Investor Hostility and the Communist Governed States in India

In one of my earlier posts “Brand Bengal: It’s High Time to Rethink”, dated September 06, 2008 I had discussed the current state of investor hostility in the Communist regime in West Bengal. After the Dubai based Smart City decided to quit its ventures to set up self-sustained townships for information technology and knowledge-based industries near Kochi, Kerala I am compelled to think ‘is investor hostility plaguing communist governed states?’

The proposed Smart City was likely to generate direct employment for 80,000 people and provide indirect employment to another 20,000 people. This is only the employment generation aspect, besides this there are other aspects like revenue generation for the state in the form of taxes, and economic growth of the state which gets adversely affected. Added to this will be a domino effect wherein other investors restrain themselves from investing in projects in Kerala.

When the Tatas pulled out of its Nano project from Singur, West Bengal the immediate loss was over Rs. 5,000 crore and the potential loss was a whopping Rs. 80,000 crores. Smart City, Dubai had urged the Kerala state government to commit at least 12% free land out of the total 346 acres of land. The Kerala government still does not have a clear-cut answer to this issue and have dilly-dallied things.

Kerala and West Bengal are two states where the communists have ruled for long tenures and had once built a strong political base. In West Bengal the current public choice is against the red-brigade, they have been badly beaten in the Panchayat (local self-governments) elections followed by the Parliament elections. The story in Kerala is also similar, and if the investor hostility continues then the communist governments in these two states would have to pack their bags soon.

"Brand Bengal" It's High Time To Rethink

West Bengal is one such state of India where a single political party and their allies have been the ruling government for more than three decades. The pace of industrialization in this left-liberal state has been nevertheless slow as compared to all other major states of India. The withdrawal of the Tatas from the Singur project is yet another plight, another result of political intrigues which is resulting in a pyrrhic victory for the opposition party. If the Tatas go, they will take with them almost everything that matters to Brand Bengal. Image and the big bucks. The first entity doesn't carry a price tag but the second one does: a whopping Rs 80,000 crore in investments.

The immediate loss will be over Rs 5,000 crore, including the investments on the ancillary units in Singur. The list would also include tier-II vendors, who will have no reason to be here once Ratan Tata moves out. What's more, the Tata brands like Tata Realty Infrastructure, Tata Metaliks and Maithon Power Limited might also take flight, amounting to a loss of at least Rs 10,000 crore. Besides, there are other bigtime investors who are already jittery. Bharat Forge, which had decided to invest big time in Bengal largely because of the Nano plant in Singur, is now in two minds. The company would have brought in Rs 6,500 crore. This top-of-the-line forging company had signed an MoU with the government earlier this year. Ever since trouble erupted in Singur, their response to the state industries department is: We'll get back.

Brand Bengal had attracted investment announcements of Rs 1,27,302 crore since the third quarter of the last financial year. But this target is now a distant dream. In case of a Tata pullout, there will be a question mark on the investment from nonferrous metal major Vedanta Group. That will be another Rs 16,000 crore gone. Then, there are steel majors who would have implemented their projects this year, but are apprehensive now. All these steel majors, including Adhunik (Rs 5,000 crore), Shyam Steel (Rs 8,000 crore), Jai Balaji (Rs 16,500 crore), Bhushan Steel (Rs 4,000 crore), and Abhijit Group (Rs 8,000 crore) may not be all that keen to invest.

Once the Tatas pullout it will send a negative signal to the investors' mind and they would either imitate the steps of the former or procrastinate their decision. The Tata Group is respected as an organization around the globe, and in India it is synonymous with "stability, sustainability, and reliability". A mere callous attitude of semi-literate politicians just for the sake of gaining political mileage would abjure the interest of the investors resulting into permanent damage to the economic growth of the state. It is high time that the people of Bengal give a second thought to building up "Brand Bengal"; if not now, then never!