Ground realities

This time every year, Outlook Business does a reality check of how the economy is really faring — not through numbers that the government’s statistical department pushes our way, but by sending our reporters across the country to get a first-hand understanding of the issues facing business and economy.

Last year, we reported from eight industrial clusters on the state of business there. This year, we bring to you reports from the five richest states that collectively contribute about 45% to India’s GDP. Not surprisingly, the problems with our economy are not as bad as we thought — they are much worse. For instance, the social schemes everyone praised as the UPA government’s biggest success is now being flagged as the biggest threat to business. It seems people are content to lead a comfortable life in penury rather than take up factory jobs, which is resulting in an acute shortage of labour and escalating costs. While the right level of wages can always be debated, what we are seeing is how social schemes with financial incentives unrelated to productivity can hamper the economy. Rising labour costs are a major issue for business and are raising serious questions about our competitiveness. 

Apart from common issues that plague every state, each state also has a different story to tell: for instance, Tamil Nadu is doing a good job of attracting big multinationals and service companies, but is blamed for being insensitive to the ailing health of small businesses. The richest state, Maharashtra, is losing its lead to neighbouring Gujarat. In Uttar Pradesh, industry is disillusioned and is pinning its hopes for better policies on the just-elected government: The future looks hazy

In other stories, we have a feature on the power situation in the country, which is finally coming to a boil. Tariff increases look inevitable but whether state governments will bite the bullet is still a question. This budget season, we will bring you lots more on where the economy is headed.
Keep reading.