Chief Ministers woo foreign investors to their states. The interest is mutual
Sixteen months ago, when Virginia Governor Bob McDonnell and his Maryland counterpart Martin O’Malley visited India on near-simultaneous trade missions, it was a showcase of American federalism at its best. Governors, as chief executives, are largely responsible for running their states economies in the US. Because of the highly decentralized nature of the US system, state leaders like McDonnell and O’Malley have a lot of leeway when it comes to wooing investments and they also routinely compete with each other to attract investors. A case in point is a recent event hosted by the Confederation of Indian Industries in Washington, where as many as nine governors shared the stage. While their presence alone was a big statement on the importance they attach to investments from India, each governor made compelling cases for investing in his or her state. In post-liberalization India, a similar trend may be happening, with more and more chief ministers donning the mantle of being the economic ambassadors of their states. The leader of this pack, at the moment, is Narendra Modi, who has attracted considerable investments to Gujarat from abroad. Many chief ministers are trying to replicate Modis success; among them is Nitish Kumar who has made growth and good governance the centerpieces of his government.
Perhaps the first chief minister to realize the importance of foreign investments was Chandrababu Naidu, who turned Hyderabad into Cyberabad by attracting global IT brands to the city.SM Krishna too had similarly opened the doors of Bangalore to international IT giants. The chief ministers have figured out that, in order to attract foreign investments, they need to create an investor-friendly climate in their states. Naidu and Krishna focused on building IT infrastructure, while Modi scores big by providing good governance and putting in place an efficient administration with fewer red tapes. Most states no longer think that making pitches for foreign investments is the prerogative of the Central government alone, as is evident from the number of trade missions that they sent abroad. In Washington alone, the US-India Business Council (USIBC),the trade group representing American companies investing in India and Indian multinationals doing business in the US, hosted at least seven high level delegations from four states Gujarat, Madhya Pradesh, Arunachal Pradesh and Jammu & Kashmir in just over a year. Two of the delegations were led by chief ministers: Arunachal Pradeshs Nabam Tuki and Madhya Pradeshs Shivraj Singh Chouhan. A third chief minister, Akhilesh Yadav of Uttar Pradesh,is scheduled to be the chief guest at this year’s USIBC annual conference. In fact, this would not be Yadavs first interaction with American business leaders. Earlier,he hosted a USIBC delegation in Lucknow, Barely hours before the USIBC delegation landed in the state capital,another high-profile guest from the US was also in town: World Bank president Jim Yong Kim. The CM sought from the Bank $3.5 billion over the next several years in improving the states dilapidated infrastructure, electricity generation and waste management. In many ways, Yadav and others are borrowing a page from the book of Modi, who has been adept at courting domestic and international investors. No doubt investors are pleased about the new-found enthusiasm of chief ministers to welcome them. Most businesses find not having to deal with the bureaucracy in New Delhi very refreshing. Indias license raj may be history in theory, but many international business leaders find that, in practice, it is very much alive and kicking. So from the investors standpoint, by dealing with states directly, they can save a lot of time and money.