Industrialisation

Tall claims of industrial development in Uttar Pradesh

Print edition : November 06, 2020

Prime Minister Narendra Modi with Chief Minister Yogi Adityanath at the Uttar Pradesh Investors’ Summit 2018 in Lucknow on February 21, 2018. Photo: Nand Kumar/PTI

While Yogi Adityanath continues to speak about turning Uttar Pradesh into a trillion-dollar economy, the ground reality is that the State suffers a lack of qualified manpower, affordable electricity, a business-friendly taxation regime and a conducive working environment.

The Uttar Pradesh government has, over the past three years, attempted to build an investment-friendly image of itself, organising headliner summits and claiming the inflow of millions of dollars of cash. The fact that the State managed to climb up to the second spot in the ease of doing business index is often cited to give credence to Chief Minister Yogi Adityanath’s pro-development narrative at a time when Uttar Pradesh has emerged as the hotspot of Hindu majoritarian politics and police communalisation.

In March, Yogi Adityanath claimed that his three-year regime had seen an investment of nearly Rs.3 trillion in the industrial sector from private as well as public players. According to him, this investment resulted in employment and self-employment opportunities to 33 lakh people since March 2017 when he took over as Chief Minister. He said: “The State is constantly moving towards a new direction, and in addition to the industrial sector growth, several big infrastructure projects are also under way…. We have the vision to integrate all the industrial training institutes and polytechnics with entrepreneurship so as to generate lakhs of job opportunities for the youth, who are full of energy and potential, and they just need the right direction.”

In February 2018, at a grand investors’ summit hosted by Yogi Adityanath in Lucknow, which witnessed the participation of A-lister businessmen from across India, it was announced that as many as 1,045 memoranda of understanding (MoUs) had been signed. The total investment was pegged at Rs.4.28 lakh crore. But two years later, the agreements had largely failed to translate into material investment, punching holes in the development narrative that the government was trying to use as a cover for the increasingly totalitarian character and spirit of its term in office.

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Speaking to Frontline, Alok Ranjan, former Chief Secretary of Uttar Pradesh, said only 30 per cent of the proposed Rs.4.28 lakh crore of investments had been actualised. He added that the investors were making similar promises in other States, too. “The main reason for this gap between promise and delivery is not the ongoing pandemic but the inadequacies at field level infrastructure,” he said and added that there was also an “overcommitment by the investors” in the MoUs that had been signed. A case in point was the commitment of Rs.90,000 crore investment made at the Lucknow investors’ summit in 2018 by Korea-based WorldBestech. Pledging almost 20 per cent of the total Rs.4.28 lakh crore of the investment MoUs signed, WorldBestech CEO and president K.K. Kim had said: “We shall set up a gas-based power plant and allied companies in Mathura that would also solve the problem of potato growers of Mathura and adjoining districts.” However, it soon surfaced that the annual revenue of WorldBestech was only Rs.6.5-13 crore. Furthermore, an investigation by NDTV revealed that “the Korean firm appears to have an Indian subsidiary based in Pune with whom the parent company appears to have had legal troubles”.

Inexplicably, voices from within the Uttar Pradesh government diverged on the question of agreements translating into actual investment. In February, Uttar Pradesh’s Minister for Industrial Development, Satish Mahana, said that only 90 of the 1,045 MoUs signed had resulted in the kick-starting of commercial projects. That roughly translates into an investment of Rs.39,000 crore. However, around the same time, Yogi Adityanath made a contradictory claim that 371 of the projects were in progress. He said that these projects had generated “more than 33 lakh direct and indirect employment opportunities”. In September, he said that out of Rs.4.28 lakh crore investments pledged, projects worth Rs.2 lakh crore had already started. The Samajwadi Party spokesperson Ram Pratap Singh dismissed these assertions. He said that despite Satish Mahana claiming investments worth Rs.39,000 crore pouring into the State, at least eight related projects had been cancelled owing to the lack of finances.

