India: Beyond the Global Investors’ Summit - Future Directions

October 10, 2016 | Tridivesh Singh Maini

The state of Madhya Pradesh (MP) held the fifth Global Investors summit (the first was held in 2007) from 22-23 October in Indore. Since then, MP has come a long way with an economic growth rate in double digits. For the year 2014-15, its industrial sector grew at eight per cent and its agricultural sector at 20 per cent.

Finance Minister Arun Jaitley and Chief Minister Shivraj Singh Chauhan both highlighted this point during the summit, with the former stating that MP can no longer be classified as a “BIMARU” state, an acronym for the states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, all of which were seen as lagging economically. He also made the point that MP would benefit immensely from the Goods and Services Tax (GST) that Prime Minister Modi has pushed through parliament and emerge as a supply chain hub. Said Jaitley, ‘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 stated that Indore is emerging as an important educational hub and this would stand the state in good stead.
In attendance at the MP Summit were representatives from South Korea, the UAE, Singapore, the UK and Japan. On the whole, about 4,000 CEO’s were present. Prominent individuals present at the summit included Alok Sharma, who is the United Kingdom’s Parliamentary Under-Secretary of State in the Foreign and Commonwealth Office, and the Singaporean Parliamentary Secretary, Mohammad Faishal Ibrahim.
The Summit saw commitments to invest 5,62,847 crore rupees (approximately $110.3 billion). Some of the key investors included Aditya Birla Group Chairman, Kumaramangalam Birla.
CM Shivraj Chauhan has been quite proactive in attracting foreign investors and has visited several countries, including China. Despite the efforts of the MP Government, however, the state lags in job creation. It has not been successful, moreover, in converting much of those commitments into actual investments. An August 2016 report released by the Associated Chambers of Commerce of India (ASSOCHAM) titled ‘Analysis of Madhya Pradesh: Economy, Infrastructure and Investment’ highlighted these points. First, in August 2016 over 85 per cent of new investment commitments, around Rs 53,000 crores or approximately $10.4 billion, that the state attracted during 2015-16, remain no more than commitments. Second, as of 2014-15, over 70 per cent of the investments were made by the public sector, not the private sector.
While the MP Government is to be commended for aggressively reaching out to foreign and domestic investors, other states need to think of fresh approaches.
First, the states would do well to study how Chinese provinces other than coastal ones have managed a turnaround. While some efforts are being made to rekindle ties with other Chinese provinces, the focus tends to be on the coastal ones and we tend to look at the case studies of the more progressive provinces.
Second, the states could consider joint summits. While they participate in Investors’ Summits held by each other, with an eye on attracting domestic investors, only the north-eastern states collaborate on joint summits. This approach is important because a number of key infrastructural and industrial projects pass through more than one state, requiring inter-state collaboration. While competitive federalism may be healthy on one level, collaboration is also required on another. One example of a larger-scale projects that transcend individual states and demand co-operation between them is the Delhi-Mumbai Corridor. Similar large infrastructure projects are being established in the important Tamil Nadu-Karnataka belt in South India. There is, thus, a need for Zonal/Regional summits; Rajasthan and Madhya Pradesh could jointly organise joint investor’s summits, for instance.
Foreign Direct Investment in manufacturing, while important, is not a panacea for all economic problems. States like Rajasthan have already taken the lead in learning from Singapore in areas like tourism, skills development and education. While “Make in India” is an important endeavour, India should place a greater emphasis on Research and Development and innovation. State governments should play a key role in this – the southern states, which played a key role in making India an IT powerhouse, are well placed to do so.
Fifth, there is a need to enhance air connectivity. Rajasthan, for instance, has benefitted from a direct flight between Singapore and its capital, Jaipur. A decision to introduce this flight was taken during last year’s “Resurgent Rajasthan” programme and has encouraged co-operation between the two. The same is needed for other states as well. One of the issues that the MP Chief Minister raised was the need for international airports in Indore and Bhopal, its capital.
In conclusion, Investors’ Summits are a good beginning and clearly show that states are keen to work with foreign entities but state governments, especially those which have not attained a high level of development, need to think of innovative approaches and should not bank on any one sector.