development, need to think of newer approaches and should not blindly follow any one model.

*Tridivesh Singh Maini is a New Delhi-based Policy Analyst associated with The Jindal School of International Affairs, Sonipat. Comments and suggestions on this article can be sent on: [email protected]

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