The political turmoil in Tamil Nadu after ruling party head and chief minister J Jayalalithaa’s jailing will upset investor sentiment, worry business circles.
Business Standard spoke to representatives from industries based in Tamil Nadu, multinational companies which have invested in Tamil Nandu, other stakeholders and state government officials.
On condition of anonymity, the investor community said there was worried uncertainty among them.
On the other side, while acknowledging it was a “valid” fear, state government says all processes are system-driven in the state and they need not worry about the political developments.
A chief executive officer of one of the large business houses in this city, with interests in manufacturing and services, said there was a big difference from Jayalalithaa’s earlier unseating from the CM’s chair by a court order, in 2001.
She had not been jailed at that time and was accessible to the man she nominated as replacement, the same one as this time, O Panneerselvam. This time, she is not only jailed but also in a Bangalore prison.
Another industry leader said the impact depended on when Jayalalithaa would get bail.
Another company head said if she got bail or was even shifted to a Chennai prison, it would ease the situation.
The focus of the new CM and his ministry should be to bring their leader out of this mess and till then, it would not be a smooth drive for industry.
A senior official from a foreign embassy said he was putting some proposals showing interest in Tamil Nadu on hold till the political stabilised.
Most of them have said investments would be diverted to other states, thanks to a favourable system such as availability of both skilled and unskilled labour, pro-industry policies and access to export markets.
One problem for Tamil Nadu is competition for investors from neighbouring states. For instance, the Andhra Pradesh government had announced clearance of investment proposals in cement worth Rs 9,200 crore. To which, industry representatives said even if the current situation hadn't arisen, those investments would have gone there, as the needed raw material, limestone, was available in that state.
“(Andhra Chief Minister) Chandrababu Naidu is also known for his strengths in attracting investors,” said an industry leader. Telangana and Andhra Pradesh are competing each other and with neighbouring states for attracting investments. The new political situation offers an advantage to these states, said the source.
The film industry is backing Jayalalithaa. Sources said the film industry will stop all activities, including film shooting and closing of theatres.
A senior government official, while accepting these as genuine apprehensions, said the worries would be belied.
“Yes, the current situation has created some uncertainties among investors and they are valid. But if you look at the procedures of clearance, it’s all system-driven and any such political developments will not put any clearances on hold for any projects,” said the official.
- Tamil Nadu, one of the top 3 investment destinations in India, attracted $13 billion investment last year
- Total number of foreign companies around 3,000, including Fortune 500 ones such as Ford, Delphi, Visteon, Hyundai, Daimler, Dell, Nissan, Toshiba, Yamaha, Mitsubishi
- Total number of factories 42,288
- The state has the second largest economy and is also one of the fastest growing states in the country. In 2012-13, Gross State Domestic Product was $145 billion, 7.8% of India’s GDP
- In 2013-14, exports from the state were worth Rs 2,15,400 crore, about 11.5 per cent of total Indian exports
- Average yearly economic growth was 9.75 per cent in the past nine years. This year’s target is 11 per cent