Ila Patnaik reviews CMIE data on state wise per capita investment in 2007. The states with the leading investment per capital are Haryana and Orissa. It just happens that I am quite familiar with both states since I am Oriya and go back there to visit my folks quite often and because I grew up in Haryana and go back there once in a while as well.
Both states have able forward thinking administrations. And some help of course. Haryana’s proximity to Delhi is something they have taken advantage of. Orissa is blessed with more than its fair share of natural resources. But beyond that there is still a lot of good work going on. In Bhubaneswar, the traffic isn’t anywhere near being a problem yet. But the government is working hard to widen roads. Shows that someone is thinking ahead.
Patnaik attributes the differences and the trends in investment per capita to the quality of the state government administration. If I were to drill down a little more and ask myself the question, what would I look at if I were to set up a new center for my business my criteria would be as follows:
Rule of the law – This is not just about riots and bandhs. It is also about how secure my employees feel to live and work in the state. Do government officials harrass or help businesses? And so on. The two states at the bottom of the table are Uttar Pradesh and Bihar.
Resources – In our case that would be about skilled human resources. For a steel company it might be iron ore or coal. Orissa and Jharkhand have plenty of the latter.
Infrastructure – I don’t need to explain this one. But I believe there is a nuance here which should not escape us. Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka are either below the national average or have dropped their ranks. This is somewhat unexpected. My explanation for this is – urban infrastructure. All four states have mega cities that are the main centers of investment. However, while real estate prices in these cities climb into the stratosphere, traffic, pollution, water and electricity shortages are making them less attractive. Haryana is an exception here in that Gurgaon and Faridabad, to a lesser extent aren’t yet repelling investment.
The data itself is quite interesting. Being in the financial information business, I automatically start looking behind the numbers. How is this collected? What are its sources? Inclusions, exclusions? Is it investments announced or investments deployed? Regardless, if the data is comparable across states it is valuable.
Hopefully the states are looking at the data too, not just economists.
[via Ajay Shah]
Another interesting observation (even though not close to the discussion here) is to see how the bifurcation of the states is working out. Are smaller states better off for economic development of that region ?. What we see here is while Jharkhand and Uttaranchal have fared better than the Oldies (AP, TN, Karnataka & MH), Chattisgarh fell behind. Any thoughts ?
Basab, the foremost parameter of industralisation and greater urbanisation is to have sound thinking and good administrator at the helm of affair. Rightly so, these two states have those. Though I belong to Orissa, have stayed all across the mega states you mentioned. The first thing which strikes negative about them is – they surge on attaracting investment giving second fiddle to infrastructure development, becoz of which we see sudden collapse of big cities- B’lore’s trauma is well known, so also Chennai, Hyd and of course Mumbai.
These two states have taken those learnings seriously and are investing heavily in infrastructure, roads, railways, air-connectivity. Anybody looking for fresh investment, either knowledge based or manufacturing, these two states have resources to attaract.
Going by the experience of the four “advanced” states, I have a feeling that all forward thinking freezes no sooner a backward state picks up the slack, begins to attract investments. Suddenly the opposition begins to smell rats and comes alive; bureaucracy gets ideas too.
Basic premise – the incumbent govt. should not take credit. It has to go. The incumbent opposition will pretty much do the same thing when it assumes power. So the vicious cycle continues since there is always an opposition that wants to claim credit for development. (Imagine Dhabol power project in MH, Smart City project in Kerala)
Investment in any sector is good. Orissa incidentally has a history of investment (and sometimes the earliest ones) in Ports, Steel, and Mines etc. Also Punjab, where I have been for a long time, saw tremendous growth in agriculture.
However, the question is about what kind of investment and will it be sustainable for the region in the long run?
As Seth Godin puts it; 19th century was century of building efficient farms, 20th became the race to build big factories and 21st will be the century of knowledge (and hence ideas).
If I look at the place where the “metros” came up, be in Kolkota or Chennai or Mumbai; these cities are actually gifts from British (as they were residencies) and hence saw growth in post independence era. Delhi was the capital even in Mogul era and hence saw good growth.
