Building a stronger investment base

The Tamil Nadu government should match its outreach activities with speedy decision-making

October 31, 2019 12:15 am | Updated 01:28 am IST

Tamil Nadu Chief Minister Edappadi K. Palaniswami at Amazon’s Fulfilment Center in East Bay, California, earlier this year.

Tamil Nadu Chief Minister Edappadi K. Palaniswami at Amazon’s Fulfilment Center in East Bay, California, earlier this year.

Tamil Nadu is not known to be a State that markets itself on a large scale to grab the attention of the rest of the world. Even when the process of economic liberalisation gained momentum in the late 1990s, the State’s Chief Ministers, Jayalalithaa and M. Karunanidhi, remained largely unmoved. This was when their counterparts in other southern States, Andhra Pradesh and Karnataka, went abroad frequently to promote their States and woo investors.

This is why Chief Minister Edappadi K. Palaniswami’s two week-long visit in August-September to the U.K., the U.S., and UAE drew attention as a noteworthy event. It also did not go unnoticed that a Tamil Nadu Chief Minister was visting the West after a gap of over 40 years, and to a foreign country after 20 years. More than two decades ago, in January 1999, Karunanidhi made a brief visit to Singapore. Earlier, in late-1978, the then Chief Minister and AIADMK founder, M.G. Ramachandran, had gone to the U.S., Japan and Singapore.

Mr. Palaniswami’s foreign tour came just 18 months before the Assembly elections. His visit resulted in the signing of 33 project-specific Memoranda of Understanding (MoUs), envisaging an investment of ₹8,835 crore and the employment of 35,320 persons, apart from pacts with eight U.S. organisations. Among the areas covered under the MoUs are Internet of Things, Artificial Intelligence, agriculture and food logistics, Liquefied Natural Gas production and distribution, warehousing, and e-auto rickshaws.

Timing of the trip

Yet, there is a strong view that the Chief Minister should have undertaken the trip at least a year ago, as that would have provided more time for prospective investors to pursue issues in project execution with the current dispensation. Many also believe that such a visit should have preceded the two-day Global Investors Meet (GIM) in January. The GIM led to the signing of 304 MoUs and 12,360 pacts concerning micro, small and medium enterprises, with investment commitments totalling ₹3,00,431 crore.

However, a Chief Minister is not just the administrative head of a State; he is also the political executive and must take into account political factors before deciding to embark on any foreign journey. A year ago, Mr. Palaniswami was in the process of consolidating his position within the party and the government. Further, an element of political uncertainty had prevailed as the final verdict of the Madras High Court on the disqualification of 18 MLAs was still pending. That the political situation has now become conducive for him could be seen from the fact that he chose not to distribute his portfolios among his ministerial colleagues before he left Chennai, contrary to what two of his predecessors, Karunanidhi and MGR, had followed in the 1970s during their overseas visits.

Mr. Palaniswami went on the trip now for another reason. Since Jayalalithaa’s death in December 2016 and the subsequent convulsions in the State’s ruling party, there is a perception in certain quarters that Tamil Nadu, which otherwise has every qualification to attract foreign investment in terms of infrastructure and human resources, is in a state of flux and that there is a politically weak government in place. Perhaps due to this factor and many others, the State is yet to witness the volume of Foreign Direct Investment that it did in 2015-16 when Jayalalithaa was at the helm. Data available with the Department for Promotion of Industry and Internal Trade of the Central government show that the State accounted for about 5% to 7% of the country’s FDI inflows between 2016-17 and 2018-19 whereas the figure was a little more than 11% in 2015-16. As a member of Mr. Palaniswami’s delegation puts it, the visit, which included an elaborate interaction with a group of Tamil entrepreneur-diaspora, helped correct the “negative image of the government to a large extent.”

Direct exposure

There is nothing like direct exposure. Only when the political leaders see for themselves, say, the working of a plant aimed at ensuring waste water recycling and reuse, as Mr. Palaniswami did in Anaheim, Los Angeles, are they convinced of the efficacy of such concepts, given the fact that ideas like this are yet to capture the popular imagination in India despite its repeated cycles of drought.

Officials of the Tamil Nadu government always take pride in the fact that they have an “effective follow-up mechanism”, which is why, they point out, nearly two-thirds (67) of the 98 MoUs signed during the State’s first GIM in September 2015 are now in different stages of implementation. In monetary terms, these projects, enabling the generation of employment opportunities for around 1.62 lakh persons, have entailed an investment commitment of ₹ 1,04,961 crore against the overall figure of ₹2,42,160 crore for all the 98 MoUs.

Within a couple of weeks of the Chief Minister’s return, a high-level committee headed by him has been formed for investment facilitation and single-window clearances. A policy document has been unveiled to promote electric vehicles with the aim of attracting investments of ₹50,000 crore and creating employment opportunities for 1.5 lakh persons. After the enactment of a law on ‘ease of doing business’ two years ago, 52 project proposals for large enterprises, envisaging an investment of about ₹18,110 crore and generation of jobs for around 68,200 persons, have been cleared. A new industrial policy, incorporating changes in the post-GST scenario, is also in the works.

Notwithstanding this context, the authorities should keep in mind that a visit or two will not bring miracles at a time when the Indian economy is considerably stressed. When prospective investors come to Tamil Nadu, they should be convinced of speedy clearances and approvals with no hassles.

For a more holistic approach

Besides, the outreach activities of the State government should continue and either the Chief Minister or a senior Minister should attend events, including next year’s World Economic Forum in Davos, a forum that N. Chandrababu Naidu had visited often as Andhra Pradesh Chief Minister. Simultaneously, the authorities should sustain their attention on countries such as Japan, South Korea and Taiwan, whose representatives attended GIM 2019 in large numbers.

The State government should vigorously pursue with the Centre the implementation of the Defence Industrial Corridor project, about which nothing much has come to be known since its launch in January. Further, while it is imperative that the State remains focussed on issues concerning large enterprises, the interests of MSMEs, which provide employment to about 1.3 crore people in the State, should not be lost sight of. Only a holistic approach would make such a visit as the one undertaken by Mr. Palaniswami more fruitful.

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