When prominent demographer Ashish Bose suggested the name “Bimaru”
for the collective of four north Indian states that were struggling to perform
well on both the economic and social fronts, little did he realize that this
name would stick for several decades to follow. But, it’s now a moniker that at
least one of the four states – Madhya Pradesh – is keen to shed as it projects
itself as a growth state for the future.
At a workshop organized by CII at Bhopal on March 5, Professor
BB Bhattacharya (BBB) [picture below], economist and former VC of JNU, suggested an interesting distinction – you are still a
Bimaru state when, like Bihar, you are seeking special economic packages, and
not like MP when you are confident of creating your own destiny.
As is well known, MP’s economic growth in recent years has
come from agriculture. It is the country’s leading producer of soybean and
pulses and #2 in wheat. The state has won the Krishi Karman award – an award
given by the National Food Security Mission to states excelling in foodgrain
production - the last three years in a row.
I am still not completely clear about how and why the state
has been able to achieve 10+ % growth in agriculture the last three years. While
the government of MP credits the growth to improved irrigation, adoption of
technology and better farming practices, and optimum utilization of rain-fed
areas, media reports refer to a zero-interest loan scheme to farmers,
availability of power, and better irrigation coverage.
But, whatever the reason, the state has realized that it
can’t depend on growth in agriculture alone for the future development of the
state. That’s why it is increasingly looking at industry as the key to future
growth.
An Industrial Growth Strategy for MP?
At the workshop, Professor BBB made a few important
observations in his opening remarks. The East Asian growth story was as much a
story of social development as economic development, and the availability of
skilled and educated manpower made the growth story possible. East Asia also
became technologically savvy quickly, and rapidly made the transition from being
a mere recipient of technology to a creator of technology as well. He therefore
underlined the importance of human development and technological capabilities
for industrial growth.
Mr. Prabhakar Kadapa, CEO of Avtec, a CK Birla group company
that makes engines for the automotive industry observed that his company’s products
are becoming more knowledge and technology-intensive. While it has plants in
multiple locations, the technology-intensive work that has a higher element of
value-added happens in Hosur near Bangalore and not in his older plant in
Pithampur near Indore. He estimated that 70% of his future capex would flow
into Hosur.
As a participant in the panel, I observed that the East
Asian countries had followed a similar trajectory of industrial growth,
starting with relatively less complex industries and then graduating to more
complex ones. But I wondered aloud whether manufacturing will remain the same
going forward, or whether there will be fundamental changes. Some recent
developments like the growth of 3D printing [see picture below] and the shift of some manufacturing
back to the developed world might point to fundamental changes in the nature
and patterns of global manufacturing.
Mr. Prabhakar felt that in spite of these changes there
would still be plenty of opportunities in low-cost manufacturing. He felt that
manufacturing could make a leap if MP is able to attract one or two big name
automotive companies to make the state their hub.
Prof. BBB emphasized the importance of individual companies
inserting themselves into global value chains and then striving for continuous
improvement to maintain competitiveness. Mr. Sanjay Kirloskar observed that his
company’s single biggest recent investment was in 3D printing, and that the 3D
printer was allowing dies and moulds to be created rapidly thereby cutting down
the overall cycle time of taking new products to the market. He also cautioned
that we should change perspective from low-cost to total cost of ownership, and
emphasise quality.
I also emphasized the importance of catching the next wave
at the right time. MP pretty much missed out on the IT services wave and
managed to attract companies like Infosys and TCS too late. Given the slowdown
in their businesses, it’s doubtful that their development centres in the state
will ever reach a large size.
The final point I made was on last mile connectivity and
speed. While MP has undoubtedly made significant progress in building highways
connecting the major cities in the state, city and last-mile connectivity
remains an issue. The state has the right intent, but there is a need to match
the intent with speed of execution as fast response is key to competitiveness.
What the State Government is Doing
The Government of MP has taken the mantra of “Ease of doing
business” seriously. At a workshop with industry on March 4, the government
explored 150 different possibilities for simplifying permissions and
procedures. MP CM Shivraj Chouhan personally spent a good part of the day at
this workshop, and reportedly told state bureaucrats not to worry about the few
percent of people who will take undue advantage of the simplified processes.
Instead, he advised them to focus on the benefits that will accrue from
simplification.
Participants in the workshop were appreciative of the
government’s efforts but underlined the importance of the government’s
industry-friendly approach trickling down to the lowest level of the
government. Such a change in approach is reported to have happened in some
states like Gujarat. Industries Commissioner Kantha Rao said the government
hoped to use technology to overcome any problems at the delivery point.
Mr. Kantha Rao also mentioned that the state is trying to
leverage the central government’s policy initiatives – it’s been one of the
first states to have its own policies for supporting Electronics Systems Design
and Manufacture, and Defence industries. The State also offers one of the best
policies for textile units.
Cautions
Professor BBB cited the example of China to warn the state
that several advantages that the state enjoys today like availability of land,
water and electricity could very rapidly change into constraints if industrial
development takes off. Echoing this concern, some of the participants suggested
that the state be sensitive to environmental concerns upfront rather than
trying to address them later in a corrective mode. One participant suggested
that the state should focus on clean energy. But, as he was speaking I recalled
President Obama’s travails in trying to support clean energy and wondered
whether Madhya Pradesh is quite ready for such challenges.
While there was broad agreement that the state needs to be
able to attract higher quality talent to support R&D investments, some
participants asked whether MP can hope to attract higher end jobs without making
its cities more attractive. Would techies ever consider an Indore or a Bhopal
on par with a Bangalore or a Hyderabad?
Another line of discussion centered around what the state can
do to promote entrepreneurship. Can it set up incubators to support young
entrepreneurs? Mr. Kantha Rao said, quite rightly in my view, that the
government is not ideally suited to setting up or running incubators, but could
be a catalyst of such initiatives.
Some Concluding Thoughts
India is embarking on a pro-manufacturing policy at a time
when manufacturing itself may be on the verge of major changes. While the speed
of adoption of new manufacturing technologies is difficult to predict, it is
clear that the last generation of technologies itself has made manufacturing
much more technology-intensive and most plants today are run by a small core of
very highly skilled people. Given this,
it’s an open question how much employment manufacturing can create. Govindraj
Ethiraj, Chief Editor of the Ping Network who moderated the discussion told me
that a recent McKinsey report predicts a decline even in knowledge-intensive
jobs thanks to changes in the way work is done.
Having said that, government policy support will create
manufacturing opportunities in some sectors for sure. Defence is one of these,
with the government having indicated its preference for products manufactured
in India, and its willingness to move away from the earlier public sector
centric model of defence production.
But, state-level strategies remain tricky. Should all states
try to woo all types of industries? How can states build additional layers of
advantage that would make companies find them more attractive as investment
destinations? These are some of the big questions to ponder over.
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