Madhya Pradesh Should Aim To Be The Breakout State Of India

In his seminal 2012 book Breakout Nations, the author Ruchir Sharma explained the ingredients which allow a country to break away from the peer set and embark on a path of sustainable and manageable economic growth. Sharma drew upon a long list of enabling factors, including political, legal, economic, and social, to explain how nations can channelise investments in the most productive way possible to transform their fortunes.

Indian states are no smaller than countries elsewhere in the world. At an estimated gross state domestic product (GSDP) of 7,13,676 crore or $106 billion for 2016-17, Madhya Pradesh would have been the sixtieth largest economy in the world if it were a nation. If this estimate holds representing an 18 per cent growth over 2015-16, the per capita income of the state will touch almost Rs 85,000 per year, almost 90 per cent higher than the 2012-13 figure. And yet, despite these spectacular numbers, Madhya Pradesh is unable to shrug off the BIMARU tag. Coined by the sociologist Ashis Nandy, the states of Bihar, Madhya Pradesh, Rajathan and Uttar Pradesh were recognised as the sick states hampering national progress. While the peer group definition was indeed right in the 1980s, Rajasthan has definitely marched ahead of others from the lot. Madhya Pradesh is at the cusp of that break out, and should ensure it detaches itself from whatever economic fate awaits Uttar Pradesh and Bihar in the coming years.

But how does Madhya Pradesh become the breakout state of India? There are significant challenges. A majority of the 75 million people in the state depend on agriculture for livelihood and survival. Many Indian states have large cities, with a single city sometimes acting as the engine for economic growth, housing more than 15 per cent of the state’s population. In contrast, Indore, the fifteenth largest urban agglomeration in India as per the 2011 census, houses barely 4 per cent of Madhya Pradesh’s population. In fact, the top four cities by population – Indore, Bhopal, Jabalpur and Gwalior – account for just about 11 per cent of the state’s population. The state has become the de facto grain bowl of India since 2011 when it surpassed Punjab and Haryana in terms of total grain output.

But even accounting for the high double-digit agriculture growth, the gap between Madhya Pradesh and the Rs 1,00,000+ per capita states is huge. Significant strides made in agriculture in the last few years are absolutely necessary to turn the wheel of fortune but not sufficient.

In the coming years, the Madhya Pradesh government should focus increasingly on promoting specific areas of manufacturing, industry and services to make that decisive shift away from the laggard pack of landlocked northern states.

In his current term as chief minister, Shivraj Singh Chouhan has covered some ground to ensure Madhya Pradesh does not remain a one-trick pony. The chief minister has been hosting Global Investor Summits, the fifth edition of which is scheduled for 22-23 October in Indore this year. He has been going around the Indian metros and foreign lands seeking new investments. A new industrial policy for the Medium, Small and Micro Enterprises (MSMEs) sector has been launched. The chief minister has, in the last few years, managed to persuade IT (information technology) service leaders like Tata Consultancy Services and Infosys to evaluate the state as an outsourcing destination. There have been plans to position Indore as a FinTech destination. The state has invested in some great marketing campaigns around tourism, and backed up these campaigns with customised outreach programmes. But this is only the tip of the iceberg, given the agrarian identity and mindset prevalent in the state.

To ensure that the share of agriculture, currently around 45 per cent of the GSDP, falls below 30 per cent over the next few years, industry, manufacturing and services have to grow at breakneck speed, given that the state will continue to witness strong agriculture growth on the back of the efforts of the last decade. Rather than adopting the ‘spray and pray’ strategy of attracting whoever wants to come to the state, Madhya Pradesh will do well to focus on a few areas of non-agricultural growth, which dovetail well with the existing economic set up.

First, the state should immediately focus on food-processing related industries. The central government now allows 100 per cent foreign direct investment in this sector as of June this year. Madhya Pradesh has moved the needle on agriculture with greater focus on horticulture. However less than 10 per cent of the fruits and vegetables grown in India are processed near the source, and this is a significant area of agriculture produce wastage. The state today has only one big food park, located in the Khargone district; it was inaugurated earlier this year in February. Bringing organised, technology-driven food processing closer to the farm gates can be an immediate area of synergy.

