India’s port of calling: Credible Gujarat and Diligent TamilNadu
Ahmedabad, 23 April 2012
With so much support from the enlightened and interested DG readers on previous posts on Gujarat’s Economic Development, I have decided to write a series of articles on comparing Gujarat and Tamil Nadu.
Both these states are high on radar of global investors and usually become first call for one reason or another. Today when any investor looks to India, very soon they realize that Golden India as hyped outside is just a mirage and no longer exists at least at New Delhi. The so called architects of reforms have gone into a deep slumber and what was highly rumored among investors, Mr. Kaushik Basu finally confirmed that reforms are on holiday may be until next general elections. The leadership vacuum and precipitous decline on the part of current leadership of India as pointed out by US analysts is seen as final straw on the credibility (http://www.firstpost.com/economy/us-inc-whispers-to-oabma-about-leadership-vacuum-in-delhi-281892.html). Not that our own stalwarts like Deepak Parekh and many concerned industrialists have not raised voice earlier but policy Paralysis is so acute that it hurts the world which is having great expectation from our young and democratic country. Ironically the “Incredible India” word comes to haunt us back as Incredible also means Unbelievable.
By having vibrant and thriving ports, both Gujarat and TamilNadu face outside world more than Delhi does literally. Chennai with proximity to South East Asia and Gujarat with Europe Middle East Africa (EMEA), both are led by strong leaders but their economic growth trajectory is triggered by different reasons. We will try to examine what keeps them ticking and what attracts and what could be improved further. What are the mutual lessons? However before getting into those details, first let’s go through briefly on the contemporary history of independent India’s tryst with development. Kindly excuse my brevity and simplified explanation for want of space.
Since student days two things I could never very well understand was why we were called a mixed economy and why a low growth rate was known as Hindu rate of Growth. In reality the whole nation was at the mercy of power center of Delhi. Control of industrial development in country in the guise of License Raj was enormously suffocating; it encouraged many inefficient and corrupt systems. To add insult to injury, the low growth then was attributed to the identity of India and clubbed with religion. The contradiction had to cease at some point and as iron curtains of the Communism/Socialism melted, New Delhi too was found exposed, wanting for shelter. The gulf war only added to woes and there was no other way but to liberalize.
It is almost 20 plus years since India took first step in the direction to get genuinely integrated with world economy. A lot is written about the desperate time. How boldly the then Prime Minister cut though all the contradictions of contradictory policies and decided to take firm path of reforms. The man credited though was his deputy (then finance minister) who worked very hard to make sure the vision was implemented. Followed by many more committed FMs, the reforms continued. I have analyzed the period purely from the economic and investor’s angle.
(1) Uncertainties till 1998:- In Search of Level Playing Field: However socially and politically it was a big huge CHAOS. The political chaos was evident from the fact that no government could survive their five years term. The opinion makers getting divided and man on the street confused. The oxy morns were in its play at best and it was a classic case of one step forward and two steps backward. None the less the external forces made sure India continued on reformist path. The control regime of Delhi also had to first time share their powers with periphery as many states decided to take decision making their own forte. The straight Jacket policies of Centre still continued, but States started taking their own calls on what is good for them. This was the time when Gujarat made Petrochemicals as growth engine and Tamil Nadu chose Automotive. This was also a time where domestic industries were crying in single tone “Level Playing Field”. The License Raj had weakened their structures and they found onslaught of global competition unbearable.
(2) (1999 to 2004):- Attaining PoNR:- Finally Indians got over the hangover of the Reforms phobia and chose a Government with clear mandate. The Industry by this time also realized there is no looking back and got their act together. Most of them chose their core area of growth and were ready to take the world. Those who could not survive without controls naturally found themselves at disadvantage. These five years in the hindsight look the best years for reforms. Genuine and concentrated efforts were made in Infrastructure building. Roads, Power, Ports they all grew. More important according to me was formation of Disinvestment Ministry. For India, with perennial deficit finance this was the right step in that direction. It is said that a country like India or China, when they reform, it takes at least 12 years to reach Point of No Return (PoNR). The PoNR means that both internal and external stakeholders get convinced on country’s willingness to change. While China had their PoNR in 1991, for India the moment arrived at 2003. It is not coincidental that BRICS report should come out in this year celebrating India as the only long lasting growing economy of the block. One better thing of this period was States became quite free in defining and designing their own growth plans. In pre reforms era, all the investment from Government in particular state was decided by how much the state leaders can please high command, this was indeed a welcome change.
