Recently, on September 5, Union finance minister Nirmala Sitharaman released the latest Ease of Doing Business (EoDB) rankings for reforms for 2018-19. Andhra Pradesh topped the rankings, again, for the third year in a row.
Earlier, on August 26, Niti Aayog released the Export Preparedness Index of Indian states in 2019-20. In this, AP found itself in the 20th position, ahead of small landlocked states like Meghalaya and Sikkim. These contrasting performances of AP 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 dotted with major and minor ports. Andhra was the linchpin of India’s Act East initiative. Our EoDB rankings since 2015 have reflected a willingness to leverage such advantages through reforms in civil administration and markets.
But the poor performance in exports indicates that the state government lost its way by 2019. There has been a drastic rise in the unease of doing business owing to the current YSRC government questioning pre-existing commitments and contracts.
Andhra has the highest unemployment rate in India, as per CMIE data for August 2020. Though the pandemic-induced slowdown is partly to blame, it also indicates an erosion of AP’s economic strengths in the past year. From being a highlight of India’s growth story since 2014, we are fast becoming a 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 the better-paying secondary and tertiary sectors? But now it is becoming a lesson on why not to sacrifice governance and growth policies for political oneupmanship.
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 under chief minister Chandrababu Naidu who promised a job in every family through sustainable industrial growth.
We embarked on a path to industrialisation as agriculture simply could not provide economic mobility for our increasing workforce. 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 long-standing 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, in providing benefits to workers and gender equality. This was complemented by consistently topping India’s EoDB rankings.
Between 2016 and 2018, 2,299 projects worth â¹16.7 lakh crore were in various stages of implementation with an employment potential of 34.7 lakh jobs. Of these, 1,065 projects worth â¹3.5 lakh plus crores able to employ over five lakh people commenced production or erected machinery. More projects worth another â¹13 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, 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.