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|January 25, 1999
South's future north-bound as US investors pledge support
Shobha Warrier in Madras
When Dean R O' Hare, chairman of the US-India Business Council, said in his inaugural address at the US-India Investment Summit in Madras that till recently American investors had a different image of India, the gathering sat up and took notice.
India, Hare said, was viewed as a country with the world's largest, 300-million strong middle class aka the consumer class. The Americans, he said, believed that India was a low-cost, one-billion-people heavy society that needs to do a lot of catching up with the rest of the world, especially in its ability to manufacture the basic things for life.
But the image began to melt as soon as the Indian leaders and business-persons swooped down on the USA and discussed their goals, achievements and strategies. "A new vision of India's economic future began to emerge -- one that is startlingly different from the one that brought many investors to India in the early part of the decade."
By the time summit wound up, the new vision acquired a definite shape as the US investors agreed that the south is "the place" for future investment.
The prospective investors said that nobody could define India as a developing country now, as it has the world's second largest pool of trained professionals. As they repeated this view, the chests of India's politicians and entrepreneurs swelled with pride.
O'Hare observed that it was not the consumers who defined the economic potential but the extraordinary reserves of human capital. It was not India's internal market that was of concern to the outside world but its capacity to compete to sell its services and products in the global markets. The south seems to offer not ''low-cost'' but ''high value-added'' services, he said.
One of the significant observations made was that till 1991, the Indian industry had to follow the policies of the Central government whether it was situated in West Bengal or Gujarat or Tamil Nadu. The states had no authority to go ahead with their independent ideas and that accounts for the low industrial growth of many of the states and the high growth of certain states. With the liberalisation and globalisation of the Indian economy, states attained the power to decide what they wanted to achieve.
Jaswant Singh, the minister for external affairs, said as much when he remarked, "India does not live in Delhi alone." The new-found freedom of states was best exemplified by Andhra Pradesh Chief Minister Chandrababu Naidu. In keeping with his globe-trots to sell his state, he came to Madras, shared the platform with his Tamil Nadu counterpart M Karunanidhi, and marketed AP. The more aggressive you are, the more investments you get -- that was what he conveyed through his actions.
Another interesting point was related to the relevance of history. There was a time, hundreds of years ago, when south India exploited its 5,700 km long coastline and had trade with countries like Greece, Rome, Africa and some East Asian countries. This factor, speakers said, will again help the south to surge ahead in the post-liberalisation era. It may be mentioned here that the southern states are vying with each other in developing their ports.
It was quite evident from the enthusiastic and upbeat mood among the US investors that they were quite convinced about the statistics provided to them that social development, the foundation for any economic growth, had already taken place in the south.
As against the national average of 52 per cent, the literacy rate in the south is 60 per cent. And 40 per cent of the polytechnics, engineering and medical colleges in India, are located in the south. The south accounts for over 70 per cent of the software produced in India. And 33 per cent of the total investment proposals approved and under implementation are in the four southern states. A very confident Karunanidhi said, "The day is not far off when the south will become India's main engine of growth."
The highpoint of the summit was the video conference via a satellite link featuring Jeffrey Sachs, director, the Harvard Institute for International Development and consultant to the governments of Tamil Nadu and Karnataka, talking from America with the delegates in Madras.
N Sankar, chairman, the Indo-US Joint Business Council, announced to the audience that it was Murasoli Maran's idea to have such a ''high-tech'' talk with Sachs. Last year, at the summit organised by the Confederation of Indian Industries, Sachs's was the lone voice which spoke in favour of India when doom- sayers were predicting the end of the Indian economy.
Sachs still sees an optimistic future for the Indian economy. He described the south as 'dynamic' with tremendous potential. He told the investors, ''India is the most highly desirable place to do business, as unlike China, there is a rule of law here. There is a sound and working legal and judicial system and there is a lot more of transparency.''
Lending credence to Sachs's views, the National Council for Applied Economic Research reported last week that India is finally emerging out of recession.
But not all is well, he agreed. When his institute did a survey of investors in 53 countries, India came first among the 53 countries in the information technology sector but when it came to infrastructure, it occupied the last position! Sachs also cautioned that India has to solve its fiscal deficit problems and improve its infrastructure if it wants to emerge as an economic power.
If one met confused, hesitant and indecisive investors at the CII meet in Madras a year ago, here at the Indo-US summit, they were more clear and certain in their outlook. Now they see a different India, an India that is emerging as a strong power and an India that can attract foreign investors even in the field of infrastructure. But one of their strong demands was that the service sector including banking and insurance must be fully opened up, as it is the fastest growing segment in the world.
US investors said the introduction of the insurance reforms bill, repeal of the Urban Land Ceiling Act and proposed opening up of the telecom sector reflect the government's determination to cut down on bureaucratese and red-tape and corruption. There was a unanimous view that India would lose out in the IT industry, if it were to continue with the same telecom lines.
In a joint statement, N Sankar and O'Hare said that the investors were impressed by the video presentations of the five southern states and they had come to the conclusion that "India is emerging as a global economic power in the leading growth sectors of the 21st century".
The fact that investments in India increased even when the sanctions were on, shows that the US businessmen find India the most attractive market.
Of all the presentations, the one presented by Chandrababu Naidu was the most engaging. He was the star attraction of the whole two-day show. The conference hall was packed to the brim when he made the presentation. One had to just compare the attitudes of the governments of Kerala and Andhra Pradesh to see how important investors are to each state.
E K Nayanar, Kerala's chief minister, chose to depute his industries minister Susheela Gopalan. Of all the southern states, Kerala is far ahead in social development, literacy, lowest birth rate, standard of women's living conditions. But if an investor were to compare all the positive aspects with its one negative aspect, that of trade unionism, Kerala lags behind. This was quite evident at the summit too.
Even though the techno-park in Kerala has attracted quite a few, other areas still have not. The video presentation by a bureaucrat from Kerala steered clear of all the basic details. "Interested investors can come to the state's stall and get all the details" -- that seemed to be the message.
In contrast, Naidu invited the US investors "to come to my state and meet me", drawing applause from the gathering. And, when he was through with his address, he was given a standing ovation. Karnataka got a lukewarm response from the investors, as its chief minister was not present. The chief minister of Pondicherry even announced that he was going to open an American corridor in his territory.
Photographs: Sreeram Selvaraj
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