(3) (2004 till now):- Oxymoron Called Indian Reforms: When Kamal Nath, then Commerce minister decided to sell India; he aptly chose the title “India Everywhere”. This was indeed the mood in matured market as companies around the world believing BRICs report were all vying for their space in this happening place. For India’s luck the Lehman crisis did not affect much and domestic demand continued to swell only fueling the rush. This however had a very adverse impact on the Indian Administrators. The leadership and administration took FDI and global investors for granted and thought Industry will invest irrespective of Govt reforming further. One international banker told me in 2008, “You cannot miss preaching by Govt officer on how India managed its affair well. Once he is done then only he may pretend to listen to you”. But the message to International community was “we will not reform any further as you will come in spite of that”. Investors were given scuttle hint, when The Ministry of Disinvestment was scrapped. The situation started getting worse as reforms got replaced by key word called CONTROL. In the guise of clearance, central agencies started creating many hurdles to the level where every industry started crying for reforms again. The urge to indulge in populist measures on one hand and control induced corruption on another, the governance and reforms were sacrificed in broad daylight. The so called architect of Indian reforms are proving to be in no control as various power centers within the Government or administration are running the show. With tongue in a cheek the words “Indian Reforms” started to sound like Funny Oxymoron.
In this backdrop, global investors are trying to figure out how to solve this India riddle. If USA, Japan or European countries are cozying up with the leading State leaders, there is not without any reason. If CEOs are spending more time at States than Center, there is a clear coded message in it.
One thing that is in stark contradiction with Center’s inability to persuade investors is the successful Vibrant Gujarat summits held by State of Gujarat. It is very ironic that more the central Government tried to control things; more Global and Domestic Industry lauded the CM of Gujarat. When TIME wrote an article on Modi, it ended with sentences and I quote, “If he succeeds, India may never be the same.” In the ten years of his rule, he has beaten Indian growth figures by big margins and continues to do so with the participation from his people. The shout and cry for Modi to play major role for India is only going to go louder in days to come. And as one Australian paper mentioned Gujarat is the Credible India within Incredible India. And I quote “With economic growth averaging about 10.5 per cent over Modi’s decade, the state is increasingly looked upon as the model for a ”credible India” – a play on the ”Incredible India” slogan of the national tourism agency – where bureaucratic and political obstacles are cleared for sustained high growth.” I could not agree more. (http://www.smh.com.au/world/role-model-for-a-nation-on-the-march-20120203-1qxei.html)
When on January 10, 2012, Japanese minister of Economy, Trade and Industry (METI) snubbed his counterpart Mr. Anand Sharma and made a trip to India only to meet Jayalalitha the writing was clear on the wall. Even the most protocol sensitive Japanese realized that talking to people in Delhi is a waste of time. The delay in DMIC (except for Gujarat) is testing their nerves and they decided to take things on their own far away from Delhi. The other countries are also not far behind. The docile nature of people and the hard-working entrepreneurs are surely Chennai’s strength. In spite of ever rotating government, the state still remains high on the investor’s radar thanks to her people and place advantage. If today every third car in India is made in Tamil Nadu, the state has also reached in coveted top 10 destinations for Global Automotive space.
Considering India’s Global trade is miniscule, the role these two states will play in integrating India with world is significant. In coming series, I shall humbly and candidly try to explore these states from Global investor’s perspective. Some of them are stark reality, some of them pure obvious things investors would look.
Kindly watch this column for further update.
Entire series:
Part 1:India’s port of calling: Credible Gujarat and Diligent TamilNadu
Part 2:Two ports, different paths: How to attract FDI
Part 3:India’s port of Calling: Importance of prolific ecosystem and lessons for Gujarat
Part 4:Tale of Two Industries: Lessons for Processed Gujarat from Discrete TamilNadu
Part 5:India’s Port of calling: Role of Palate, Place and People: A potent recipe to cook FDI
Part 6: India’s Port of Calling: Perils of welfare state- lessons for Vibrant Gujarat
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Thank you DG for this excellent analysis, keep posting similar articles.
Thanks a lot for liking. Part two on its way next Monday 7th May.
