A decade or so ago, it would have been a nasty joke to suggest that Tamil Nadu would end up becoming one of the most difficult states in India to do business in. And yet, as the state celebrates its 60th foundation day, the people of the state receive news that the state now ranks 18th in the Indian government’s assessment of states’ business reform action plan.
Last year, the state was in the 12th position in business reforms, and it has been steadily falling in the past few years in the ease of doing business index.
The gravity of the situation certainly hits you hard when such numbers are revealed, but when one takes a step back to look at what has been happening in the state for the last few years, this is hardly a surprise.
The politics of Tamil Nadu has steadily pushed the state away from being an industrial powerhouse to an alcohol-driven welfare state, where people are drunks on entitlements, where businesses are killed systematically and where those in power lord over people by deciding what is good for them, when the state itself is floundering in near-total paralysis.
This is not to rundown welfare schemes, but what will sustain the economy and fund welfare schemes if not for businesses? Alcohol, perhaps – and that’s what is happening.
The DIPP’s Implementation Scorecard which has ranked Tamil Nadu in the 18th position is a good place to start analyzing where the state is going wrong.
Access to information and transparency is at an all-time low, with the present dispensation perhaps being the opaquest the state has ever seen. Construction permits are not easily available and the single-window system is so centralized that it has created a narrow bottle-neck allowing very few to pass through. It seems pretty easy to get environment clearances, though.
“From being the pride of manufacturing, Tamil Nadu today is becoming uninvestable,” says Manu Sundaram, a DMK spokesperson, “The slide downhill has taken place gradually over the last five years largely because there is no economic vision and industry-friendly leadership. Chennai, in 2009, was hailed as Detroit of South Asia as car manufacturers made a beeline. Today, we are staring at the exodus of industries starting with Nokia, Foxconn and losing many others to Andhra, Gujarat, Maharashtra, Karnataka, etc.”
Manu also says that the AIADMK government made us believe that Global Investor Meet would attract investment but has failed to make necessary reforms or even follow up with investors.
This isn’t news. The AIADMK government was amply warned that a disaster was impending if the GIM was not followed up with solid action on the ground.
In September 2015, when the GIM happened, The News Minute pointed out as to how the bombastic numbers being put out in the name of MoUs were just that, numbers, and that most of the investment might not actually come through. Read here. DMK patriarch Karunanidhi had even released a statement then, criticizing the government. And the warnings are ringing true. According to DIPP data, of the Rs. 19,500 worth of investments proposed in 2015, only Rs. 500 crore actually came through.
We had then written, “State’s policy has to improve the ease of doing business for private companies. The bureaucracy has to move files along quick to ensure that all the required permissions and clearance are given in a timely manner.”
And this is exactly where the state seems to have failed, according to businessmen.
“No decisions are being taken. Even bureaucrats don’t know if they are to seek instruction to clear files or not now. This was the mode from 2011 and this has just worsened,” says a businessman based in Chennai.
What’s more, Jayalalithaa’s health only seems to have worsened the situation. With her hospitalized, the government is reticent to clear files and award contracts, because such decisions could send across wrong political signals now.
Professor Selvaraj, an economist based in Chennai, says that investor sentiments are low because of bureaucratic hurdles. “There are no investor friendly policies, and the land rates and power tariffs make it unviable to invest in the state,” he says.
At the very least, dormant SEZs in Oragadam and Tirunelveli must be reactivated, he adds.
But beyond such measures, the core problem seems to be opaqueness and the centralized nature of decision-making, with bureaucrats and ministers having very few powers. This is a rude wake-up call for the state, but will the ruling party pay heed?
Note: The views expressed here are the personal opinions of the author.