Opinion When the states march in

Developments at the state level of late have been very encouraging. Most states have identified the industry sectors that they wish to promote and outlined specific action agendas to develop these sectors. Infrastructure construction under public-private partnerships is being led by the states,which have actively taken up power and roads projects. Social and human development too has been high on their priority list. With the recent reforms initiated by the Centre,state governments can be even more proactive in laying out new policies to promote growth.

To begin with,state governments have to be engaged partners in Central reforms. For example,the introduction of the goods and services tax depends on cooperation from all the states. Although much progress has been made in finalising the legislation,concerted administrative action from all states can help in its smooth roll-out by April 2013. This applies to other proposed legislative measures as well,including land acquisition.

The power sector reforms depend on state governments as well. State distribution companies are facing financial losses,and many have not changed tariffs for years. This has led to power shortage,and industry users bear the burden of subsidising tariffs for other consumers. Power availability is viewed as one of the chief indicators of a propitious investment climate.

In order to develop healthy competition for investments,each state must adopt the best practices prevalent in the others and identify policies that will have the maximum impact on income growth. There are several areas in which innovative policies have changed business climates. The share of manufacturing in the state domestic product (SDP) and employment,which has a positive correlation with the rate of income growth,varies between states. For example,manufacturing contributed almost 30 per cent to Gujarat’s SDP,but only 10-14 per cent in some other states in 2008-09. On the whole,more off-farm job opportunities can improve SDP growth.

The recently published National Manufacturing Policy speaks of raising the share of manufacturing in the GDP from the current 15-16 per cent to 25 per cent by 2022,and of creating a 100 million new jobs in the sector. All the states need to participate in strengthening investment climates and ease business. Quick administrative procedures,land for industry,adequate power supply and other infrastructure would add manufacturing facilities and jobs. Most states have mechanisms to establish industrial estates,with some states making excellent progress in creating industrial hubs. Recently,many initiatives have been taken,under Central schemes,in key sectors such as food processing,leather and chemicals.

The states need to move on infrastructure as well. Apart from ensuring power supply,market and rural-urban connectivities such as roads and highways,inland waterways and ports must be strengthened. The public-private partnership route has proved successful,and the states can further fast-track the creation of these facilities. Notably,e-governance infrastructure has been rolled out in most states,and more services can be delivered through such models.

Agriculture and water management are also in the domain of states. Public investment is required in deploying irrigation technology and for implementing groundwater management in a targeted manner for specific types of land and crops. Another key area of engagement is skill development. Industrial training institutes were to be upgraded through tripartite interventions of the Central and state governments and industry. But progress has been slower than planned. Creative use of secondary school premises,skill-building curricula,and partnerships with industry must be employed to make vocational training readily available to students. Labour regulations in states should also be geared for attracting investments.

In the past,historical factors as well as more recent policy frameworks have led to divergent economic experiences among our states. Among the 10 most populous states,which account for as much as 77 per cent of India’s total population,the gap between the richest and poorest states is large. This is compounded by different rates of growth. If the trend continues,regional disparities in income will be accentuated. Multiple speeds of growth among states should be replaced by all states growing to their best potential. With all states progressing on an agenda of reforms,India can enjoy a more balanced and sustainable economic development path.

The writer is director general,Confederation of Indian Industry

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