Manpreet Singh Badal, finance minister, Punjab, has claimed that Punjab is on the path to recovery. This is evident from a 25% increase in its plan size during the last two years. Punjab’s plan size was about Rs 4,000 crore in 2006, Rs 5,111 crore in 2007 and Rs 6,200 crore in 2008. Talking to FE, Badal said the government was targeting a growth of 25% per
annum. He, however, agreed that the ideal plan size of
a state like Punjab should
have been about Rs 15-kcrore.
Badal said in the first five months of 2008-09, the collections under VAT had shown almost a 40% growth, the highest in the country . The latest report of the Centre for Monitoring Indian Economy (CMIE) also says Punjab is emerging as a preferred destination for investment.
The CMIE report refutes that only some real estate projects had come to Punjab by saying that maximum investment had come in manufacturing, followed by services, electronics and construction. The report adds that FDI flow to Punjab is also significant as 49% of the share in FDI had come from LN Mittal Company in a single project of about Rs 2,000 crore in the power sector,besides other investment from NRIs.
The report states that the manufacturing, textiles, chemicals sector along with the paper industry had attracted maximum investment. In the services sector, IT and telecom accounted for a greater share while in infrastructure, road projects, construction and housing projects took the lion’s share followed by shopping malls.
Badal’s observations and the CMIE report are in complete variance with the joint study conducted by KAF and Ficci on ‘State-level reforms: Increasing investment in Punjab,’ suggesting that Punjab was no more a favoured destination for entrepreneurs.
The study says while 62% of the respondents shared a pessimistic view of Punjab as an investment destination, only 9% were optimistic while the remaining took a neutral stance. This was substantiated by 52% of the respondents, who felt that the industry is facing difficulties. Only 29% participating companies claimed they were doing ?reasonably to extremely well? and 20% were even worried about their survival. Also, 53% said it was extremely difficult to start a business in the state while 33% felt it was ?moderately difficult.? Also, the state stood very low on other parameters on investment climate. While 48% felt that the state’s industrial policy was bad, 71% felt the same for the attitude of government officials. The study was based on an interaction with industry captains across the state and feedback on business environment, infrastructure conditions, land and labour availability, tax related issues and procedural hassles faced by the industry.
The study report came within a couple of days after Assocham released its report on Punjab, suggesting that Punjab was losing about Rs 3,000 crore annually, on account of free power to the farm sector. The Assocham report also suggested that the funds could have been diverted towards other economic development of the state.
When asked, Badal told FE that Punjab fell short by about Rs 3,000 crore, in funding its education and health schemes but said that doing away with free power is not the answer. He said that in time, people might accept his views on phasing out subsidies in any form. As far as special concessions to different states are concerned, they would be pass? by 2010. By then, VAT would give way to GST, in which, states would have a major share, he added.