Sinlung /
13 September 2013

Arunachal Pradesh Beats Karnataka in Investment

By Asha Rai
Bangalore, Sep 13 : Karnataka is a classic case of a state supposedly set on a trajectory of fast growth finding itself decelerating. In this sense, it mirrors India's growth story where projections for sustained, long-term growth have been abruptly reversed.

According to RBI data for the fiscal 2012-13 , Karnataka was placed a miserable 12th in terms of attracting investments, slipping from its second position the year before and fourth in 2010-11 . Last year, Karnataka managed to attract just 20 projects and accounted for just 1.5% of the envisaged cost of projects for which institutional assistance was sanctioned in 2012-13 against 12% the earlier year.

It's galling that a small state like Arunachal Pradesh, more in the news for Chinese incursions than for industrial enterprise, is two ranks ahead of Karnataka in the investment sweepstakes. Worse, neighbouring Andhra Pradesh - which is being split into two, and which has been racked by violent protests - has consistently stayed in the top 5.

Andhra Pradesh has managed to remain at the top in terms of attracting investment in the past four years, whereas Karnataka has slipped in and out of the list.

The reasons for Karnataka's fall from grace as a favoured investment destination and a showcase for modern India are not far to seek. Policy paralysis and political instability the state has witnessed in recent times are coming home to roost.

In particular, the past two years have been bad as the state has had no administration to speak of. With the BJP government trying to hang on to power at any cost amid ballooning corruption scandals, a jailed chief minister and a breakdown in civic services, there was no interest in governance. With politicians engaged in survival, the bureaucracy went into slumber, resulting in the current pathetic scenario.

It looks like the second rank in 2011-12 was courtesy the empty hype of the Global Investors' Meet of 2010. As TOI reported earlier, it transpires that less than 5% of the total Rs 4 lakh crore investment was actually implemented. The story of the second edition of GIM (in 2012) is worse: less than 0.5% has been implemented.

Doing business in Karnataka is getting increasingly difficult, says industry. Single-window clearance, in reality, means approaching more than a dozen agencies; it takes 4-6 months to get a company started; and land acquisition is well nigh impossible. The South Korean giant Posco pulled out its $6-billion steel investment due to a gridlock over land acquisition.

"It's becoming practically impossible to do public-private partnership projects honestly at scale. There have been dishonest ones at scale and honest ones that are popcorn stands. But the grid box of honesty at scale is missing," says Manish Sabharwal, chairman, TeamLease Services, a temp-staffing company.

The government's failure to be an enabler is another issue. Says civic analyst Ashwin Mahesh: "In the past, we used to focus on enabling investments by the state - in science and technology, infrastructure, policies -and left it to others to develop the society and economy using these inputs. In recent years, this has changed. Now, the state itself wants to be the developer of the economy, or leading politicians in the state government want to do it themselves. This is mired in illogic and conflict of interest."

It's not a stretch to link this lack of enablement with the massive scams our politicians have found themselves mired in recently.

All of which means that the country's seventh largest economy is less attractive than those of its less-fancied neighbours. Instead of spurting ahead, Karnataka will first have to pull itself out of the hole that it has dug for itself.

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