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Vol. XXXII No. 6, July 1-15, 2022

Growth Plans for the State

-- by Unnikrishnan A.R., Managing Director, Saint-Gobain India ­Private Limited

By 2030, Tamil Nadu, plans to emerge a trillion-dollar economy and will become the richest state in India. At that value, she would be five times the India of 1991 and as big as India in 2007. Two areas, namely Infrastructure and MSME, are central to this giant leap forward.

Infrastructure

Examples of infrastructure include transportation, telecommunication, power and water supplies. Tamil Nadu’s infrastructure is reflected in the following.

City roads are getting congested with every passing day. A lot more flyovers are needed. Lack of mass transport connectivity creates traffic chaos. While industrial areas are developed, adequate social amenities must be designed in the vicinity. This and not proximity to Chennai, will then become the USP.

Most companies export through Chennai, Ennore and Kattupalli ports. All three face infrastructure issues leading to delays and higher costs.

Chennai has a domestic cum international airport, housed in the current heartland of the city. This is unlike Bengaluru and Hyderabad, where thev are located far away from the city thus allowing these airports to be more spacious and extravagant.

Power cost in TN for the industry is high. Thanks to wind and solar renewable sources of power, both abundant in the state, Tamil Nadu can offer one of the lowest cost of power to industry.

Climate change and general apathy are bringing Chennai close to a manmade disaster, of water shortages. The city’s average rainfall is almost twice that of London’s. Yet two years ago, it became one of the first major cities in the world to run out of water. As the city grew, vast areas of the surrounding lakes and ponds disappeared. In the last 125 years, Chennai’s water bodies shrank from 12.6 square kilometres to about 3.2 square kilometres. According to Anna University, by 2030, 60 per cent of the city’s groundwater will be critically degraded.

What must the State do right by 2030?

TN must develop infrastructure at a faster pace to match those existing in the western world.

Roads are what impress a visitor. Create top-quality roads inside the city and keep them clean and maintain them well. Bring in accountability for contractors if streets break down within a specified period of construction. Engage third-party service providers to keep the city spic and span.

Work with global project management skills and make the metro completely functional by 2028. Bring in international experts in project management, if required.

Picture Courtesy: The Hindu.

Implement a user-friendly mass transport network along the highly-industrialised corridors to enable staff to commute fast. This would mean seamless travel to Siruseri, Chengalpet or Gummidipoondi.

Rationalise the Metro train fares to reasonable levels, as it is twice as expensive as a bus fare. Once people are accustomed to the comfort, travel volume can pick up to capacity and the tariff can be increased gradually.

Road connectivity to ports needs to be improved and other transport modes explored. Establish CFS near the industry clusters. Expand port facilities and set up a transhipment hub like Singapore. Convert the state itself into a massive logistics hub. The work in the port should be simplified, streamlined and paperless. Make extensive use of the long coastline.

Replace old coal power plants and move towards renewables. Address the availability of Natural Gas at internationally competitive prices. The state has tremendous potential to emerge a manufacturing hub for renewable energy. In Odanthurai village, the Panchayats have put up their solar plants. Encourage rooftop solar in a big way.

The state must practise rain water harvesting as a religion. Water-saving and recycling are equally important. Execute the plan to restore some temple tanks and build hundreds of new ones with green slopes throughout the city to absorb and filter heavy rains, recharge the groundwater and store water for use during dry months.

Encourage people to de-crowd Chennai. Let companies set up units outside and bring development to other cities. Implementation of the smart city project in these locations can be an excellent first step in improving the living conditions. Chennai lags behind in living conditions and implementing innovative city projects can help.

In TN, land availability is emerging as the first criterion for setting up the industry. Develop connectivity to the hinterland ports before buying and developing land for new industries. Land price is so prohibitively high that MSMEs can’t afford these and large sectors cannot function without MSMs supporting them.

Rebuild urban spaces, plant trees and make the environment lovely to live in. Investors will invest if they find clean surroundings.

Micro, Small and Medium Enterprises

Micro, Small and Medium Enterprises (MSME) constitute a vast majority of the industry mind space. They have a crucial role in building an economy because they are home to start-ups. For that, they need support from the ecosystem. What goes in their favour is that they can quickly adapt to proven practices. Also, start-ups, the cousins of MSMEs, are hotbeds of innovation. MSMEs face problems articulated below.

Many companies follow archaic production techniques and do not have access to state-of-the-art technology. This has led to operational inefficiencies and management issues and stymied their growth plans.

Several of them are unaware of the incentives offered by the government to aid CapEx and working capital requirements like capital subsidies and interest equalisation.

MSMEs find it difficult to access resources, including top-flight human talent. The pay is not at the leading edge and does not attract the best people to work for them. Bankers find them too risky to lend and customers have serious trust issues without a strong brand.

What must the State do right by 2030?

1. Corporates must support MSMEs by taking them into their supply network and work closely to transfer best practices. Skill sets required for IoT, ML and Robotics should be made available for large companies and companies along the supply chains and vendor networks.

2. MSMEs must:

a. Employ graduate ­engineers and pay them handsomely. Hire competent managers to transform into a professional company.

b. Go totally online, adopt new technologies, accept payments and foster in-house innovation.

3. Government must help MSMEs by:

a. Facilitating growth by providing access to local and global markets, offering assistance for innovation and assuring money for expansion.

b. Creating a globally competitive MSME pool by providing the required business support infrastructure.

c. Establishing a cluster purchase platform to pool in requirements from multiple buyers and place an order with the supplier. This will provide economies of scale.

4. Depending on the sub-segment to which MSMEs belong, the nature of support from the government should be different:

a. Early-stage start-ups (those in the proof-of-concept stage) need cultural and education ecosystems that foster entrepreneurship.

b. Established successful start-ups (those with a minimally viable product) need processes, talent and money access.

c. Growing medium-size companies (with business models with a competitive edge) need access to foreign markets, increased operational efficiency and technology adoption.

5. Some activities the government can undertake are:

a. Promote start-up hubs, including branding a city. The plan should be 100 startups a year.

b. Provide venture-capital funds (VCFs) to start-ups as governments look to these startups to boost innovation and growth.

c. Launch scale-up programmes that help MSMEs’ access international finance, brand building, global networking, consulting and mentorship.

d. Develop a one-stop platform to access any government service, programme and data. Make them a marketplace for business opportunities and provide links to financial institutions, advisers and legal services.

These are just a few dimensions that need a multipronged approach to make the state a destination of choice. By 2030, the state can be not just a $1 trillion economy but TAMIL (Talented, Attractive, Modern, Innovative, Limitless) Nadu in its true sense. – (Edited excerpts from the document Enterprising Tamil Nadu brought out by the CEO Forum of CII). Courtesy: Industrial Economist, March-April, 2022.

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