Will States pay heed to Rajan’s warning?

He is Raghuram Rajan. He does what he wants. If an experience is anything to go by, he also says whatever he wants. In 2005, he criticised the then retiring US Federal Reserve Chairman Alan Greenspan for leaving the global economy vulnerable. In 2015, Rajan said how Indian Prime Minister Narendra Modi was ahead of the rest of the country. “I think he (the PM) is ahead of us. So we have to come up to speed in some dimensions. For example, if the idea of India as a strong economy is sold outside, and they come in, and they don’t find the ease of doing business, the permissions, etc. people aren’t happy,” Rajan said. Like in 2005, Rajan will not find many takers for his proclamation. Unfortunately, divided as we are into the pro and anti-Modi camps, Rajan’s comments are bound to generate a certain amount of ammunition for Modi’s detractors.

Rajan acknowledged Modi’s initiative to position India abroad as an ideal destination for investment. However, unless the same is backed by “action on the ground” the effort may prove counterproductive. He has a point. When an investor is attracted by the sales pitch and finds that it takes three months to the Foreign Investment Promotion Board (FIPB) to convey if the proposal has been cleared or not, he may not be amused. Even after acquiring the requisite permission the investor needs to scout for land that will require clearance from all landowners through numerous public hearings. Such hearings are the hotbed of political extortions with little or no benefit to those who give their land. The rules framed cannot be changed due to stiff opposition. Will an investor bring his money to sink into such an uncertain atmosphere?

If the investor is lucky enough to locate a patch of land provided by some pro-active State, his waiting period has just begun. Land provided by State Industrial Development Corporations requires several approvals before construction can start. In the hinterland of the national capital Delhi – in NOIDA and Gurgaon – there are 50 odd permissions necessary for construction to commence. Unless the investor is desperately in love with India as a destination, his patience would have withered by now.

Once the factory is set, and activity commences business should be smooth. Not in India. Of course, the obstacles for business vary from state to state. In Uttar Pradesh, for example, so frequent is the demand of several rent seekers big or small that many investors opt not to touch NOIDA, despite possessing a better infrastructure than Gurgaon. With rampant unemployment, political parties allow such extortions to keep their cadres happy. This is the situation on <g data-gr-id="56">ground</g>.

Coming back to Rajan’s comment on the situation on the ground it may be noted that regional satraps control the ground situation. These leaders now find themselves out of tune with the current socio-economic aspirations of people. In their desperation to remain in <g data-gr-id="57">power</g> these leaders use the same failed trick – muscle power coupled with the rhetoric of socialism. To thwart Narendra Modi, “the articulate spokesman of India”, as Rajan called him, these leaders use abusive language, incorrect logic and white lies to hide their incompetence. The situation on the ground needs to change.

The ground reality is best illustrated by a recently released report of Ease of Doing Business among States. Gujarat and Andhra Pradesh have emerged as the first and second most competitive States. Both have Distance to Frontier (DTF) scores to figure among the top 50 nations in the world. Clearly Modi’s vision of taking India to the top 50 is not out of touch with reality. All we need is proper leadership at the ground level. In 2005, Rajan analysed the past and warned of the mistakes that the retiring Allan Greenspan made. This time, he has looked to the future and warned India of the possibility of failures on the ground. If regional leaders do not pay heed to Rajan’s comments, it will be yet another missed opportunity. Warning from Rajan is timely for leaders in various States. If they refuse to read the writing on the wall, the electorates will decide their fate. Now is the time for regional powers to follow the path of nation building or get consigned to the dustbins of history. I hope they will read Rajan’s message correctly.