Industrial vibrancy or make-believe?

The Vibrant Gujarat series to showcase the state as an investment destination began in 2003 as the brainchild of then chief minister Narendra Modi.

The seventh of these with eight countries taking part has just concluded in Ahmedabad. The Gujarat government should be more than pleased with the participation of over 2,000 companies, two million-plus visitors and over 2,500 international delegates.

Apparently the seventh Vibrant Gujarat global summit was bigger and more impressive than all the previous editions with over 21,000 memorandums of understanding (MoUs) worth Rs 25 lakh crore or about $400 billion signed. No wonder the Gujarat government is so cock-a-hoop.

But MoUs are no more than mere wishes. The gap between MoUs signed and the actual realisation of investments is quite big and ever more yawning after every summit.

Of the 17,719 MoUs that were signed in the last six summits from 2003 to 2013, together worth Rs 39.6 lakh crore only 9.14 per cent or less than Rs 4 lakh crore of these wishes have turned into horses that the people of Gujarat can ride on.

The Centre for Monitoring Indian Economy, which has a well-earned reputation for integrity and thoroughness of its data analysis, has looked at the data for two previous Vibrant Gujarat summits in 2009 and 2011.

The 2009 summit also saw the sheepish return to the Modi fold of Ratan Tata, who in the aftermath of the 2002 Gujarat carnage vowed never to do any more business with Mr Modi there.

In 2009, it was claimed by chief minister Modi’s government that 3,574 MoUs were signed for investments worth Rs 12 lakh crore or close to $200 billion were signed.

On investigation, the CMIE could only capture information for 220 projects worth Rs 3,94,700 crore. The CMIE pointedly stated that “the number of projects captured were drastically low when compared with the official numbers displayed on the events website because of poor disclosure of basic information about the projects proposed.

In most cases, the website does not provide details of a valid company name, location, product and capacity.” Quite clearly there is much more make believe than reality about these vibrancy moments?

Even out of the 220 projects, the CMIE was able to track “there was no progress in 36 projects worth Rs 1,65,900 crore”. In addition, the CMIE reported that 33 projects worth Rs 45,000 crore were stalled. And this is very revealing; “there was no information at all on the progress of 31 projects worth Rs 1,07,600 crore,” suggesting more smoke and mirrors.

The truth about Gujarat’s industrial vibrancy was that only 63 projects worth Rs 21,700 crore were completed and another 54 projects worth Rs 54,000 crore were in progress.

Thus, six years later we get a conversion into investment of just Rs 75,700 crore from MoUs worth Rs 12 lakh crore.

The data for the Vibrant Gujarat 2011 is even more damning. Out of the MoUs worth Rs 20 lakh crore in 8,380 projects claimed, only 175 entailing investment worth Rs 1,88,300 crore could be identified. Despite these trends the notion of a Vibrant Gujarat went from strength to strength.

To give the reader some idea of the fudge involved, consider this: The total industrial investment between 2009-12 in all of India was '24 lakh crore.
In the 2013 summit,

Mr Modi, echoing Mahatma Gandhi’s call during the Swadeshi campaign, called for “not just mass production, but production for the masses!” By now it was becoming apparent to most political weathercocks that Mr Modi would be soon succeeding Manmohan Singh, and our captains of industry turned out in numbers to pay homage to the future political master, without whose blessings our crony capitalists will not amount to much.

But none was as effusive as Anil Ambani who described Mr Modi as “the king among kings” while announcing one more of his trademark mega investments. Between 2009 and 2013, he had promised investments worth almost '85,000 crore of which not a paisa worth has been realised so far.

This hyping of MoUs is now infectious. Three days back many morning newspapers carried a full page colour advertisement featuring a beaming Mamata Banerjee announcing MoUs of her own worth a rather precise Rs 2,43,100 crore in her state under a somewhat Obamaseque caption, “Yes.

Bengal Can”. Clearly, the person who drove out the Tata Nano plant from Singur to Sanand in Gujarat has come full circle to realise that without industrialisation there can be no growth. Akhilesh Yadav has just celebrated the industrial climate in Uttar Pradesh but few numbers are coming out.

This competition among the states for investment is welcome, but clearly a better climate will demand better infrastructure and social climate.

You cannot have swine fever sweeping through Gorakhpur and hope to attract investment. Just as you cannot attract investment in a state where the chief minister takes to the streets at the drop of a hat.

Few are emulating Rajasthan, which has enacted a slew of labour reforms and promises 24x7 power supply, as Gujarat does.

To spur investment, I for one wouldn’t mind competitive federalism instead of co-operative federalism where all states co-operate in hamstringing industrial production, stall tax reform and practice competitive populism instead.

But one final comment. It’s about the propriety of Prime Minister Narendra Modi’s unabashed enthusiasm for the Vibrant Gujarat fests mid-wifed by chief minister Narendra Modi? Clearly, the Prime Minister’s hand has been at work to draw in the UN’s Ban ki Moon, the World Bank’s Jim Yong Kim and the US’ John Kerry, for they clearly had no MoUs to sign or business to give, except to humour Prime Minister Modi.

Mr Modi has been directing most overseas visitors such as Xi Jinping and Shinzo Abe towards Gujarat. But Gujarat is not India’s most happening state. In terms of FDI, Gujarat is still well behind Maharashtra, Delhi-NCR, Karnataka and Tamil Nadu. But in these TRP days it’s fluff, not facts, that count.

The writer held senior positions in government and industry, and is a policy analyst studying economic and security issues. He also specialises in the Chinese economy.