Modi’s Gujarat best-placed to benefit from DMIC go-ahead (CNBCTV18)

R Jagannathan Sep 16, 2011

The main thing about the $90 billion (Rs 4,32,000 crore)Delhi-Mumbai Industrial Corridor (DMIC), which the Unioncabinet cleared on Thursday, is that it has little to dowith Mumbai or Delhi. It’s more about Gujarat and Rajasthan, and about creating new cities and manufacturing hubs. Reason: Delhi and Mumbai are merely the geographical termination points of the corridor. The corridor’s largest land stretches are in Rajasthan (39 percent) and Gujarat (38 percent), with smaller stretches of 10 percent each in Haryana and Maharashtra. Delhi and Uttar Pradesh share the balance 3 percent of the development hinterland.

If it works, the states which have already hit the ground running to plug into the DMIC’s bounties will be transformed. One state will hit the jackpot: It’s got the ports (41 of them), the land, the infrastructure and the policies to milk the DMIC cow when it arrives on the scene. In short, the biggest beneficiary of the UPA decision on DMIC will be its arch-enemy: Narendra Modi and Gujarat.

Why? Because only Modi has had the vision to position Gujarat right under the udders of the DMIC milch cow. The DMIC – if it lives up to the goals of its dreamers – will mark a strategic shift in India’s development strategy and goals and Gujarat has grasped that before the rest.

Here’s why One, execution of the DMIC successfully will mean abandonment of our rose-tinted view of rural development and village economics and going the whole hog for urbanisation-led growth. Goodbye Gandhi, hello Nehru and Ambedkar. Gujarat is already 43 percent urban. By Census 2021, and helped by the DMIC, it will be more than 50 percent urban. India is currently 31.2 percent urban.

Execution of the DMIC successfully will mean abandonment of our rose-tinted view of rural development and village economics. Reuters Two, DMIC will mean the creation of new planned cities and manufacturing centres that will challenge the dominance of Mumbai and Delhi – though the latter will remain the political power centre. Gujarat is right in the middle of it all – close to commercial Mumbai, and far enough from Delhi’s political machine.

Three DMIC will mean shifting urban decision-making powers from elected municipalities to a corporate structure where a CEO-like figure runs the new urban centres that will come on either side of the DMIC trunk routes. Under Modi, Gujarat Inc is essentially run like a corporation.

Four, political power will shift from rural to urban areas as DMIC prompts major migrations and increase the voting clout of urban areas. Team Anna will find more recruits than traditional vote-bank politicians.

Five, it will create new winners and losers among states. States that re proactive in developing policies built around the DMIC’s potential will walk away with the jobs and investments. Gujarat bids fair to be the No 1 DMIC beneficiary.

Six, DMIC, which is to be funded with Japanese help and expertise, will be India’s first major effort to build a Chinese kind of mega-capability in infrastructure. Gujarat is the only Indian state with China’s growth record. During 2005-10, it grew 11.3 percent – far above the Indian average of 8.5-9 percent.
So what is the DMIC dream really about?
The DMIC’s vision is that jobs and manufacturing prowess are built around the ability to move people and goods efficiently – with related infrastructure. So at the heart of the DMIC are two core investments – a high-speed dedicated railway freight corridor, a six-lane expressway with no red lights, three ports and six airports.

Around this transport axis will be built nine mega industrial clusters of 200-250 square km each, power plants, industrial estates, residential colonies, and related social infrastructure like schools, hospitals, and recreation facilities.

Translating such a huge vision into reality calls for lots of money, intense cooperation between centre and states, and an empowered corporate structure for implementation that can deliver to tight deadlines. A fledgling corporate structure has already been created. Styled the DMIC Development Corporation (DMICDC), it is headed by Amitabh Kant, who is CEO and Managing Director.

In an interview some months ago to DNA, Kant explained the rationale for DMIC in very clear terms. “The basic objective of the DMIC is to drive manufacturing. This is because only then can India hope to keep growing at 9-10% year-on-year. That is the only way India can hope to wipe out poverty. If this growth rate slows down, poverty alleviation will become that much more difficult.”

But to make it all work, many things have to fall in place. Among them: the new manufacturing policy, an urbanisation-friendly land acquisition policy, and a reasonable and quick environmental clearance stance where all stakeholders work to the same drumbeat.

This, in fact, is where Gujarat delivers. A single-point decision-making structure practically lured Ratan Tata to take his Nano project from Bengal to Gujarat. It is why Gujarat has quickly become the country’s fourth auto hub in less than three years of trying – after Delhi-Gurgaon, Tamil Nadu and Maharashtra. In contrast, the UPA’s decision-making structure is too diffused and confused. Despite clearing the DMIC project, there is no guarantee that the rest of the policy support system will be put in place quickly.

Friday’s newspapers, for example, reported that the new Minister for Environment and Forests, Jayanti Natarajan, has put a spoke in the wheel of the new manufacturing policy – which is crucial to the DMIC. Natarajan, who was moved into the ministry in July to replace Jairam Ramesh, who was widely seen as too pro-environment to be pro-development as well, is now proving to be even less of a pushover for a government that is keen to reform and reinvigorate growth.

Meanwhile, Jairam Ramesh has put out a draft Land Acquisition Bill that will raise the cost of land and slow down the rate at which underemployed rural people will move to urban jobs. At $90 billion, the first phase of DMIC’s costs are probably an underestimate. Add the Land Bill’s escalations, and the DMIC might just become unviable in parts.

Moreover, schemes like the National Rural Employment Guarantee Act (NREGA) and the draft Food Security Bill – which are aimed at creating a new entitlement regime in rural areas – may work against the urban thrust of the DMIC and manufacturing policies.

Somewhere, it appears, there is no integration between the UPA’s social and economic growth objectives – and till the twain meet, the DMIC will be difficult to achieve. But parts of the DMIC vision will always happen because of proactive state governments. One government, in particular, has been silently building its own separate challenge to China: Gujarat. With India’s largest coastline, Gujarat has ports to match. So the port part of the DMIC vision is already being implemented in Gujarat. The urban vision is already underway. Remember this name: Dholera. This new port city is barely 28-km from the administrative capital of Gandhinagar (near Ahmedabad) and the state government is planning a 50,000 hectare city, of which nearly 30,000 hectares have already been acquired. The Dholera-Ahmedabad highway will have 16 lanes – the widest in India.

Says Amitabh Kant of DMICDC: “If all goes according to what we and the government of Gujarat have planned, Dholera could be India’s biggest industrial and residential hub. In fact, it could be the world’s largest as well.”