8/2/2019 OL 24

1/1

Beyond Vindhya Major

Inever tire of telling friends that India isakin to 28 distinct European nations insidea common bordersociety, lingo, businessmethods changing every few hundred milesand not a homogeneous entity as is believed.

Ruchir Sharmas Breakout Nations is unarguably an epoch-defining bookunusual for a comparative study of nations

based on ground-level data collected from personal experi-ence. On his conclusions about the Indian north and south,though, I beg to differ. A perceptive report by Zurich-basedfinancial services group Credit Suisse titled Fresh Horsesargues that between 2004-2008, almost every Indian state,with a handful of exceptions, saw a compounded annual rateof growth of over 9 per cent. Even West Bengal, a state run by Communists for three decades, grew 1.5-2 percentage points more than the nationalaverage for 1994-2003, making one wonderabout the causality between governanceand growth. South IndiaAndhra Pradesh,Tamil Nadu, Karnataka, Kerala and Pond-

icherryhas a combined state GDP of over$300 billion, securing it a place among thetop 30 economies of the world, and contrib-utes over 22 per cent of Indias GDP and 28per cent of its employment. It also produces38 per cent of Indias engineering graduates,49 per cent of its medical graduates and 25per cent of its post-graduates each year. The region also pro- vides a higher-than-national average access to basic ameni-ties, with close to 100 per cent electrification of its villages.While schools in UP teach b for bomb and c for chaaku,where is the question of the north overtaking the south?

Barring Gujaratcompeting less with the rest of India thanwith Chinaalmost all states pale in comparison to southIndia on most metrics of investment and development. Bet-ween 2005 and 2010, private equity and venture capitalfunds invested nearly $10 billion in around 450 firms in thesouth, higher than any other region. Key investment sectorsare IT/ ITES , consumer finance, power and construction andengineering. TN has the largest auto and ancillary clustersas also ICT manufacturing and textiles; AP leads in pharmaand ITES (IT-enabled services); Karnataka in software deve-lopment, ITES , steel and ICT manufacturing; Kerala in tourismand healthcare. Each states share is between 10-30 per centof the national revenue in their respective sectors. A shin-

ing example is Karnataka, which hosted a Global Investor

Meet in 2010 that saw a staggering ` 3.92 lakh crore of investment signed in 389 MOUs, about a quarter on whichconstruction work has already begun in just two years. Aremarkable sign despite the political uncertainty in the state.

The real challenge is one of governability and here almostall the stateswith the exception of Gujarat, Bihar, Chhat-tisgarh and, more recently, Karnataka and Maharashtrahave nothing to write home about. In general, there is comp-aratively less strife, less violence, more discipline in, say, a

Karnataka or a Tamil Nadu as compared to a UP or a Hary-ana. On governability, investors are wary of the absence of the basics in India. One, we follow common law more in pro-cedure than in substance and contracts enforcement is labo-rious, painful and riddled with corruption. Second, very fewin government (fewer still outside) are able to assure inves-tors that a policy, once written, will stay good for the foresee-

able future. Policy interpretation is always based on show me the guy and I will show you the rule and the same rule can be readinto 180 degrees every which way, depend-ing on who is on the other side! Further, lit-igation is constant with courts sometimes

even turning around their own multi-bench judgements! Third, even sectors like powerthat have seen enormous reform since2003 still require almost 20 statutory andnon-statutory clearances before one canstart a power plant! The license raj is stillprevalent, albeit in mufti, or many a times

in the form of the grabbing regulatory hand!In all these (and other) aspects of governability, the differ-

ence between the south and the north is, in general, one of degree. Though in a few exceptional cases, its one of kindtoo: southern governments are seen by industry and inves-tors as more reasonable, less capricious or rapacious andmore understandingwith, regrettably, some honourableexceptions. Without question or qualification, though, therole model for states remains Gujarat on the investment,manufacturing and industry fronts. Kerala wears that aspi-red-to mantle on the grounds of its social indicators. Gujarathas shown that strong, decisive leadership has a causal effecton economic growth. It has spurred inter-state competitionfor investment. That will be good for the country as a whole.

Lastly, though, let us not forget that Rajnikanth, who canmake even a website work without the Internet powering it,is with the south. Now, now, come on, does the north really think it can still beat the south? Silly rascals. 4

(The author is an IAS officer. He tweets @srivatsakrishna.)

7 May 2012 OUTLOOK24

SRIVATSAKRISHNA

COVER STORY/

OPINION

The South has no cause to rise again. Its sun has yet to set.

SORIT