And recently Bangalore and Hyderabad became “metros” due to IT only. The actual offshoot is by a number of engineering colleges (I guess TN will have more engineering colleges than whole North combined together, though on quality I will not comment favorably)
Do you think investment solely in these sectors (not to offend anyone, but this I consider to be conventional ones and old, though still a way of making money) will be good in the long run for states like Orissa / Haryana or a Himachal or Jharkhand?
orissa to b specific bhubanshewar is making rapid strides in the path of development over the last few years.
but then at the same time traffic too is becoming a pain in the neck for the residents..but then development comes for a price…so a trade off is inevitable!
Venu, I have certainly read/heard opinion that would support your theory that smaller states are better at administration and do better.
Satya, knowledge sectors are not the only desirable form of development. You might argue that the knowledge sectors which concentrate in large metros are the reason why these metros are going to pieces. That said, states, like companies or people, will build on their strengths. Bangalore’s universities were its strength that it leveraged into IT and knowledge based industries. Orissa and Jharkhand have mineral resources and that’s what they will build upon.
You are right about Haryana and Orrisa, and this may be true for couple of other states too. But what these states probably need are some charismatic leaders to promote them. In case of Karnataka and AP both, both states were well promoted by both the industrialists and the politicians.
I am born and raised in Orissa. Having spent last decade away from the state, I couldn’t agree more on the need for charismatic leadership. The reason Orissa isn’t doing as well as it deserves is not for leadership or potential; it’s just because we have not ‘packaged’ it well. The following arguments support my belief:
I agree that development requires stupendous leadership. Other attributes that are required include a innate base for growth, political goodwill, stability, infrastructure, and availability of talent – among others.
The natural base of resources in Orissa need not be over emphasized. The success stories of the organizations with interests in IT has been telling. The state administration has been burning midnight oil to provide the necessary infrastructure and in weaving conducive policies for investment. Take a simple example of widening of roads, or ear-marking of land for the IT corridor. Success breeds success.There has been sufficient data to prove that the government in Orissa is actively engaging in pro-development policies. The political leadership shows no mercy towards corrupt people and practices. Unlike many states the governments in the state generally spend full term in office. Rajendra Mishra (of Times of India’s ‘Lead India’ fame) is a product of citizen activism. A country of the scale as ours’ can’t settle for one.
A lot of India’s (and for that matter, Orissa’s) people are heading mantle of organization leadership. Many head sales function. All that Orissa needs to do is to hire one such leader to help package Orissa better – to the corporations, policy makers, people and powers that be.
Yo ….where did u disappear after Infy ?? I just figured that …apart from doing a stint in Infy …we have one more thing in common … i belong to Orissa ( Odisha ..to be politically correct) too ….
Well … one bit of observation ..is that all states where shops/establishments/ppl ….shut for a good siesta ….have had bad growth records …and this is quite contrary to the mid-day sleep VS productivity – line of thought .
well..Whizzed past ur blogspot …found it interesting : )
If all you say that Orissa is well prepared in terms of road infrastructure to meet the development needs, I disagree.
The airport hasn’t changed in the last 8-10 years….a period oevr which cities have undergone massive infrastructure change to support investments (Karnataka-Mysore, Andhra-Vizag). These states have learnt from thier mistakes and are making ammends.
Look at the massive environmental damage(cyclone, heat waves, flood) the state govt in Orissa has allowed in the name of Mining…..This damage is much larger than the infrastructure mistakes other cities have made.
I guess it need a massive wave of development in the right direction!!!
I do not know about Orissa other than what you mentiond on cycles/floods etc. But definitely about Bangalore and Hyderbad.
Blore infrastructure sucks. Blore-Mysore highway floats if there is some rain. Hyderabad infrastructure is better comparatively, but the city is like a devil’s curse with its mindless growth. People have built houses wherever they wanted and whenever they needed.
These two cities have thrived on outsourcing (I do not want to belittle it), but then the fact is they are pure cheap labors. Clients directly call folks from Infy, Wipro etc as contractors with a disgusting look (a sugary word for cheap coolies). They do not call by names, it is contractors always!
As the joke goes Bangalore and Hyderabad will be Nangalore (naked place) and Hinjada-bad (city without bone) without IT.
Actually, India has long way to go in infrastructure. Simple solution is to be privatise with sense. Otherwise, it will be like Blore IAL, which is in the jungle now at Devanhali and to reach there it takes 5 hours from the city! You can travel the entire world faster than make a drive around in Bangalore!!