In 2002-03, a major survey was conducted on investment climate and the competitiveness of Indian manufacturing. Of the 250-odd detailed questions in this all-India survey, a dozen were purely qualitative in nature. More than 1,850 factory managers and entrepreneurs were asked to rank 12 states of India according to their perceptions of best and worst investment climate. They were also asked to rank each of these states in terms of whether it was better or worse than the state in which their factory was located. Finally, they were asked to rank states by various constituents of investment climate, such as labour relations, power supply, law and order, hassles by local government, telecommunication facilities and the quality of transport infrastructure. The idea was to check the quality of their rankings — namely, how well did these stand up in the face of “hard” data from the survey as well as secondary sources.
Maharashtra scored the highest in terms of investment climate, followed by the national capital region of Delhi. These two states were considered to have the “best” investment climate. Next in rank was a cluster consisting of Gujarat, Andhra Pradesh and Karnataka, which were classified as having”good” investment climate. Punjab, Tamil Nadu and Haryana were in the category of states having “medium” investment climate.
Madhya Pradesh, Kerala, West Bengal and Uttar Pradesh were at the bottom of the pack, and were considered by entrepreneurs and factory managers to exhibit a “poor” investment climate. To be considered a marginally better investment destination than Uttar Pradesh can hardly be perceived as the crowning glory of West Bengal.
This was the second survey of its kind, coming on the heels of a previous one conducted in 1999-2000. In both instances, West Bengal was relegated to the bottom category. For a Bengali, albeit in exile, I was depressed by the results — for it showed that, despite positive changes that have occurred in the last five years, Indian manufacturing industry’s perception of West Bengal remains as dismal as before.
Consider some of the data in greater detail. While 21 per cent of the respondents believed that West Bengal was a better investment climate state compared to the one in which they had their manufacturing plant, 79 per cent thought it to be worse. Similarly, West Bengal was considered by entrepreneurs and managers to fare poorly in labour relations, law and order, hassles by local government officials, transport infrastructure and power supply.
As the “hard” data showed, some of these perceptions were wrong. Take factory visits by government officials as an example. Managers of plants in West Bengal were graced, on average, with 8.5 visits of government officials per year. This happens to be well below the average of 13.2 visits in Tamil Nadu, 12.4 in Gujarat and 10.5 in Andhra Pradesh, and less than the overall 12-state average of 8.9 visits.
Equally, West Bengal was far better on the power front than what perceptions suggested. It had significantly fewer power outages per month compared to most states. That the power situation was better also showed up in the fact that 55 per cent of factories in West Bengal had captive generator sets, compared to 66 per cent in Karnataka, 74 per cent in Andhra Pradesh, 91 per cent in Delhi’s national capital region, and 92 per cent in Punjab —states that were ranked well ahead of West Bengal in the subjective view of investment climate.
Similarly, the average cost of power — after taking into account power drawn from the public grid and private generator sets — was Rs 4.10 per Kwh for West Bengal, versus Rs 4.50 for Andhra and Karnataka,Rs 5 for Gujarat and Tamil Nadu, Rs 5.90 for Punjab and Haryana and Rs 6.30 for Delhi and its neighbourhoods.
So, while in some areas, the data showed that West Bengal was clearly better than the average, the fact was that perceptions showed otherwise. The overwhelming view of entrepreneurs and manufacturers was that West Bengal was no better than Uttar Pradesh, Kerala or Madhya Pradesh in terms of its investment climate. What that meant was that, given a choice, a manufacturing company would rather invest in Maharashtra, the Delhi region, Gujarat, Andhra Pradesh, Karnataka, Tamil Nadu, Punjab and Haryana than in West Bengal.
Since perceptions matter a great deal in making investment decisions — especially those that involve the outlay of several hundred crores of rupees — the powers that be in West Bengal clearly have their task cut out for them. For the rest of this piece, I would like to suggest a few ideas to gradually reverse these opinions and attract serious interest in the state.
First, the salvation of West Bengal no longer lies in big manufacturing. To be sure, Haldia Petrochemicals is something to be proud of, and Purnendu Chatterjee may well be thinking of adding a new plant, but large scale metal bashing and petrochemicals is probably not the state’s forte. Had engineering and metallurgy been West Bengal’s comparative advantage — as it had up to the mid-Sixties — there would have been many buyers for the languishing factories that dot Hide Road, Taratolla, Durgapur and Asansol. There aren’t.
Second, vegetables and fruits are, most definitely, the state’s strong suit. Without doubt, West Bengal enjoys one of highest productivity in the growing of vegetables — which are available in abundance throughout the year. Equally, the soil and climate of many parts of the state are excellently suited for growing certain types of fruits. What the state badly needs is a couple of major fast moving consumer goods companies to invest in vegetable and fruit processing. Given the important role of panchayats in rural Bengal, the model may require taking a leaf out of Amul — by moulding the best cooperative practices with a clearly defined corporate purchasing, branding, marketing and sales set up. The advantages are many: plentiful supply of raw materials, good power supply to support the setting up of a series of cold storage chains, and a modern port at Haldia.
Properly done, I can see West Bengal being a significant exporter of processed food and preserved fruits to southeast Asia as well as west Asia. The state has to persuade companies like Hindustan Lever, Britannia, ITC and major international packaged food players to examine the prospects and invest. They may demand many concessions. I would accede to them in order to bring in the investments.
Third, the state should really focus on getting a bigger proportion of the information technology and knowledge industry business. While youth passing from the Indian Institute of Technology, Kharagpur, Shibpur and the Regional Engineering Colleges are finding entry-level jobs in IT companies in Bangalore, Hyderabad, Chennai and Pune, there are hardly any serious IT facilities or development centres in West Bengal.
Just as Azim Premji was persuaded to set up a Wipro Development Centre in Calcutta, so too should others be won over to invest in West Bengal. Cite lower cost of living; better quality of life, telephone facilities, lack of power cuts, give dollops of concession, and get more IT and business process outsourcing investments in the state.
Perceptions change for the better when more and more people speak well of something. Industrialists in Calcutta singing paeans of praise for the state doesn’t count for much. West Bengal needs industrialists elsewhere singing Hosannahs. That’s when the next Renaissance could happen.