Among the key aspects to turn around a flailing economy severely impacted by the unexpected COVID-19 pandemic would be to actively woo and secure investments that will not only bring in revenue but will also create jobs.
The Tamil Nadu government is also marching aggressively on this front, showcased by Chief Minister M.K. Stalin’s recent visit to Dubai. It is said about $1 billion (₹6,100 crore) is the commitment from the United Arab Emirates. Totally, $9 billion (over ₹68,000 crore)-worth of investment commitments, with a potential for creating over 2 lakh jobs, have reportedly been attracted by the DMK government in its 10 months of rule.
While the DMK government has started on the right note in wooing investors, signing so far 130 memoranda of understanding, converting them into reality holds the key.
Industries Minister Thangam Thennarasu said the investments will be made in various districts of Tamil Nadu, ensuring balanced, not stunted, regional development.
He also pointed out that investments have come in to focus sectors such as electronics, auto-components, industrial parks, Free Trade Warehouse Zones, IT/ITES, general manufacturing, food processing as well as new areas such as furniture manufacturing and EV charging infrastructure.
The State has been at the forefront of attracting investments in the electric vehicle space. A report from Colliers India said India will see total investments of ₹94,000 crore ($12.6 billion) in the next five years in the electric vehicle space and Tamil Nadu will account for the highest share of 34%.
Mr. Thenarasu said that of the 130 MoUs, 21 were signed a fortnight ago and their implementation would take some more time.
As for the 109 projects, 3 have commenced production/partial production/trial production. Nine projects have commenced their construction or are ready for foundation. As many as 96 projects are under implementation. Only one project has been dropped owing to financial reasons, he added.
The Minister noted that the MoUs signed are scrupulously followed up by specialised sector- specific teams in Guidance and the government is confident that it will ensure implementation of these projects in the near future.
M. Ponnuswami, former chairman of CII, Tamil Nadu, said Tamil Nadu’s conversion rate would be higher than in other States. He also pointed out that Guidance is professionally run and it is doing a good job of bringing in the investment.
K.E. Raghunathan, convener of Consortium of Indian Associations, said the Chief Minister’s foreign trip to attract investments was a good start and positioned ‘Made in Tamil Nadu’ in the global market. A 30% conversion rate of the signed investment proposals and 40% conversion rate in the number of jobs to be created are considered a healthy sign, he said.
The State government should focus on quick turnaround time for investments to come into stream. The Ola electric vehicle factory coming up in the State within record time shows it has the ability to quickly turn investment pledges into reality and that’s the confidence-building measure, Mr. Raghunathan said.
Course correction
He said the other States were aggressively competing to attract investments and in the recent past, Tamil Nadu has lost out on investments from Kitex Garments, Kia Motors and Qualcomm to other States.
Some of the industry officials who did not wish to be named pointed to the absence of big ticket investments in the State in recent years and hoped the DMK government, which has a strong mandate, would fill that void.
Mr. Raghunathan said the government must draw lessons from the Sterlite Copper episode, the Ford plant closure and the recent labour unrest at Foxconn plant. “The government should have a clear policy on what kind of industries it would focus and permit, apart from putting in place standard operating procedures for foreign companies to align with the local culture. It also needs to have a framework for companies which are exiting to ensure social security to affected workers,” he added.
Mr. Raghunathan said that though the State Budget increased allocation for micro, small and medium enterprises, it was not distributed properly. “The focus should be on helping out firms in the MSME sector which were affected badly by the pandemic or unable to avail themselves of the Union government’s stimulus packages,” he said.
Mr. Ponnuswami underscored the need to upskill MSMEs with a focus on exports. He said the government should look at jewellery exports and getting MSMEs to register on the Union government’s e-Market Place, which facilitates online procurement of common use goods and services by various government Ministries or Departments.
Another industry official said there was a delay in MSMEs getting environmental clearance and there should be a quicker mechanism. He wanted the efficiency of the State Industries Promotion Corporation of Tamil Nadu Limited (Sipcot) improved and its functioning put on a par with that of Mahindra World City and Sri City.
“Most people prefer to set up operations in Sri City because all procedures are completed in quick time and taken care of by them. Maybe the State government can do lateral hiring for Sipcot and make it run like Guidance,” the official said.
