AP tops in ease of doing biz, but needs to do more
Telangana, despite one-notch slip in EoDB ranking to 3rd in 2019 tally, has been attracting a steady flow of investments
Andhra Pradesh did it again. For the third time in a row, the residual State retained the top slot in ease of doing business (EoBD) rankings for 2019. Political slugfest over the ownership of the latest rare feat apart, it's no small achievement for a State which is yet to settle its capital city conundrum and which lacks a revenue-churning metropolis.
AP shared the top ranking with Telangana in 2016 before emerging as sole leader in 2017-18.
Telangana was at second place in that edition. In the inaugural edition of the rankings in 2015, Andhra Pradesh was at 2nd place while Telangana came at distant 13th. AP retained the top ranking in the latest edition even though the assessment was based on a survey among industrialists and industries, while Telangana slipped by one spot to third position.
A close look at the latest rankings reveals that several key States have suffered drastic decline in their rankings. Gujarat, the home State of Prime Minister Narendra Modi, slipped to 10th place now from fifth position in the last edition. It topped the rankings in the inaugural 2015 edition. Karnataka, the country's other major growth engine, came at 17th position this time. It stood at a decent eighth place last time. Same is with Haryana as its rank fell from third rank last time to a low 16th now. Odisha's rank dropped to 29th from 14th.
However, some States did extremely well. Most importantly, Uttar Pradesh, the country's most populous State, improved its ranking by 10 spots to second place. Delhi also improved its ranking by 11 positions to 12th spot.
But, there is no direct link between the rankings and the investments that States get. Telangana, despite one-position drop in EoDB ranking in the latest tally, has been attracting a steady flow of investments. It has received several decent investments during the ongoing Covid-19 crisis too. The State will continue to do so as it ticks right boxes when it comes to industrial ecosystem and infrastructure.
It has a mega metropolis in Hyderabad which is home to one of the country's leading IT hubs. Interestingly, the IT sector in Hyderabad has been logging the highest upswing in the country in recent years. Real estate sector in the city is also on a strong-footing even though the situation in this space is getting worse by the day in other major cities thanks to Covid-19 spread.
But Andhra Pradesh will have to sweat it out to attract new investments even after securing the numero uno position in the rankings. The State has a long way to go when it comes to industrial infrastructure, connectivity and other ecosystems. Furthermore, it has to bring the capital city conundrum to a logical conclusion as early as possible.
However, the Jagan Mohan Reddy government has taken a laudable step by focusing on Micro, Small and Medium Enterprises (MSMEs) which are always in the forefront when it comes to generating jobs, both skilled and unskilled. But AP's New Industrial Development Policy for 2020-2023 announced recently, may not support the growth of the key MSME sector on expected lines.
The drastic change in the land allocation norms from the existing lease and buy to composite lease-cum-sale will certainly discourage MSME entrepreneurs. Under the new policy, land is given to new industrial units on lease for 33 years with an option to buy it after operating the unit successfully for 10 years. MSME entrepreneurs who generally need small parcels of land prefer to buy the land for new units if they can afford it.
They take loans on the land and operate units whenever they go through tough times. That will not be possible if the industries are set up on leased lands. Further, according to the new policy, some incentives will be paid only after three years of operations. These two new norms are likely to discourage MSME entrepreneurs from investing in Andhra Pradesh. The State government should alter these new policy norms and make them more MSME friendly if it wants the key sector to flourish in the State.
But excessive focus on MSMEs will send wrong signals to large investors. So, Andhra Pradesh should give equal importance to large industries as well. It's an undeniable truth that the MSME ecosystem will not flourish in any State without the presence of large industries.
But incentives offered by the previous TDP government to Kia Motors still seems to be haunting the present dispensation. That's what we can gauge from the recent remarks of Industries Minister Mekapati Goutham Reddy. But the presence of Kia's massive automobile plant in Anantapur district in backward Rayalaseema region will certainly benefit the State if the administration there leverages it effectively.
The fact of the matter is that Kia Motors has put Andhra Pradesh and its Anantapur district on the global automotive map. Sri City, a flourishing integrated business city in neighbouring Chittoor district, is home to the automobile manufacturing plant of Japan's Isuzu Motors. Kobelco, another Japanese brand which makes construction equipment, also has its plant there.
Homegrown Amara Raja Batteries has several plants in Chittoor district. The Andhra Pradesh government can use this decent automotive ecosystem to develop backward Rayalaseema region as a hub for the automotive industry.
Electric vehicles, which are gaining traction these days, are expected to dominate the mobility space in future. Sooner or later, US-based Tesla Motors, a leading electric vehicle maker, will set up its plant in India. AP can use the existing ecosystem to attract such global automotive brands.
But attracting investments is no cakewalk. A dogged perseverance is an essential strait to impress prospective investors. An able team is imperative. A proactive attitude is a must. Above all, governments and their leaders should not hesitate to walk an extra mile to support investors, provide the right infrastructure for new industries and create a comfort zone for new investors.
States and countries which embody these qualities will succeed in attracting investments irrespective of the EoBD rankings. That's the reality. There are no free lunches in this world. That's more so in the business world, isn't it? Anyway, Andhra Pradesh needs loads of private investments to put its financial health in order.
There is no other way out for the State. AP will be able to attract private investment only if it succeeds in leveraging its existing ecosystem and strengthens it further. It should also be able to leverage the top EoBD ranking. That's the bottom line.