Delhi scores over the country, but that is only half the story
September 5, 2000
When Maharashtra lost to Gujarat as the most favoured business destination a few years ago, we consoled ourselves with the thought that Mumbai's position as the commercial capital of the country was unassailable. The capital market, with two powerful stock exchanges located here, the film industry and the banking and financial institutions, we thought, were adequate to swing all relevant statistics in favour of Mumbai.
The Confederation of Indian Industry, India's leading industry association, now says this may not be true. A study commissioned by the CII has thrown up an unusual pecking order of states that attract business the most, in the post reform era.
The study, led by Dr Bibek Debroy of the Rajiv Gandhi Institute for Contemporary Studies, has ranked the various states under 14 categories such as -- achievements, investment climate, infrastructure penetration and efficiency, financial sector performance, purchase of consumer goods, expenditure on education, health, labour and personal finance, performance of the social sector, environment, law, order and justice, level of affluence and penetration of mass media. It also ranked the states separately for their attractiveness as an investment destination.
The findings seem startling. They show that Delhi, followed by Goa, Kerala and Punjab are the most attractive business destinations in terms of overall ranking with Maharashtra coming in at a distant fifth. In terms of investment ranking, the study re-confirmed Gujarat as the leader followed by Maharashtra, Goa and Kerala.
For the record however, data released by the Indian government's ministry of commerce and industry has Maharashtra at the top of the list based on "industrial investment proposals" received in the 1990s. This data shows Gujarat a distant second, followed by Uttar Pradesh, Tamil Nadu and Andhra Pradesh. But as they say, there are lies, damned lies and statistics -- and until one knows the exact data, parameters and weightages used in arriving at the conclusion, a comparison with the CII study is pointless.
Let us get back instead to CII ranking of Delhi as the favoured state of business and industry. Factors that contributed to Delhi's ranking is its level of affluence, purchasing power of consumers and performance of the social and financial sectors among others, says CII. You could interpret this as meaning that 10 years after P V Narasimha Rao and Manmohan Singh embarked on the process of reform, liberalisation, deregulation and delicensing, it is still babudom and political patronage that reign supreme. Businessmen -- Indian and foreign -- prefer to be located in and around the capital because proximity to power makes business easier.
It is possible that Delhi's elevation as a state has skewed comparisons in the study. It is virtually a city-state and as such a magnet for businessmen. Goa, the hottest tourist destination, is in the same category. A better comparison would have been that of Delhi and Goa with Mumbai, Bangalore, Chennai, Hyderabad etc.
Delhi is a good-looking, well-planned city with broad avenues and loads of greenery. As the capital, it also gets a lot more attention. But it also has a higher level of pollution, extraordinarily indisciplined traffic, rampant corruption, acute power shortage, bad work culture and inadequate local transportation.
Mumbai is expensive (in terms of real estate), crowded and congested and until it finds a way to link up the hinterland over the sea, it has little scope for further expansion. Yet it has a better business environment, no power shortages, efficient and professional people and a good public transport system. It is also the film and investment capital of the country with no threat to either business in the near future.
Delhi again scores on cost of property. Real estate is cheaper and unlike Mumbai, it is still possible for Delhi's movers and shakers to aspire to sprawling farmhouses on the outskirts of the capital. Its suburbs have attracted several large MNCs because it allows them to interact closely with the Indian government and their own diplomatic corps. Delhi's main appeal is concentration of political power and not per capita income. Every big media house is headquartered there because they seriously believe that all national decisions emanate from the capital notwithstanding our pretensions at decentralisation.
Major television channels even run their business programmes out of Delhi though half the shows are focussed on Mumbai's sharebazar (The National Stock Exchange and the Bombay Stock Exchange together account for over 75 per cent of the country's trading turnover, a good chunk of the remaining is also mainly inter-exchange arbitrage between the Mumbai bourses and others). Heck, even the weekly investment magazine of the largest economic paper was relocated to Delhi a few years ago underlining the importance of the capital.
Businessmen cannot avoid their frequent pilgrimages to Delhi. Their industry associations hold all major seminars and conferences there in the hope that powerful netas and babus will condescend to speak at these events and listen to their pleas. Normally media-shy industrialists make time to schmooze with fixers and columnists in Delhi, hoping for information on political equations, policy decisions and their competitors.
But still, Delhi cannot score as an investment destination with Mumbai, except by clubbing it with the entire state of Maharashtra. The press has expressed great shock at the fairly low ranking of Andhra Pradesh and Karnataka in the CII study, even though the chief ministers of the two states are making waves over their reform agenda. On the face of it, this seems unfair. (The comment is based on the CII press release and without access to detailed methodology of the study).The efforts of N Chandrababu Naidu and more recently, S M Krishna, have attracted a lot of attention here and abroad. But reforms require infrastructure building which is a slow and painstaking process. Naturally, a lot of business interest as well as infrastructure creation efforts are concentrated in and around the state capitals -- Hyderabad and Bangalore. These are unlikely to show up so quickly if the comparison is between tiny city-states such as Delhi or Goa.
In the circumstances, such surveys may only end up disheartening leaders such as Naidu and Krishna who face a constant struggle within their parties and outside about the political wisdom of pushing economic reform over hollow populism. It would be in the interest of Indian business if it finds ways to support and encourage these reforms rather than discouraging their efforts.