Why just a strong CM cannot attract investments
DIPP data suggests that more than a single individual at the top, the collective efforts of a strong government are crucial in attracting investments. BSE291.85
6.85 (2.40%) Vol:1261720 shares traded NSE292.00 10.35 (3.67%) Vol:11067747 shares traded At a time when the frequency of investor summits in various states rivals that of literary festivals, it is important to take a deep breath and look at the bottom line. The aftermath of investor summits is often not pretty.
Memorandums of Understanding (MoUs) signed between state governments and corporates in the spirit of summit bonhomie most often don't get translated into actual investment on the ground.
A look at foreign capital making its way to various states in India makes for an interesting read — not only for what it says about investor confidence, but also for the governance message being sent out by various states.
Foreign capital is the most skittish kind of investment that there is, and the Department of Industrial Policy & Promotion ( DIPP) in the ministry of commerce & industry has some important data on just where this capital is landing (see Big 5: Then & Now).
Where's the Money?
Between 1992 and 2008, a substantial period of 16 years, the top five states where FDI made its way were Gujarat, Maharashtra, West Bengal, Uttar Pradesh and Andhra Pradesh, in that order. While Gujarat, Maharashtra and Andhra Pradesh were expected in the top five, the surprise entries were UP and Bengal.
During that period, UP was going through the Mandal-Mandir churn of identity politics and uncertain coalition governments, while West Bengal was under the Left party rule — factors which should have discouraged investment in these states.
"This proves very clearly that political leadership is completely irrelevant to holding on to investment or, at the very best, it is of transient interest to investors," says economist Bibek Debroy. "What really matters is that the senior bureaucracy should be stable and efficient in dealing with business. These numbers basically reflect that. The chief minister of a state is less important as a factor."
Besides, of course, the fact that West Bengal was embarking on its own version of perestroika under Buddhadeb Bhattacharjee, the then chief minister. On the list of actual foreign investment for 2011, in fact, Gujarat slips to No. 3 in the rankings, with Maharashtra and Andhra Pradesh gaining traction. Karnataka andJharkhand replace West Bengal and Uttar Pradesh.
DIPP data suggests that more than a single individual at the top, the collective efforts of a strong government are crucial in attracting investments.
BSE
291.85
6.85 (2.40%)
Vol:1261720 shares traded
NSE
292.00
10.35 (3.67%)
Vol:11067747 shares traded
Memorandums of Understanding (MoUs) signed between state governments and corporates in the spirit of summit bonhomie most often don't get translated into actual investment on the ground.
A look at foreign capital making its way to various states in India makes for an interesting read — not only for what it says about investor confidence, but also for the governance message being sent out by various states.
Foreign capital is the most skittish kind of investment that there is, and the Department of Industrial Policy & Promotion ( DIPP) in the ministry of commerce & industry has some important data on just where this capital is landing (see Big 5: Then & Now).
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Between 1992 and 2008, a substantial period of 16 years, the top five states where FDI made its way were Gujarat, Maharashtra, West Bengal, Uttar Pradesh and Andhra Pradesh, in that order. While Gujarat, Maharashtra and Andhra Pradesh were expected in the top five, the surprise entries were UP and Bengal.
During that period, UP was going through the Mandal-Mandir churn of identity politics and uncertain coalition governments, while West Bengal was under the Left party rule — factors which should have discouraged investment in these states.
"This proves very clearly that political leadership is completely irrelevant to holding on to investment or, at the very best, it is of transient interest to investors," says economist Bibek Debroy. "What really matters is that the senior bureaucracy should be stable and efficient in dealing with business. These numbers basically reflect that. The chief minister of a state is less important as a factor."
Besides, of course, the fact that West Bengal was embarking on its own version of perestroika under Buddhadeb Bhattacharjee, the then chief minister. On the list of actual foreign investment for 2011, in fact, Gujarat slips to No. 3 in the rankings, with Maharashtra and Andhra Pradesh gaining traction. Karnataka andJharkhand replace West Bengal and Uttar Pradesh.
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