Industry in Jagan’s Andhra sputters to an abrupt halt
On September 5, Union finance minister Nirmala Sitharaman released the latest “Ease of Doing Business” ( EoDB) rankings for reforms in 201819. Andhra Pradesh topped the rankings, again, for a third year in a row. Earlier, on August 26, Niti Aayog released an “Export Preparedness Index”, comparing performances of Indian states in 2019- 20. In this, AP found itself at 20th position, ahead only of small landlocked states like Meghalaya and Sikkim. The contrasting performances of Andhra Pradesh in 2018- 19 and 2019- 20 are a result of two different kinds of governance.
Andhra has several natural advantages. It has the second longest coastline and along it, dozens of major and minor ports. Andhra was the linchpin of India’s Act East initiative. Our EoDB rankings since 2015 reflect a willingness to leverage such advantages through reforms in civil administration and markets. But the recent export performance report indicates the government lost its way by 2019. There has been a drastic rise in “unease of doing business” owing to the current YSRC government questioning pre- existing commitments and contracts.
AP has the highest unemployment rate in India as per CMIE data for
August 2020. Though the pandemicinduced slowdown is partly to blame, it also indicates an erosion of AP’s underlying economic strengths in the past year. From being a highlight of India’s growth story since 2014, we are fast becoming its latest failure. Andhra was at the forefront of solving India’s decades- old dilemma — how do we shift millions of individuals from the low- paying primary sector to better- paying secondary and tertiary sectors? But now it is becoming a lesson on why not to sacrifice governance and growth policies for political one- upmanship.
FROM AGRARIAN TO INDUSTRIAL ECONOMY
The trajectory of every prosperous country is similar — predominantly agrarian countries with rising populations transform into industrial powerhouses, creating millions of quality jobs. India is struggling to make this transition. Half its workforce is still dependent on agriculture, even as 12 million youth join the job market every year.
“Make in India” was a manifestation of this need to transform our states into industrial economies. Though a fledgling state in 2014, Andhra Pradesh deftly took up this challenge under the Telugu Desam
Party government. Chief minister N. Chandrababu Naidu promised a job in every family through sustainable industrial growth.
We embarked on a path to industrialisation. Our aims were to create new jobs for lakhs of youth shifting away from agriculture or youth newly joining the labour force, ensuring all regions and districts gain new industries and investments and creating a favorable infrastructure for investors. We had to compete with Tamil Nadu and Karnataka, which have seen longstanding success in industries, investments and services.
The Centre for Policy Research analysed NSSO and Labour Bureau surveys, ASI and RBI figures, and their 2019 report showed AP topping India in overall performance, scoring well in creating employment and keeping unemployment rates low and providing benefits to workers. This was complemented by consistently topping India’s EoDB rankings.
Between 2016 and 2018, 2,299 projects worth ` 16.7 lakh crores were under various stages of implementation with an employment potential of 34.7 lakh jobs. Of these, 1,065 projects worth ` 3.5 lakh plus crores able to employ over five lakh people commenced production or erected machinery. More projects worth another ` 13 lakh crores are under various stages of construction or approval. Kia and Hyundai built in Anantapur; Foxconn, Isuzu and Apollo in Chittoor; Kurnool and Kadapa saw Asia’s then largest solar parks taking shape; Nellore saw Aurobindo Pharma, Gamesa and Sembcorp; Srikakulam saw Reddy Labs, while Vizag saw prominent companies as Hinduja, Asian Paints, Rashtriya Ispat and Pfizer begin production.
‘ PROFIT A DIRTY WORD’
When power changed hands in 2019, there was an expectation that the new government would continue the momentum. What transpired is a policy paralysis and a reverse flow of domestic investments and FDI equities. MoUs were cancelled, companies hounded out, existing contracts dragged to courts or subjected to quasi- judicial review commissions in a move reminiscent of licence permit raj.
As Niti Aayog pointed out in its export performance index, “AP’s performance remains poor… due to lack of policy measures.” World Bank and AIIB pulled out of planned loans worth half a billion dollars as did the Singapore Consortium. It was evident that the current government simply didn't see this kind of industrialisation as a priority.
This created an atmosphere of great uncertainty which is anathema for businesses looking to invest. Major companies such as LuLu and Adani pulled out of their projects in Vizag. Inaction on the government’s part led to Chittoor losing an ambitious Reliance electronics hub. This was a pattern repeated across the state as the YSRC government began to ascribe ulterior motives to every company’s actions.
Stuck in a socialist mindset of perennially doubting the private sector, AP began haemorrhaging investments and companies. Commerce minister Piyush Goyal remarked on how the Centre was forced to consider legislating bills to protect investments from state harassment.
From being the highlight of India’s growth story, AP has now become one of its problem states: driven by a vendetta against all initiatives of the previous government. Obsessed with rewriting legacies rather than building on them, chief minister Y. S. Jagan Mohan Reddy threatens to undo all gains.