Tamilnadu is doing very well in manufacturing as we
Tamilnadu has done very good job in Manufacturing as well as knowledge based industries. Gujarat is almost zero in knowledge based industries (IT and R&D). Before 2000 Gujarat was #3 state in terms of GDP but now Tamilnadu is #3 and Gujarat is #5.
THANKS TO Mr. Naredra Modi.
Reply to comment by Gujarati
Here are two Government of India websites – both the websites refute your claims.
Real Growth Rates of States – GSDP % at Constant Prices (as on 15-03-2012) – DATA is from 1994-1995 to 2011-2012. Please note that data for gujarat is not available for 2011-12 (although that does not matter – also see the numbers for Gujarat before/after Modi).
http://planningcommission.nic.in/data/datatable/0904/tab_103.pdf
http://mospi.nic.in/6_gsdp_cur_9394ser.htm
CAN YOU PLEASE SHOW ME on this chart where Gujarat is Number 3 in 2000?
I am assuming that when you mean Number 5 you mean in total GDP. so let us assume that the states you mention ahead of Gujarat are Maharashtra, Uttar Pradesh, Andhra Pradesh, Tamil Nadu. If you notics on that chart (published by GovernmentOfIndia), those states had more GDP than Gujarat even in 1999-2000. The reason is that they have larger populations, hence more GDP since GDP is a total.
Fine you say, what about GSDP PER CAPITA (means total GDP/population).
Here is a link on Wikipedia (i will find GoI link if you want)
https://en.wikipedia.org/wiki/List_of_Indian_states_by_GDP#Growth_in_GDP_per_capita
if you sort on the year 2010 (by clicking on the title column “2010″) then you will see that among the LARGE STATES, Gujarat is Number 3 after Haryana and Maharashtra. Data for 2011 for Gujarat is not available in that chart so I will not comment about that.
Here is the Planning Commission of Government of India website for your kind perusal and for further research.
http://planningcommission.nic.in/data/datatable/index.php?data=datatab
About Tamil Nadu I will only say this – they had 10-15 ministers in Vajpayee’s NDA government, that have 10-15 ministers in UPA 1 and 10-15 ministers in UPA 2 government. All their ministers openly push all foreign investors to Tamil Nadu. see what happened when Maran was industry minister. See how much benefit Gujarat got with just one Dinesh Trivedi as Railway Minister – now think what would have happened if Gujarat had 10-15 ministers in center for last 15 years.
See this for example
http://www.thehindubusinessline.com/companies/article3328700.ece?homepage=true&ref=wl_home
“VA Tech Wabag, listed on the stock exchanges BSE and NSE, is collaborating with IDE Technologies of Israel to set up the project funded by the Government of India. ”
I am not getting jealous or anything – they are also part of India so their success contributes to India’s success, but at least be a little fair minded (very challenging for Modi critics).
To Babloo,
Awesome reply man, very detailed.
Thanks Babloo for additional and very impressive analysis.
Though an extra caution would be prudent when furthering argument. The dynamics of politics works differently for TN. No point of time they had 10-15 cabinet ministers, nor the desalination plant you are talking about in Nemmili has got huge grant from Center. What they got is peanuts and only part of VGF. And remember Gujarat’s best ambassador at Center is PS to Congress chief. TN does not have any one even distantly close to that. It may sound surprise but interest of state is a matter that does unite rivals.
The point here is not to ridicule a state v/s state but rather getting out of that myopic view and ponder about Center’s inability to promote growth across. The inordinate stagnancy in advancing reforms is immensely choking that investors are searching for oasis. They are finding in bits and pieces at Gujarat and TN.
Idea would be to see purely from an global investors eyes on what do they find on the ground. And it is so surprising to find how the growth trajectory of both this places differ. We will examine and there might be rude shock as we see ourselves in the mirror of TN.
Thanks again for the interest and look forward to more participation.
@SominduS
Hi,
Gujarati..
first..visit..tamilnadu…
excluding..large..city..
and..visit..every..small..villeges…
and..you..will..find..out..soon..how..badley..
people..of..tamilnadu..lives..there..live..in..tamil…nadu..
there..is..no..human-walfare…not..in..tamilnadu..but..villeges..of..intire..hindustan..
excluding…gujarat..and..panjab..
GDP..BY..%..IN..LARGE..CITYS..IN..HINDUSTAN..MEANS..NOTHING..
80..%..STILL..LIVES..IN..VILLAGES..
