States of affairs

As the Vibrant Gujarat summit was drawing to a close, Finance Minister Arun Jaitley was right in welcoming competition between States as a way of attracting investment. Competition will spur States to iron out policy and administrative roadblocks, making the country an easier place to do business in. State business summits have caught on in recent years; the occasion provides them a platform to showcase their intent and facilitates an open interaction between industry and government. Earlier this month at the West Bengal investors’ meet, Chief Minister Mamata Banerjee tried her utmost to set right her government’s anti-industry image. While supporting West Bengal’s initiative, Jaitley went one up in Gandhinagar, saying that GST would happen in a year — putting the onus on States to cooperate rather than be perceived as obstructionist. The focus is now on Karnataka and Tamil Nadu, which will hold their respective meets later this year. The Gujarat summit resulted in 21,000 MoUs worth over ₹20 lakh crore being inked. To put this figure in perspective, the West Bengal, Madhya Pradesh and Uttar Pradesh editions (the latter two were held a few months ago) translated into MoUs worth ₹2.4 lakh crore, ₹3.8 lakh crore and ₹57,000 crore, respectively.

These meets have given rise to criticism that they are no more than jamborees at huge public expense, with the actual investment a trickle to the flood of MoUs signed. The Gujarat Congress has alleged that a mere 9 per cent of the MoUs inked between 2003 and 2011 have fructified. Without belittling the importance of these summits, States should be more accountable. But a more serious concern relates to whether this competitiveness has led to balanced regional development. Gujarat, Tamil Nadu, Delhi and Maharashtra have been the preferred States for investors, even before these summits came into vogue. That investors continue to opt for them is evident in the value and number of MoUs signed. A McKinsey study released last October suggests that the trend is likely to hold. It observes that of India’s 29 States, eight high-performing ones in terms of GDP per capita will account for over half the GDP growth in the coming decade. Moreover, 49 metropolitan clusters in 183 districts, most of them in the west and the south, will account for 77 per cent of India’s GDP growth — a suggestion to investors to stick to these regions.

State summits have clearly not been able to address regional disparities, the social and ecological effects of which are already upon us. Studies show that while there has been a convergence in growth rates of advanced and backward States in the Eleventh Plan, inequalities in per capita incomes have risen. Disparities within States and even within districts are on the rise. A complex scenario such as this requires a nuanced response, to which the NITI Aayog could apply itself. The Gujarat summit was rightly viewed as an exercise in “knowledge sharing”. This should include a public-private response to unequal development.

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