Second, Madhya Pradesh should focus on promoting MSMEs and local industry in the area of renewable power. The solar parks in Neemuch (150 MW, operational), near the Rajasthan border, and Rewa (750 MW, tendering phase), near the Uttar Pradesh border, are among the largest in India. The state has been promoting solar power aggressively and it is well placed to attract further investments. Seeking new investments in developing new solar parks, as well as manufacturing components which can be consumed locally in these parks, should be a high priority.

Third, the state should look to become a hub for R&D in the pharmaceutical sector. This is a big sector for the state, with more than 50,000 people employed in the industry. The state has almost 400 small and large pharmaceutical units with an annual turnover exceeding $1 billion. However, most of the large multinationals and the dominant Indian firms have expanded in Telangana, Karnataka, Gujarat and Maharashtra, which are the traditional industrial states. Given the existing platform, Madhya Pradesh should claw back some of the business. It should certainly be possible to compete with Himachal Pradesh, Sikkim and Goa for manufacturing bases, especially in a post goods and services tax world.

Fourth, Madhya Pradesh has not tapped into its tourism potential in a big way. The oft-beaten tracks of Indore, Ujjain, Bhopal and Khajuraho-centric tourism should give way to a greater focus on the eastern side of the state. Raisen and Vidisha districts, both not very far from Bhopal, house a range of historically significant sites and monuments and can between them provide an alternative tourism track. The Bhimbetka rock shelters, where first human markers were discovered from 15,000 years ago, the Buddhist stupas of Sanchi, the unfinished Paramara-era Shiva temple at Bhojpur with the unfinished parts still left in the accessible stone quarries close by, the unfinished Jain temple at Bhojpur, the Cave of Parvati, the inscriptions dating back hundreds and, in some cases, thousands of years can easily be developed into history lovers’ dream tour. Add the hill station and caves of Panchmarhi, the tiger reserve of Kanha, Bhedaghat in Jabalpur and Amarkantak, where the mighty Narmada originates, and a vivid picture of huge untapped potential emerges. The state has to invest in the upkeep of these sites and monuments, as the Archaeological Survey of India seems to focus only on certain big-name locations without investing time and resources on beaten tracks. Chief Minister Chouhan will have to take the lead in bridging the current divide between the urban and accessible western Madhya Pradesh and rural and neglected eastern Madhya Pradesh. Tourism is the right starting point.

Fifth, and perhaps the most important, Madhya Pradesh needs to make big investments in improving its human capital and human development indices. As per the United Nations Development Programme data, the state has consistently ranked near the bottom of the list of Indian states on the Human Development Index in the last few years. The real change in agricultural economy has not trickled down on the HDI parameters for now. In the 2016-17 Budget, there has been a departure from the usual rural development heavy expenditure pattern. The state has proposed to increase the outlay on school education by 33 per cent and open 2,000 new health centres, including a Medical City at Sanchi using the Rashtriya Swastha Mission allocations. Almost 900 crore has also been allocated to educate the girl child – addressing female literacy and avenues for increasing female workforce participation are burning issues for the state.

Ruchir Sharma warned against bracketing different nations together under labels like emerging; he has talked about the uniqueness of the path each nation takes towards economic prosperity. That has to be the biggest lesson for Madhya Pradesh. The national leadership in agriculture should give the state the confidence to chart its own course on other constituent areas of economy. Niche areas have to be developed at a rapid pace, just like agriculture moved between 2005 and 2011, and results shown quickly.

Chief Minister Chouhan may well get a national role if the Bharatiya Janata Party gets a second term in 2019, but before that, he will have the uphill task of battling the fatigue of a 15-year-old same-party rule in the state election. Irrespective of the results of the two electoral battles down the road, Chouhan has a big opportunity in leaving his permanent stamp on the creation of an affluent Madhya Pradesh – a process he started in all earnest a decade ago. The Global Investor Summit 2016 is just the right platform to plug these holes and create a breakout launch pad.

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