Free Press Journal

FDI: Maharashtra aims high, but shoots low

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The latest figures from the Reserve Bank of India (RBI) should give Maharashtra immense cause for cheer. It became the biggest recipient of foreign direct investment (FDI) from among other states in India (see chart). And, if advance estimates are any guidance, it is possible that the state will be the biggest FDI recipient for 2017-18 as well.

In fact, the state hasn’t done too badly for itself. Just go to its economic survey for 2016-17. It points out, quite pertinently, that in terms of advance estimates of real (at constant 2011-12 prices) Gross State Domestic Product (GSDP) for 2016-17, the state economy is expected to grow by 9.4 % over the previous year.

More significantly, the ‘Agriculture & Allied Activities’ sector is expected to grow by 12.5 % which puts Maharashtra in the same league as Gujarat or Madhya Pradesh in terms of growth rates. Industry is expected to grow at 6.7%, while services is expecting to clock a growth rate of 10.8%.  This will probably be the first time in decades when agriculture will grow faster than either industry or services.


All this should be music to the ears of economy watchers, who believed that Maharashtra had been punching way below its weight all along. That may be so. But, there are smoke signals warning of trends that could spoil the party. For instance, the tallest tower in the country will now be built in Bengaluru, and not in Maharashtra.  True, the building is being built by a Chinese company to house mostly Chinese joint ventures.  But, the signal is unmistakable.

All along, it is Mumbai which has boasted of the tallest tower. The baton is now being passed on to Bengaluru. Maybe, the state’s own greed in charging extremely high rates for its FSI made Bengaluru a more attractive proposition. Or maybe, the economic environment of clearances was better in that state. This needs to be watched very carefully.

Recent disclosures of the corruption that prevails in the municipal corporation of Mumbai (the fire at a terrace garden which killed 14 people) prised open the lid revealing a can of some very obnoxious worms. The fact that one of the investors of the illegal eatery was the son of a former police commissioner only muddies the waters further. It exposes the sleazy underbelly of Mumbai’s real estate linked licensing raj.

Watch another indicator. Maharashtra had around 210 lakh cattle according to the 19th Livestock Census, 2012.  This census which is held every five years (the 18th livestock census was in 2007) shows Maharashtra in a very favourable light. The ratio of cows to buffaloes was 2.77 – cows accounted for 73% of its cattle population compared to buffaloes. This was higher than the national ratio of 1.76.

But, there are strong indications that this ratio could worsen in light of the cow slaughter ban that the state allowed to get enforced – in keeping with the Hindutva agenda of the present government at the centre. The ban on transportation of buffaloes meant for slaughter made things worse. It is possible that part of the farmer distress faced in Maharashtra could have been on account of this ban.

The state forgot that farmers purchase cows or buffaloes only to make some more money from the milk they produce. If fed properly, cows could generate a net surplus of around 100 per cow per day for around 300 days. The cattle slaughter ban could have dampened voter enthusiasm in Gujarat as well (http://www.asiaconverge.com/2017/12/gujarat-elections-hindutva-beef-ban-may-actually-hurt-bjp/). If Maharashtra is not careful, it too could get singed.

When a farmer cannot sell his aged cattle, which is unable to procreate – hence unable to lactate – he has to sell it off.  Hitherto, the farmer got around Rs 20,000 per head of cattle when it was old. Now, the market for purchase of cattle has almost dried up. Nobody wants to buy cattle that will be subject to vigilante fury at check posts.

The farmer then suffers three types of losses. First, he unable to get the Rs 20,000 for the ageing cattle head. Second, he is unable to replace the old cattle with a young cash-generating one. He cannot subsidise the cost of Rs 60,000 for the new cattle with the Rs 20,000 he could have got from the sale of the old one. So, he defers this purchase. That crimps his future earning potential as well. Third, he has to pay for food and medicines for the ageing cattle now. Like all ageing life forms, ageing cattle also translate into higher medicare costs. Some of the farmer fury against the state could have been because of this ban. Expect the cattle number to change dramatically when the next census figures are out.

But, there are other extremely wonderful things the government has done on the rural front. It has raised the minimum support price of milk to Rs 27 a litre.  Most cooperatives (owned mostly by the Congress and NCP political leaders) in Maharashtra had been paying farmers only Rs 18.  That brings additional cashflow to the farmers. It has built jal-shivirs (dams) which store rainwater, which is then used for irrigation. That eases the farmer’s dependence on rains. All this will accelerate rural wealth-generation.

Rural wealth matters in Maharashtra. This because hitherto the state has focussed more on urban centres, causing some 20% of its population to cluster within 2% of the land that makes up this state. With rural wealth, will come rural consumption which will mean more industrial growth.

But, will the state be able to rein in its avaricious government staff – especially at lower levels – that have become extortionists of the worst kind? You can see them in the state’s sales tax officials, its Food and Drug administration, its Fire Clearance department and – of course – its municipalities.

That is something the state will have to deal with. For now, it has done well on many counts.  But, to regain the numero uno status among Indian states will require much, much more.

The writer is consulting editor with FPJ.