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The Chief Minister and his Cabinet colleagues have consistently grabbed headlines with their tall claims of turning Uttar Pradesh into a trillion-dollar economy. Contrary to the spate of gruesome crimes such as rapes and alleged fake encounters, the State government said that a “strong law and order” situation and infrastructure development in power, road, communication and transport sectors were the reasons a trillion-dollar economy was well on its way. These claims do not withstand a cursory glance at the facts at hand. Currently, the State’s economy is pegged at Rs.16 lakh crore. If Uttar Pradesh were to become a trillion-dollar economy, it would have to register an annual growth rate in excess of 30 per cent until 2024 and quadruple its current size. In the past two decades, the State has not touched an annual growth rate in excess of 10 per cent. When one considers that, it appears that the trillion-dollar mark cannot be achieved before 2034-2035.

MSMEs collapsing

A recent conclave of owners of micro, small and medium enterprises (MSME), helmed by the non-governmental organisation Progressive Council, found that the sector was on the verge of collapse. The MSME entrepreneurs were of the opinion that a string of policy fiascos such as demonetisation and bad implementation of the goods and services tax (GST), combined with the economic meltdown and the losses incurred owing to the COVID-19 pandemic, were responsible for the downward spiral in their businesses. The MSMEs employ about 120 million people and are responsible for 33.4 per cent of the total manufacturing output, and in Uttar Pradesh they contribute 45 per cent of the total exports from the State. The MSME owners complained that there was no formal financing structure in Uttar Pradesh. The findings of the conclave revealed that after the lockdown, the capacity utilisation of around 8,000 micro enterprises was only 50 per cent.

Ram Pratap Singh said that the incumbent government’s assessment of how the economy might grow was based exclusively on data relating to industries, which it inflated. Speaking to Frontline, he said: “As much as 60 per cent of the economy is dependent on agriculture. The government cherry-picked data from the industries sector and used it to make an estimation of overall economic growth. Obviously, it is based on the belief that agriculture would also grow accordingly, which is deceptive. The MSMEs are on the verge of collapsing. How will new investment flow in?” He pointed out that the construction of six information technology (IT) parks was only partially complete.

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At the same time, there were some positive initiatives that might make Uttar Pradesh more investor-friendly. At the “Invest UP” summit held in September, the State government announced the setting up of an industrial zone in Meerut and a reduction in the rural-to-industrial land conversion circle rate from 35 per cent to 20 per cent. In case of conversion of huge land, the rate dropped to 14 per cent. Adityanath said that his government had received investment proposals worth Rs.7,000 crore from Japan, the United States, the United Kingdom, Canada and Germany.

In June, Yogi Adityanath interacted with business leaders at a webinar organised by Federation of Indian Chambers of Commerce and Industry (FICCI). He stressed that policy reforms undertaken by his government, besides ongoing efforts to enhance road and air connectivity, would facilitate the emergence of Uttar Pradesh as “an economic powerhouse”. He addressed the major challenge of land availability that currently hindered investment. “Land bank was a challenge. Today, I can say that we have more than 20,000 acres to be provided to new investors,” he claimed, adding that connectivity projects such as the Jewar Greenfield International Airport and the Meerut-Prayagraj Expressway projects were making rapid progress.

However, experts such as Alok Ranjan, who have mapped Uttar Pradesh’s socio-economic indices over the decades, view these developments with cautious optimism. Alok Ranjan said land was very highly priced in Uttar Pradesh and the State Industrial Development Cooperation had not come up with any tangible action plan to mitigate this: “A government order is one thing and implementation of that order is another. The government may sanction a power connection project in 15 days, but how much time and harassment on the field one has to navigate to actually get the connection would ultimately determine the fate of a project, for example.” Despite the land bank initiative, many feel that in the absence of policies to bring prices down or even reduce electricity tariff, there would not be any windfall gain.

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Ram Pratap Singh pointed out that in order to attract actual investment, the State would need technically qualified manpower, affordable electricity, a business-friendly taxation regime and a conducive working environment, none of which was available at present.

There is scepticism surrounding Uttar Pradesh’s second rank in the ease of doing business index. Alok Ranjan explained: “The ratings are based on a set of reforms recommended by the Department of Industrial Promotion that functions under the Government of India and how States have acted on these recommendations. However, this time the assessment also involved the perspective of industrialists. The State secured a mere 50 per cent score on that, which is disappointing. There was another component of investment received; UP does not figure in the top 10 in that component.”

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