Vibrant Gujarat: Reality Check of Trillion Dollar Show
Vibrant Gujarat : Reality Check of Trillion Dollar Show
Hype and Reality needs balance to retain credibility
No doubt 'Vibrant Gujarat' is a landmark event in India for the world to visit and explore India's economic potential, but the way corporates are making announcements is making fun of the serious event.
Are they really serious in their announcements? Author was part of the first edition of Vibrant Gujarat. I was also responsible for preparing investment profile for few agriculture commodities like Cumin, Isabgole and Groundnut.
After 8th Vibrant Gujarat, I decided to do a quick analysis on what all happened in last 8 episodes. Let me place a quick summary of all commitments made by corporate world from all over the world.
Let us do a reality check about business leaders and their announcements.
Till date more than 55,000 MOUs are signed and corporates have made total commitment of USD 1.53 trillion. (What was India's GDP in 2014?)
Vibrant
Gujarat Edition
|
No.
of MOUs signed
|
Investment
Commitment
|
(in
USD Billion)
|
||
2003
|
76
|
14
|
2005
|
226
|
20
|
2007
|
675
|
152
|
2009
|
8662
|
243
|
2011
|
7936
|
462
|
2013
|
17790
|
230
|
2015
|
21000
|
410
|
Total
|
56,365
|
1,531
|
Total Commitment till date :
|
USD 1.53 Trillion
|
If we do little more analysis, more interesting dimensions will emerge.
Let me do it for you.
Proposed Investment per square kilometer:
Total Area of Gujarat state is 196,024 Sq. km. It means committed investment per square km is USD 7.81 million it means about 50 crore per sq. kms. This will make Gujarat the richest region in the world.
Proposed Investment per person:
Total Population of Gujarat state is 60,439,692 (as per 2011 census). It means committed investment per person is about USD 25,330 or INR 15 lakh per citizen of Gujarat means not a single person will remain unemployed in Gujarat. Infact, with birth certificate, they can issue employment letter. Now, do we really need MNREGA, PDS and BPL schemes for Gujarat. These should be stopped with immediate effect because these people should be required for creating of infrastructure and to run factories by investors.
Proposed Investment per District:
There are total 33 districts in Gujarat; it means average investment commitment per district is about USD 46.4 billion. It is more than total FDI investment in India.
Investment per parliamentary constituency:
There are total 26 parliamentary constituencies in Gujarat; it means average investment commitment per district is about USD 58.88 billion. It means, there is no need for MPLAD fund for Gujarat MPs. Central government should divert this fund to other states.
Now, what is the future of Gujarat?
For every USD 100,000 dollar investment, we need one manager to manage the investment. It means, Gujarat will need about 15,310,000 managers and technical people to manage these investments. It means 1.5 Crores technical people are required. It means whole Gujarat population will be required to manage this investment. Population of Gujarat will add 50% in next 3 years and local demographics will change because people coming from other states will change the local political dynamics the way it has happend in Delhi and Mumbai.
Where is the raw material and market to absorb this production in Gujarat?
We don't know what type of raw materials are required, if it is mines and minerals in that case Gujarat will have many man made lakes to attract tourists.
If investment is in IT and services, in that case Gujarat will need at least 100 smart cities in next 5 years.
If it is manufacturing units for Chemicals and plastics, Gujarat may not be the right place to establish units for all the proposed investments due to lack of raw material, lack of available land, lack of market or lack of skilled manpower.
If it is in hospitals, are we expecting all sick people in Gujarat.
If it is in education, where are the faculty to teach in these new institutes. IIMs and IITs are already facing teaching faculty crunch.
Big question is when existing units are not able to show growth in Gujarat due to lack of market or manpower or raw material. They are investing outside Gujarat and outside India. What will happen to the fresh investment. Look at the stock market performance of Gujarat based Companies in last 5 years. The biggest investor in the Gujarat is struggling to convince the market about their business plans but making major investments in every Vibrant Gujarat event. Should we take these investment announcements seriously?
Why corporates are making such investments in Vibrant Gujarat?
Logically, all the investments must be based on proper feasibility analysis. The announcement of the proposed investment by corporates at Vibrant Gujarat seems to be either under political compulsion or it can be PR activity to get media attention.
Total Population of Gujarat state is 60,439,692 (as per 2011 census). It means committed investment per person is about USD 25,330 or INR 15 lakh per citizen of Gujarat means not a single person will remain unemployed in Gujarat. Infact, with birth certificate, they can issue employment letter. Now, do we really need MNREGA, PDS and BPL schemes for Gujarat. These should be stopped with immediate effect because these people should be required for creating of infrastructure and to run factories by investors.
Proposed Investment per District:
There are total 33 districts in Gujarat; it means average investment commitment per district is about USD 46.4 billion. It is more than total FDI investment in India.