GUJARAT..IS…#..1..AS..FAR..AS..VILLAGE..LIFE..FOR..LAST..65..YEARS..PLUS
i..HAVE..TRAVELED…HINDUSTAN..FROM..KANYKUMARI..TO…LADAK…FOUR..TIMES..
SECIALLY..VILLEGES…
SO..FIRST…DO..YOUR-HOME..WORK..
YOU..WILL..FIND..OUT..REAL..GDP….OF..HINDUSTAN
Thanks Dharmesh for the comments. You are right in a way that TN’s story may start and end with Chennai but so is with Karnataka and Andhra. Or Haryana for that matter.
Point is Chennai is the only thriving and vibrant port in whole of India adjacent to decent cosmopolitan city. How we view our country and how global investors view there is stark difference. We will examine them going forward. Every part of India is evolving on its own. A more like Cambrian age situation where abundant oxygen in the air all single cell species huge and provided great impact on their future evolutionary process. This could be India’s Cambrian age. Problem is some areas are getting advantage some are not. Why is it so is a riddle everyone trying to solve.
I hope you will enjoy participating and sharing it further on Social media.
@SominduS
Hello Patel,
Iam in Surat for the past 9 years. I have traveled through out Gujarat and Tamilnadu. In Gujarat, first you people improve the Highway Hotels and Public Transport facilities within the State. In Tamilnadu, you can find innumerable number of Public Transport connecting nook and corner of each town / city as well as villages. In Gujarat, public Transport facility is almost nil. From Jamnagar to Bhavnagar or Ahmadabad or Surat, how many Government buses are there. You touch your heart and tell. In Tamilandu you can find Goverment buses from Coimbatore, Trichy, Madurai, Tuticorin, Tirunelveli, Salem, Virudunagar, Vellore, Thanjavur etc apart from Chennai, Govt buses will criss cross throughout the day and also at midnight. Next related to the health factor. Infant mortality is very bad when compare to Tamilandu. Further Highway hotels are very less in Gujarat, when compare to Tamilnadu. Please don’t bluff. Further related to the quality of education in Gujarat, world knows. I don’t want to tell.
Regards
G.Shankaran.
Look at babaloo’s reply…
@Babloo you should be in Modi’s team to reply to congi dogs
Thanks for the kind words. I am only an ordinary guy. I just got frustrated by constant negative coverage of Modi and / or Gujarat. I do agree with one part of the original comment that Modi should do much more to encourage IT/Knowledge industry.
“Gujarati” bhai – I did not mean to sound as harsh as it might appear. I do agree with part of your comment that Modi should do much much more to encourage IT and Knowledge industry. Performance of Gujarat government has been lacking as far as IT/Knowledge industry is concerned – the constant negative media coverage does not help especially since the decision makers are English media reading people.
Thanks for your comments. Human Resource and people’s mindset with respect to Discreet Industry are two major positive differentiators for TN. Shall dwell upon them on the third part of article.
It is indeed surprising as to why the PM closes his eyes to the writing on the wall about the trajectory being gained by the state of Gujarat. Instead of using the central government machinery to create obstacles in the path of growth of Gujarat it is high time to accept that the policies guided by the vision of Narendrabhai need to be adopted in toto and the same need to be further enhance by enabling Narendrabhai to open up his visionary abilities for the better of India.
People of Gujarat has understood their leaders hence higher the obstacles and untruth spread or attempted to spread will fire the engines to take Narendrabhai to still higher trajectory. It is time the media understand this first. we have seen the pattern of recent judgments delivered by court right up to apex court. No amount of attempt to delay the result of the inquiries or judgments which are expected to clear the smoke from around will help. It will only delay little more. why the cases and inquiries are allowed to linger for more than ten year?
these are the various aspect which can be discussed and debated long. But the summary is that the political class and the media, no doubt it is paid one has to read the writing on the wall. December 2012 is not far away. God knows if congress will survive in Gujarat, even for name sake, will be decided by the CITIZEN of Gujarat.
I agree. The irony is for some reason current PM is being given credit for the reforms. If what Mr. Basu said is right upto 2014, we may have a lost decade under his leadership. May be thats what historians may say. The sin becomes all the more cardinal that in 2009 they had got comfortable mandate from urban class. When Growth and Development are cry from the street people like NAMO will be required to play major role. However the politics dynamics work differently in India.
