Tamil Nadu’s bureaucrats, businessmen and politicians are euphoric. For several weeks, the city of Chennai has been preparing itself for the two day extravaganza which began on Wednesday. This is CM Jayalalithaa's pet project, and as much as it is important for the industry and economy, it is for her politics.
Newspapers in Tamil Nadu are understandably enthused.
Times of India reports that Memoranda of Understanding (MoU) promising investments up to Rs. 1 lakh crore are expected to be signed between the TN government and private investors.
The New Indian Express has since revised the figure. It is now claimed that MoUs for energy projects alone worth Rs. 1.1 lakh crore will be signed, and that could boost the overall figure of MoUs signed to a whopping Rs. 2 lakh crore.
Let’s be clear, what’s happening at the GIM now is that private investors are signing a piece of paper promising that they will invest an X amount of money in the state, the money has not actually come in. This is not the case with just the Tamil Nadu government alone – you can read here about how nationally, across states, the strategy of bombastic announcements followed by little action is followed.
Obvious questions arise: How will these MoUs be implemented? When will they be implemented? Is there a timeline? Do the private investors and the Tamil Nadu government have the wherewithal to deliver on the promises? Will policy and the bureaucracy not delay the projects?
The most important question is: How many of these MoUs will actually be implemented?
If Tamil Nadu’s track record is to be looked at, the answer is not very exciting.
We have pulled up Directorate of Industrial Policy and Promotion data for the last 4 years, up to July 2015. This is the latest data on how many of these Memoranda which are signed promising investments are actually implemented. (MoU’s have another name – IEMs, that’s Industrial Entrepreneurial Memoranda)
In 2011, Rs. 73,298 crore worth of IEMs were signed, of which only Rs. 235 crore were actually implemented. That’s an implementation rate of 0.3%.
In 2012, Rs. 21,253 crore worth of IEMs were signed, of which only Rs. 524 crore were actually implemented. That’s an implementation rate of 2.4%.
In 2013, Rs. 27,380 crore worth of IEMs were signed, of which only Rs. 2292 crore were actually implemented. That’s an implementation rate of 8.3%.
In 2014, Rs. 14,596 crore worth of IEMs were signed, of which only Rs. 2500 crore were actually implemented. That’s an implementation rate of 17%.
In 2015, up to July, Rs. 17,412 crore worth of IEMs were signed, of which only Rs. 41 crore have been actually implemented. That’s an implementation rate of 0.2%.
The average implementation rate since 2011 is 5.64%. If not for 2014, the figure could have been much lower. Also, it remains to be seen that the rate of implementation in 2013-2014 is high due to some big tickets power projects like Adani Group’s. Though the projects were announced now, they could have been accounted for in earlier years.
There could be various reasons for this. The private investor could have lost funding for the proposed project. Or the government machinery could have been stuck in paralysis. If files don’t move and projects don’t get clearance, then no money is invested. The government’s policy and bureaucracy must allow businessmen to do their work at a fast pace.
As I have argued elsewhere, this does not mean that such investor-meets and campaigns themselves are unnecessary and bad. Campaigns like Make in India, Vibrant Gujarat and TN Global Investors Meet play an important role of marketing the state as a good investment destination and encourage investors. But amidst all the glitz and glamour, we need to understand that the real work starts after the summit.
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 given the style of functioning of the TN government, the CM’s office will play a crucial role in ensuring that the promised investments actually come through after GIM 2015.