Investment per parliamentary constituency:
There are total 26 parliamentary constituencies in Gujarat; it means average investment commitment per district is about USD 58.88 billion. It means, there is no need for MPLAD fund for Gujarat MPs. Central government should divert this fund to other states.
Now, what is the future of Gujarat?
For every USD 100,000 dollar investment, we need one manager to manage the investment. It means, Gujarat will need about 15,310,000 managers and technical people to manage these investments. It means 1.5 Crores technical people are required. It means whole Gujarat population will be required to manage this investment. Population of Gujarat will add 50% in next 3 years and local demographics will change because people coming from other states will change the local political dynamics the way it has happend in Delhi and Mumbai.
Where is the raw material and market to absorb this production in Gujarat?
We don't know what type of raw materials are required, if it is mines and minerals in that case Gujarat will have many man made lakes to attract tourists.
If investment is in IT and services, in that case Gujarat will need at least 100 smart cities in next 5 years.
If it is manufacturing units for Chemicals and plastics, Gujarat may not be the right place to establish units for all the proposed investments due to lack of raw material, lack of available land, lack of market or lack of skilled manpower.
If it is in hospitals, are we expecting all sick people in Gujarat.
If it is in education, where are the faculty to teach in these new institutes. IIMs and IITs are already facing teaching faculty crunch.
Big question is when existing units are not able to show growth in Gujarat due to lack of market or manpower or raw material. They are investing outside Gujarat and outside India. What will happen to the fresh investment. Look at the stock market performance of Gujarat based Companies in last 5 years. The biggest investor in the Gujarat is struggling to convince the market about their business plans but making major investments in every Vibrant Gujarat event. Should we take these investment announcements seriously?
Why corporates are making such investments in Vibrant Gujarat?
Logically, all the investments must be based on proper feasibility analysis. The announcement of the proposed investment by corporates at Vibrant Gujarat seems to be either under political compulsion or it can be PR activity to get media attention.
I can be wrong but I suggest, it will be worth to study the feasibility reports submitted by these corporates at these flagship events.This may open many new dimensions about business planning.
Economic Implications of these investment announcements:
- This investment should generate operating profit of about USD 150 billion per year to justify viability of the investment.
- This will add about USD 50 to 100 billion additional tax revenue for the state.
- This investment will also need about raw material worth USD 1 trillion.
- How much water and power is required will depend upon what type of investment is committed? I request state government to specify the type of investment committed.
- What about effluent and emissions, will it convert Gujarat into environmental disaster, worse than many cities of China
- This will make Gujarat revenue surplus state and Gujarat state can offer free education, free healthcare and free public transportation to all.
- Per capita income of Gujarat will be highest in the world.
I wish all the best for all the investors those who committed these investments. If these investors are not serious, this will reduce the credibility of these corporate announcements because these corporates also make similar announcements in every state investment conclave.The best part is all political leaders of the state feel happy with this hype but people on the street look at these announcements at modern day joke.
I saw some of the announcements made in Vibrant Gujarat 2015. The following questions came to my mind.
- Do they really have resources to invest and can they justify these investments to their shareholders.
- Are these investment announcements approved by the Board of Directors?
- Are these announcements good for Corporate Governance in the country?
- If these companies are so bullish about their investments why there are not able to make investment so far and why their existing businesses are not showing growth as projected?
In short term, Hype can help in getting attention and excitement but will raise serious questions on the capability of all the players involved.
- Imagine, if these commitments do not happen on ground, who will take the responsibility?
- Corporates will wash their hand by saying they were ready but policy environment or market was not favorable was not conducive.
- What will be the argument of state and central government in coming days? It will be interesting to watch these statements. Please do let me kow when you see any such statement.
- Why so far no status report was issues by the state government for the people of the state. Accountabulity and transparancy is important part of governance.
- Can we have status report of the investments commitment so far in the state?
It is prudent for State government to accept the ground reality and request corporates, please do not make announcements if they are not serious. At least we will know the factual positions and what will happen on ground.
Litmus Test: How many people in this country believes that corporates are serious about their announcements? Can leading industry associations like CII, FICCI etc and knowledge partners like KPMG, E&Y, Mckinsey, etc give assurance that their members and projections are serious announcements. I am sure these people must have credible insight about proposed investments or they are also part of hype creation. Should country take them seriously? Time will tell.
It will be useful if we know the sector-wise investment. This will help students to plan their career because without right skill sets nothing will happen on ground. I request state government should place status paper in public domain to convey the factual position to the country.
I will be very happy even if 10% comes to the ground as investment. This will be great achievement.
What will be the response of government?
Let us wait for Jan. 2017 for update...
What is your comment on these investments?
Do write your views in comments section below..
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