May be we are entering a new interesting phase, where we may see periphery pushing center. Lets see how it evolves.
Thanks for your comments and do lok forward to more participation as well as sharing.
@SominduS
Gujarat has made huge progress recently in leadership of Modi however, TN has been on growth track since long. I believe TN is much ahead of Gujarat as far as literacy rate, child mortality rate, sex ratio and other social parameters are concerned.
I believe steps taken by Modi in terms of correcting these social parameters are in right direction and hopefully results will reflect his efforts in near future.
Dear Eternal, Cant agree more with your views. Thanks for the comments. We will ponder over this in coming articles. Next one hopefully will be out on 7th May and third after another fortnight.
@SominduS
DG HATS OFF TO YOU FOR THESE ARTICLES. ITS HIGH TIME INDIAN PEOPLE LEARNT ABOUT ALL THIS & BECAME KNOWLEDGABLE ON WHATS HAPPENING IN INDIA IN GOOD STATES.
INSPITYE OF ALL THE UNWANTED NONSENSICAL MEDIA TV BASHING & BY THE CENTRE & ITS AGENCIES, UNDAUNTED SHRI NAMOJI HAS RELENTLESSLY PURSUED HIS “VIKAS PATH” & SEE IN A DECADE WHERE HE HAS BROUGHT GUJARAT TO.
T.NADU IS TRADITIONALLY A STATE WHOSE PARAMETERS ON QUITE A FEW ASPECTS HAVE BEEN GOOD.NOW THAT SHRI MODIJI & AMMA (JAYALALITHA) HAVE A GOOD RAPPORT IT WILL BE GOOD FOR THE STATES & INDIA TO SEE THESE 2 STATES WORK CLOSELY TO DEVELOP MANY PROJECTS ,INFRASTUCTURE ETC TOGETHER.
IN TERMS OF IDEAS ECONOMICS ETC.
Dear Bapty. I am glad you brought this collaboration among states as an issue. This I am sure will be very important thing going forward. Currently states are coming together over issues related to Federal structure. The day, they come to collaborate on Economic issues, India will progress more. What TN can learn from Gujarat and more importantly what Gujaratis can learn from their counterpart is an important thing for future growth.
You have nailed the essence of this series perfectly and I do hope you will continue to participate and share on wider social media.
@SominduS
DG doing wonderful job. keep going
Gujarat can beat Maharashtra and TN, if infrastructure projects don’t be delayed by govt and get speedy approvals. Here the major set back to growth is land aquisition and delayed approval of projects.
State govt should focus on these critical aspects. Factfully Gujarat still has to pave ways.
Btw , DG has come up with nice article which truely makes sense. Thankx…
Dear Jawan,
Thanks a lot. I do agree that a lot need to be done. Both the center and states need to move faster if India needs to be back on 10% growth path. The ability of NAMO to stay ahead of others is a good sign as it will show way to other states. But India being so diverse it is difficult to have to common straight jacket on every state. Important thing is the willingness of leaders. The state blessed with willing leader will obviously progress more.
Thanks for comments and participation.
@SominduS
At the outset, let me thank DG for providing an excellent forum. Least you can expect from Main Stream Media. Either they are obsessed with paid news in ridiculing Gujarat and her leader or dont care about anything else about what is happening to remaining 5.5 crores. On the other hand, the common sense policies of CM, is making Gujarat take huge stride and favored destination for Golden India story. There are many global investors and policy makers seeking real Gujarat picture and I guess, DG does provide that forum.
Incidentally my profession provides me an edge in meeting global investors on daily basis cutting across sectors and visiting with them or on behalf of them to various corners of Country. This gives an opportunity to learn and use each experience as a mirror to learn or unlearn things for better growth.
The series is very focussed and humble approach to analyse India purely from the view point of global investors. I dont claim to know all and the words are purely from the experience from the ground. I must admit that writing was not natural to me and if not so many interesting comments from DG followers, I would not have taken it further, so I do owe all of you a lot.
Thanks for reading, commenting and sharing further.
@SominduS
Interestingly, I read today’s NAMO interview and remembered your article. He mentions the point you claimed here. States are getting wooed directly by foreign govt bypassing Central Govt.
http://economictimes.indiatimes.com/opinion/interviews/red-carpet-not-red-tape-for-investors-is-the-way-out-of-economic-crisis-narendra-modi/articleshow/13878238.cms