Maharashtra CM report card: Fadnavis’s big investment pitch fails to beat recession

Assured investment numbers from mega projects decline; ranking slips

Written by Sandeep A Ashar , Khushboo Narayan | Mumbai | Published:October 28, 2016 8:14 pm
maharashtra, maharashtra news, maharashtra business, maharashtra industries, maharashtra news, india news The state is placed eleventh among all states on the implementation of the Centre’s 340-point reforms action plan. (Express Archive)

Maharashtra, India’s most industrialised state, ranks tenth in the World Bank’s latest Ease of Doing Business Index, two places lower than when Devendra Fadnavis took over the reins of the state.

As the state’s first BJP government turns two on October 31, the Chief Minister’s much touted agenda of improving the investment climate in the state remains a work in progress.

Even as the government has unveiled a slew of policy measures to better the ease of doing business and make the state more business friendly, investment statistics appear to indicate the pitch has so far failed to buck the recessionary trend. Private economists too feel that “not much has changed on the ground.”

The total assured investment from mega projects in Maharashtra since April 1, 2014 is a little over Rs 49,596 crore. The state has seen 77 mega investments during the period. Comparatively, in the previous 24 months, from April 1, 2012 to March 31, 2014, there was an assured investment of Rs 50,613 crore from mega projects. This period saw 80 similar investments. Officials also admitted that there wasn’t much difference in the employment capacity of investments during these periods, which indicates that the nature of investments was similar. Senior state officials said the trend was similar in the MSME segment too.

Though senior ministers have sought to discuss efforts and policy initiatives on the positive growth rate recorded in manufacturing and in the services sector, the bureaucracy admits that the recessionary trend continues to cast a spell on the investment climate.

Some bureaucrats have also made a case for increasing the pace of reforms.

As per the latest data obtained from the Department of Industrial Policy and Promotion, the state is placed eleventh among all states on the implementation of the Centre’s 340-point reforms action plan. While it has achieved 89.59 per cent of the reforms expected at this stage, the state is far behind the top three performing states – namely Telangana, Andhra Pradesh and Gujarat.

Fadnavis’s key achievement so far is seen as his success in marketing the “Maharashtra model” to domestic and global investors. This, say bureaucrats, has resulted in a spike in the number of inquiries from potential investors. In February this year, the country’s first Make-In-India summit saw the state government sign 2,603 MoUs involving a total investment commitment of Rs 8.05 lakh crore and 3 lakh jobs.

The disappointment has been the rate of conversion of these MoUs. As per latest updates, barely Rs 0.54 crore out of the Rs 2.20 lakh crore of commitments made in the manufacturing sector are “on track”.

The highest conversion rate has come in the information technology (IT) sector, where over 90 per cent of the MoUs are “on track.” Ahead of the February summit, the state had revised its IT policy, promising more incentives to investors.

Further while Fadnavis’s ‘Make-In-Maharashtra’ pitch saw 2,097 MoUs, worth Rs 24,123 crore, being signed with MSMEs, the latest statistics indicate that barely 19 per cent of these had gone into production, whereas another 12 per cent are under construction. Another 51 per cent are in “initial stage”, while in 14 per cent cases, talks hadn’t progressed beyond the MoU signing stage.

In all, just Rs 1.6 lakh crore of the Rs 3.65 lakh crore or 44 per cent of investment commitments in the core industries sectors were “on track.”

Bureaucrats also conceded that a major setback was the failure to convert big ticket commitments including those made by global IT major Twinstar Industries

(Rs 60,000 crore), and electronics contract manufacturer Foxconn (Rs 30,000 crore). Senior industries department officials said that while the former had identified land in Nagpur for its investment plans, the latter’s plans to invest have run into uncertain weathers.

Earlier this year, Fadnavis had announced added incentives for investments in lesser developed industrial belts in Vidarbha, Marathwada, and parts of North Maharashtra and Konkan, government functionaries admitted that the developed pockets such as Pune, Pimpri Chinchwad, and Nashik, remain the preferred destinations. The government is now banking on Marathwada’s Shendra Bidkin Industrial Park to buck this trend. While the allotment of plots in the Delhi-Mumbai Industrial Corridor park has been delayed, top sources said that several investors have evinced interest in the region.

Another disappointment has been the lukewarm response to incentives announced for promoting entrepreneurship among backward classes. Sources said that the move was facing hurdles over the norm to submit caste validity certificates, which the Dalit Chamber of Commerce wants waived.

Economists say that despite the government’s efforts, red-tape and corruption within departments was still high. “While his (Fadnavis) integrity cannot be doubted, corruption in government departments has not come down. Besides, foreign investors these days look at the ease of business rankings of states before investing. If Maharashtra does not improve its ratings, its ability to attract FDI can get affected,” said the managing director of a foreign financial research firm, who did not want to be named.

While Maharashtra remains the country’s most industrialised state and enjoys a location advantage, bureaucrats admitted that the competition was getting stiffer with smaller states catching up.