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Business Commentary/ Pritish Nandy

No, Chief Minister!

I have read the statistics Joshi has announced. He announced them immediately after Balasaheb Thackeray openly castigated the Shiv Sena-Bharatiya Janata Party government at an Indian Merchants Chamber meeting last fortnight for failing to stem the rot. Joshi claims Thackeray was misinformed, that he had based his criticism on facts and figures that were way off the mark.

According to the chief minister, the status of a state as far as industrial investment is concerned is based on three factors:

1. the number of industrial entrepreneurs;
2. the number of memoranda and letters of intent with the Centre;
and 3. the amount of foreign direct investment approved.

On all three counts, Joshi claims Maharashtra is way ahead of every other state.

As proof, he cites the fact that his government has acquired 17,362 hectares of land in three years for industrial development as against 34,183 hectares in 33 years by previous governments. While earlier governments spent Rs 1.04 billion on these acquisitions, he has spent Rs 1.25 billion. Plus another Rs 5.5 billion on developing corporations as against Rs 8.3 billion spent by earlier governments.

But these figures prove exactly the opposite of what Joshi says. In fact, they support what Thackeray said. They clearly show that Maharashtra is doing exactly what it should not be. It is setting up more factories, killing off its best businesses, losing its human capital, despoiling its natural assets, spending more and more on building infrastructures it does not need. What is worse, by setting up more government corporations, it is going against the spirit of economic reforms and wasting precious resources.

No wonder, the buzz is growing that Maharashtra will soon be bankrupt.

But, first, let us look at what is wrong with the state.

In reality, perhaps not as much as it looks. But, in terms of perception, everything is wrong. Maharashtra has lost its best projects to other states. Not just the Indian School of Business, which Chandrababu Naidu snatched from under Joshi's nose, every prestigious project has bypassed the state in recent times. The reason is simple: The state has become far too expensive. Expensive in terms of real estate. Expensive in terms of payoffs. Expensive in terms of time taken for approvals.

The time is long past when corporates are ready to wait for state governments to make up their mind. The future of commerce lies in cyberspace. Ground facilities are required only to build plants and factories. If Maharashtra prevaricates, other states will jump into the fray and woo away the investment. In fact, other Asians nations are competing for the same dollars. There is nothing special about facilities. They can be sited anywhere as long as power and water are freely available, the cost of land is cheap and concessional tax rates can be negotiated. If Maharashtra thinks it can coerce industrialists to invest in the state, they are cuckoo. They have to compete with the rest.

There is nothing more stupid than arrogance. Specially when you are judged by results. Maharashtra ought to know this simply because it has lost so many projects to other states. In cases like Warner Brothers, the investors have not just fled Maharashtra, they have fled India. Simply because they could not cope with the absurd demands of the government.

Tamil Nadu, Karnataka and Andhra Pradesh have grown precisely because of this. Because the Maharashtra government is arrogant and stupid, and remains in the clutches of a few big industrial houses who see the state as their fiefdom. Yet these very houses have recently become victims of their own myopic games and exited Maharashtra to invest in other states.

A recent IMRB survey for Bombay First actually reveals why corporates are moving out. Why fewer people are ready to invest here or grow their assets base in what was, for decades, India's first business city. The reasons are obvious, understandable. Beginning with the fact that the southern states are more proactive, more aggressive in attracting investors, offering high tax incentives and subsidies.

Chandrababu Naidu is a shining example of what chief ministers ought to be. He goes out of his way to grab business like any corporate CEO and there has been virtually no opportunity that he has not seized in recent months to attract the best projects to his state. He is also clever. He knows that factories pollute and, in today's technology-led world, offer scant job opportunities. So, unlike Joshi, he is not obsessed with industries. He wants business. He wants to make Hyderabad the business capital of India. Not the industrial capital.

That is why he is wooing Microsoft and Intel, Disney and Universal, the ISB and MIT.

This is what vision and foresight is all about. What Maharashtra lacks today. The government here has no understanding of the way the world is going. It is backward, illiterate, pompous, out of touch with contemporary reality. It is still looking for polluting plants and stupid, old-fashioned factories to be set up in the state and, towards this, squanders the tax-payer's hard-earned money in acquiring land. This is the stupidest thing any government can do and it is this incredible stupidity, backed up by a poor understanding of business realities, which may eventually drive them into bankruptcy.

The best, most forward-looking businesses once began in Maharashtra. Entertainment, media, finance and information technology, which require no land, no factory, no pollution control, no government funding. Where talent and creativity are the key to growth and profit. Businesses in which people are the crucial input. These are the businesses which are fleeing the state today because of unrealistic tax policies, absence of state support. The government is too busy chasing cement factories and steel plants to realise that these are the very businesses that destroy the environment, yield poor profits, shrink jobs and soak up huge funds that can be more profitably deployed.

Encouraging business, not industry, is the best option for India. It is the only way we can realise our true potential, our promise. But instead of encouraging business, the Maharashtra government is busy punishing it. With high taxes, no subsidies, brainless censorship, a corrupt administration and, what angers me the most, foolish neglect.

Movie halls are languishing. Theatres barely make money. Rock concerts are moving off to other cities, fed up with the culture cops. Information technology majors have migrated to Hyderabad or Bangalore. The non-banking finance companies are terminally sick. The stock market has lost its shine. Real estate prices are hurtling down a bottomless pit. Pubs, restaurants and night clubs have to cope with police corruption on one hand and extortion on the other. Hotels occupancies have hit an all-time low. Flights are going half empty. The 400-acre Film City boasts a profit of a paltry Rs 20 million.

If Maharashtra goes down this road, it will soon crash.

The state's tragedy is an inept, effete government that refuses to see the writing on the wall. A government that will simply not move its arse nor get to work. It is busy infighting, arguing, chasing money and pelf. Even as Maharashtra slides down the ladder of economic well being.

Fortunately, Thackeray understands politics. He senses the truth. He knows that things are going wrong, drastically wrong. But what can he do? Every time he speaks up, others hit back with a barrage of stupid, mindless statistics. Statistics that lie, prevaricate, offer pointless, puerile arguments to hide the simple truth. That Maharashtra is not exactly in the best of health.

Pritish Nandy