Tired of the long delay in getting unhindered use of land for the Nano plant, Ratan Tata has threatened to pull out.  The Bengal government has intensified its efforts to bring about an amicable settlement over the matter, but the opposition (now purportedly being represented by Mamata Banerjee and Medha Patkar) is sticking to its guns. This is all well-known, as is also quite well-known that the genesis of the problem has more to do with inadequate compensation than the farmers’ emotional connect with land.

But another interesting development has occurred around the threats, positions and counter-positions being taken by various stakeholders. Within hours of Tata’s threats to pull out of Singur and West Bengal, states across India responded by offering similar and better facilities for the re-located Nano plant. As of now, Punjab, Uttaranchal, Rajasthan, Andhra, Karnataka, and Gujarat have reportedly invited the Tata group for an alternative site in their state. Given that these are among the more pro-active governments, it would not be surprising if many other states make similar offers in the next few days.  

It is perhaps the first time when states’ have openly and aggressively indulged in competition for large-scale investments. This is a development that is both welcome and worrisome. It is welcome because such competition will only make states more responsive to the requirements of the investor. And worrisome because, if left unhindered, it could significantly and negatively impact state government budgets.

As the Indian economy gets more and more decentralised, and as (thankfully) the Planning Commission steadily moves towards absolute redundancy, action at the state government level will become the critical factor in enabling private sector investment.  Politicians at the state level also now know how important investment is for their long-term survival.  And so don’t be surprised if most states try to open up channels of communications with the Tatas and aggressively woo them for the relocated Nano plant.  Of course this will all be in the name of employment, income, equitable growth, etc. Indeed large investments have many characteristics that individual states can benefit from. But in the end it is all about votes.  

... contd.