Improve investment climate: World Bank

A recent World Bank report on economic growth and poverty alleviation in Tamil Nadu has identified the need to improve the investment climate in the state in order to promote economic growth.

Tamil Nadu's investment climate has an important bearing on the state's economic growth because of the composition of its gross state domestic product (GSDP).

Around 84 per cent of GSDP is drawn from two sectors: industry and services. While 56 per cent of the population is linked to the 14 per cent contribution that agriculture makes to GSDP, farm income accounts for only half the household income in rural areas.

A significant proportion of the state population's well being is directly or indirectly linked to performance of the manufacturing and service sectors.

The World Bank report has pointed out that there is cross-country evidence to show that there is a strong link between investment climate and growth.

The report has said that World Bank/ CII surveys on investment climate in Tamil Nadu has suggested that cumbersome and excessive regulation and infrastructural bottlenecks are serious growth constraints.

The report has identified three areas that check growth prospects. They are labour legislations, urban land market constraints and infrastructure issues.

With an overwhelming dependence on industry and services to support the GSDP urban land issues, which are under the purview of the state government, have been dealt with at length in the report.

One issue pointed out by the report is that Master Plan designations in the absence of complementary incentives make the supply of land for development inefficient.

Other issues that hinder are the time consuming and expensive process that needs to be undertaken in the event of acquisition and project development.

The report has added that the taxes on land transfer are high when compared to international practices.

Among other infrastructural issues that have bothered respondents relate to the availability of power and water. Many of the key acquifers in the state have been tapped at an unsustainable rate, said the report.