Mr. Thenarasu highlighted a slew of measures taken to improve the investment climate in the State, including Single Window Portal 2.0 offering investors 100 digitised services across 24 departments. An additional 100 services would be added by the end of this calendar year.
The State government is also working towards new policies such as life sciences, manufacturing policy, research and development, an updated electric vehicle policy, besides establishing sector- specific industrial parks and country-specific desks at Guidance, he said.
The government is also focusing on attracting investments in the defence corridor.
Bolstering MSME sector
“The State government is talking to foreign Original Equipment Manufacturers so that they enhance sourcing from industries in Tamil Nadu or have more offset partners here. Another effort is to enable MSMEs to graduate to tier-three or tier-two suppliers,” B. Krishnamoorthy, Project Director, Defence Corridor Project, said. “We are creating centres of excellence for this with private partners. Three centres will be operational in six months.”
There are also PSU-centric and consortium-centric measures where joint ventures will be facilitated for both land and air systems. Three such projects are planned in Coimbatore, all for air systems, he said, apart from proposals to have thematic Defence parks, Mr. Krishnamoorthy said.
Hans Raj Verma, Chairman and Managing Director of Tamil Nadu Industrial Investment Corporation (TIIC), said the focus would be on the growth of the existing MSMEs. Sources pointed out that the TIIC had signed MoUs to finance startups and MSMEs in the defence sector.
“Apart from a defence park, Coimbatore is set for a major investment from one of the large-scale companies. In the long-term, these will give a boost to industrial growth,” said M.V. Ramesh Babu, president, Coimbatore District Small Industries Association.
MoUs under previous regime
Mr. Thenarasu said that under the previous AIADMK regime, 165 MoUs were signed with an investment potential of ₹1,06,164 crore and a promise of 2,49,333 jobs during 2019-20 and 2020-21.
Out of the 165 MoUs (excluding Global Investors Meet, 2019), only 52 projects have commenced production. The actual investment realized is ₹7,924 crore and the number of jobs created is 20,363. Effectively, only 32% of the MoUs signed have really taken off. The actual investment realised in these completed projects is only 7.46%. With regard to employment, it is about 8.17% only.
With regard to GIM 2015, only 65% of the proposed 98 projects have been implemented. Among them, only 27.04% of the committed investment has actually been made and only 38.48% of the employment committed has been created. Now, with 7 years passed, there is very little possibility that the rest of the projects will be implemented, according to the information shared by the Minister.
As far as GIM 2019 is concerned, out of 304 MoUs signed, only 184 projects are actually considered industrial projects. Of them, 33 projects have been abandoned. So far, only 49.67% of the projects have been implemented. Again, as against the committed investment, only 26.83% has been made and only 25.66% of the promised employment has been created, according to Mr. Thenarasu.
Even assuming that the investment period ranges from 3 to 5 years and that investments will be made in these ongoing projects, there is a possibility that only 55.12% investment will be made, he added.
The DMK government has also inked deals which will fetch higher investment and jobs from the Chief Minister’s UAE visit, compared with ₹3,750 crore with a potential for 10,800 jobs signed during former Chief Minister Edappadi K. Palaniswami’s visit in September 2019.
Out of the six companies which signed pacts in the UAE with the AIADMK government, only two have invested ₹450 crore. A further ₹650 crore may materialise, according to officials.
Positive FDI flows
Now the attention would shift towards the DMK government and how it brings the MoUs signed by it on stream. On the positive note, according to official data, foreign direct investment (FDI) in the State grew about 41.5% to ₹17,696 crore (about $2.4 billion) in April-December 2021, from ₹12,504 crore (about $1.7 billion) in the comparative period in 2020. Of this, 53%, or ₹9,332 crore, has come in the October-December 2021 period.
“Over the years, Tamil Nadu has emerged as an economic powerhouse, being the second highest contributor to India’s GDP. It is the most industrialised state in the country and a favourable destination for new investments, moving swiftly towards becoming a hub for electronics-related technological transformation. The FY23 State budget is focussed on the mid to long-term priorities for achieving a sustainable socio-economic growth,” Satyakam Arya, chairman, CII Tamil Nadu State Council, said.
( With inputs from T. Ramakrishnan and Dennis S. Jesudasan in Chennai and M. Soundariya Preetha in Coimbatore)
