Good leadership pays

It has become a well-worn cliche to say that the engines of growth lie inthe states and that is where economic restructuring to power new ...

It has become a well-worn cliche to say that the engines of growth lie inthe states and that is where economic restructuring to power new growth musttake place. Yeshwant Sinha told a gathering of investors in Bangalore onMonday, India needs to get away from 6 and 7 per cent growth rates and aimhigher. The Union Finance Minister seems to think it is not overly ambitiousto look at an 8 per cent rate over the next decade. The question is, are thestates going to deliver that sort of figure? Yes and no. States like

Maharashtra, Tamil Nadu and Gujarat are in a good position to turn in highgrowth rates for many years ahead as long as there are steady hands at thetiller. Between them these three states account today for over a third ofall new investment proposals in the country. Maharashtra retains the numberone position in both outstanding investments and projects underimplementation according to the latest quarterly survey by the Centre forMonitoring the Indian Economy. Tamil Nadu and Gujarat come close behind.

These three states have shown consistently high per capita growth rates,relative to other states, through most of the 1990s. They could do evenbetter. But serious constraints to continuing growth are visible too.Government finances have been going downhill over the last five years. Ifrising fiscal deficits are not contained there will be a deterioration inthe factors that have contributed to making these states so successful.

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Cash-strapped Maharashtra is an example of how the rot sets in. Thegovernment is resorting to low paid “education workers” at primary andsecondary school level when the need of the hour is highly trained andmotivated, well-paid teachers. Maharashtra should ask itself whether itwants students who will be able to compete in a global economy which rewardsskills and education or whether it wants students fit for nothing betterthan clerkhood in government offices.

As for other states, there is a mixture of hope and despair. Unless dramaticchanges occur, especially at the level of political leadership, Bihar andUttar Pradesh look as though they will be struggling simply to keep theirheads above water. Abysmally low rates of growth persisting into the futureare likely to pull down the national rate.

In between are many encouraging stories of forward-looking political leaderswho are in the process of bringing about structural change. Their statescan, therefore, hope to attract significantly higher levels of newinvestment and to enjoy higher rates of growth in the future. Madhya Pradeshhas removed itself from the category of the stereotypical backward state andmade advances that would have been unthinkable a few years ago in the areasof education, self-government and fiscal discipline. Orissa, the firstIndian state to recognise the importance of power sector reform, comes closeafter Karnataka in new projects being implemented. Andhra Pradesh andKarnataka, quick to exploit the opportunities offered by the computer andthe Internet, have still not caught up with West Bengal’s largelyagriculture-driven rate of growth, but surely will. An all-India 8 per centgrowth rate is possible. But something has got to be done about UP and Biharfirst.