Searching for gaurav

BS OPINION

Going by the promises made at the beginning of the Vibrant Gujarat Global Investor Meet over the weekend, Chief Minister Narendra Modi has reason to feel happy "" Reliance, for instance, has said it will invest Rs 8,000-10,000 crore in the state over the next three years.

Similarly, the Adani special economic zone project was finally cleared by the Centre, and this is sure to bring in large investment. For a state whose reputation has been ravaged over the past 18 months, the meet shifts attention to business issues.

It will take more than just promises and enthusiasm to restore Gujarat's gaurav, though. According to the latest Gujarat report of the Centre for Monitoring Indian Economy (CMIE), the state is losing its hold as India's No. 1, 2, or even 3 status in terms of attracting foreign investment.

In fact, the state is barely managing to retain its fourth rank, with Andhra and Delhi snapping at its heels. According to the CMIE, while Gujarat accounted for 11.2 per cent of all investments in the country in July 2001, this fell to 9.4 per cent in July 2003.

As for projects being implemented in the country, Gujarat's share fell from 12.5 per cent in July 2001 to 10.1 in July 2003. Data for just the last year shows the number of projects abandoned each month far outnumber the new ones "" in the quarter ended July 2003, Rs 4,538 crore worth of new projects were announced while Rs 13,152 crore worth of projects were abandoned.

At 7.5 per cent of the gross state domestic product in 2001-02, the state's fiscal deficit is beaten only by states like Bihar (7.9 per cent) and Orissa (8.8 per cent). The same figure for the six fastest growing states in the country was 5.2 per cent.

Indeed, its revenue deficit, again as a proportion of the state's gross domestic product, was the highest in the country at 6.7 per cent in 2001-02. Gujarat's debt stock has also risen dramatically, doubling over three years, from Rs 23,611 crore in 1999-00 to Rs 47,317 crore in 2002-03.

With a few exceptions, this is perhaps the worst decline seen by any state. And despite being the country's most prosperous state, Gujarat has a fairly low tax-to-GDP ratio of 7.32 "" comparable numbers for Maharashtra are 8.09.

Thanks to a policy of generous tax breaks to investors, Gujarat's tax collections are not just poor, they're amongst the slowest growing "" even Uttar Pradesh's tax collections have risen faster in the past five years.

To sum up, the state is no longer as attractive as it was in the past since Tamil Nadu and Andhra Pradesh have developed faster. While this has happened, the state has managed to get pretty bankrupt as well, restricting its ability to not just give out more sops to attract investment, but also to develop vital infrastructure needed to sustain investment in manufacturing and other sectors. It will be a while before Gujarat becomes genuinely vibrant.