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31 December 2012 Business Modi & india inc

Synergy, Thy Name

Big industry, Modi feed off each other in win-win relationship
Synergy, Thy Name
Synergy, Thy Name

Just before the Gujarat state elections, Narendra Modi gave the nod for the creation of seven more districts in the state. It was a well-crafted move as it gave locals an assurance of better governance, improved the prospects for some tourist sites like Dwarka and, most importantly, met political/corporate ambitions on pushing ahead with varied projects in the new districts.

Modi has been striving for national and international acceptance for nearly a decade now, and this proactive streak with the corporate sector is finally yielding huge dividends. Most of the corporates bigwigs in the state—from Gautam Adani of Adani Enterprises, Nikhil Gandhi of SKIL Infrastructure, Shashi Ruia of Essar Oil, Mukesh Ambani of Reliance, and the powerful diamond merchants’ lobby—are said to have actively worked to ensure a third innings for Modi. It’s reflected in the results too, the BJP swept the six districts which had the highest industrial investments—Ahmedabad, Baroda, Rajkot, Surat, Mehsana and Gandhinagar. Newly industrialised zones like Gandhidham, Mundra and Kutch have also gone completely saffron. 

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Thanks to his weaving an urban development dream, many corporates are willing to overlook his dubious past and skewed development plans (which give little weight to healthcare and other social indicators). “After the ’02 pogrom, Modi used industry as a means to whitewash his image,” says ToI’s Kingshuk Nag, earlier its Ahmedabad edition editor. 

Thus started ‘Vibrant Gujarat’, a showpiece event to woo industries, during which Modi is shown hobnobbing with top Indian honchos and overseas investors. Over the past decade, Modi has given a push to many emerging sectors like chemicals, automobiles, petrochemicals and energy in the state. Today the oil refineries of Reliance Industries and Essar, the ports of the Adani Group, power plants of Torrent, pharma plants of giants Cadila and Dishman, the Nano of the Tatas, they all showcase the state’s big strides in industrial growth. Predictably, these are ranked high among the Modi favourites for special dispensation.

Sometimes, though, the political patronage can backfire. Take the case of the Nirma Group. Modi’s attempt to push through clearance for a cement plant project for the group in ’08 on reservoir land came unstuck after BJP MLA Dr Kanu Kalsaria not only organised local opposition in Mahuva but also took up the matter with the environment ministry at the Centre. But this was a stray incident. Opposition is not the norm in Gujarat where it always pays to have political connections, say observers.

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They point to the case of RIL which for a long time was not in Modi’s good books. That is till he decided to showcase Reliance’s 62-million-tonne refinery in Jamnagar as a success story to attract investments. It, of course, helped that Mukesh Ambani’s relative Saurabh Patel is Gujarat industries minister.

“Nine out of the last 10 years was a golden period for Gujarat doesn’t get sole credit for high growth.”
Bhagyesh Soneji, Assocham Gujarat

Assocham Gujarat Council chairperson Bhagyesh Soneji refutes the theory that political patronage is the reason for the spectacular growth of industry biggies like Reliance, Essar and Adani in Gujarat, saying that even if Modi hadn’t been at the helm of affairs “industries like RIL would have continued expansion in, say, Jamnagar”. At the same time, Soneji feels that “nine out of the last 10 years were a golden period for India in terms of high economic growth, so I will not give Gujarat the sole credit for the high growth (8-8.5 in 2000-01 to 11-11.5 per cent in 2011) in this period”.

Today, the share of industry in the gross state domestic product (GSDP) is 40 per cent as against the national average of just 27 per cent, while agriculture’s share is 13 per cent. Infrastructure is good, say experts. They point to the port facilities, tax incentives in some backward areas and the quake-affected Kutch region, and no hike in power tariffs in the last decade.

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Deven Choksey, CEO of KR Choksey Securities, remarks that the last decade has built upon the past legacy of Gujarat but “it has seen a government which is more proactive in support of industry, which is why there is such cooperation and coordination between the government and corporates. It has helped to create a new business environment.” He cites the example of how Gujarat’s quick response won the Tatas’ investments in Sanand, which has now developed into an automobile hub. Choksey says the Gujarat model of promoting big industry, which in turn leads to growth of ancillary units, is a good, inclusive model.

Others like Comma Consulting’s Rajiv Desai (a PR veteran who led the Congress media campaign in the ’02 Gujarat elections), however, feel that despite attempts by big industrial houses to give Gujarat a Singapore feel in its development model, “the reality is that the bulk of Gujarat has fallen behind in inclusive growth so much so that marginal groups have become further marginalised”.

Echoing similar sentiments, Soneji points out that the benefits of industrial development have not really reached the small and medium units, which were once the standard-bearers of Gujarati entrepreneurship and growth. Today, 22-25 per cent of such units in the state are sick, much the same as across the country ,“as nothing much is being done for them in Gujarat”, she says.

Finally, Modi has been heard boasting that corruption has been curbed. He may well be right where petty corruption is concerned but big money still flows, “only it’s more subtle and restricted to a few people”, says an industry expert. Seen as the leader of the new urban middle class, Modi is now being feted by lobbies in the West thanks to moneybags Gujaratis. We live in a global world, and  patronage knows no boundaries.

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