)
The recently concluded Uttar Pradesh investor conclave managed to attract proposals worth Rs 35,000 crore. For a state struggling to attract capital, the figure looks impressive. However, compared to similarly placed states' success in inviting investment proposals, the conclave, the first of its kind by Uttar Pradesh, was far from spectacular.
Madhya Pradesh held two such conclaves in 2008 and managed to get proposals worth Rs 30,698 crore in one and Rs 88,018 crore in the other. At its 2010 investor summit, the Madhya Pradesh government signed 107 memoranda of understanding for Rs 2,44,851 crore.
Uttar Pradesh's record in attracting capital is shocking. Its share in investment proposals was six per cent of the total in the country from 1991 to 2010. And, most of the proposals for Uttar Pradesh remained on paper.
The Institute of Applied Manpower Research (IAMR) reckons only three per cent of enterprises located in Uttar Pradesh are willing to invest more in the state. The institute surveyed 550 large, medium and small units across 12 districts and found erratic power and corruption were inhibiting industrial growth. Annual growth in employment in the manufacturing sector fell by 2.28 per cent between 2004 and 2010. According to media reports, 319 factories closed down in Noida in 2010-11.
"In the last 25 years, the state has shown no desire to attract industry except some investments that happened by default in the National Capital Region region. Uttar Pradesh must improve the ease of doing business here. Unless the state rolls out a red carpet for industry, investments will go elsewhere," observes Jayant Krishna, co-chairman of the special task force for skills development and education at the Confederation of Indian Industry (CII), North India.
Lawlessness is one of several reasons for the flight of capital from the state. The IAMR study reveals 64 per cent of industrial units find power to be the biggest issue. "Instability in government and multiple taxes were reported by 63 per cent and 68 per cent of the enterprises, respectively. Another 60 per cent of the enterprises, mainly involved in manufacturing of textiles and chemicals, reported corruption as a serious problem," the report adds.
Sudhir Panwar, professor at Lucknow University, says, "From 2012 Uttar Pradesh has been in election mode. The state administration preferred doles to fixing long-term problems. Hopefully, with elections over for now, the state government will set long-term goals and work accordingly," .
The decline in manufacturing aside, the state has sharp regional disparities. Per capita power consumption in the western region at 292.6 kwh (2008-09) is more than double of what it is in eastern Uttar Pradesh. According to state government data, the per capita income at current prices in 2006-07 was highest in the western region at Rs 18,959, followed by Rs 15,495 for Bundelkhand, Rs 15,271 for central Uttar Pradesh and Rs 10,392 for the eastern region.
Lawlessness, a depressed economy and low social development have spawned a new debate. Is the state too big to govern? With a population of nearly 200 million, Uttar Pradesh is five times bigger than the average state (37.7 million) in India. Its share in the country's population is nearly 17 per cent and it accounts for nearly 15 per cent of the members in the Lok Sabha, making it the most politically influential. Will a division, therefore, make Uttar Pradesh more manageable?
Experts say size should be seen as an opportunity. "Uttar Pradesh as a market is nearly 200 million, making it attractive for investors. While smaller states may have problems identifying and acquiring land for industrial projects, Uttar Pradesh suffers from none of that," says Panwar.
Krishna says, "I do not think that size is an issue. Good governance and development are needed. It is time the state's politicians realise good economics is good politics. Merely dividing the state will serve no purpose unless people vote for politicians who deliver."
