June 9, 2018
Image credit : Illustrative image
Chennai : It is not that just big investors are avoiding Tamil Nadu, a state seemingly in turmoil, even the small entrepreneurs are finding the going tough. At a rough estimate, investments worth Rs 25,000 crore have moved out of Tamil Nadu with the investors citing this or the other reason officially.
If political turmoil since the death of former chief minister J Jayalalithaa scared away investors from the state, an aggressive poaching from neighbours – Andhra Pradesh, Telangana and Karnataka – made the investors to rethink their locational preferences both when it came to expansion of capacities or launching new projects.
Opposition leaders estimates that Andhra Pradesh itself attracted mega investments to the tune of Rs 25,000 crore from industries like Kia Motors, Bharat Forge, Ashok Leyland, Apollo Tyres and others. Some of the investors were initially looking at Tamil Nadu, but they eventually decided against and preferred to go elsewhere.
When it came to the micro, small, medium enterprises (MSME) the situation is worse.
Tamil Nadu government has admitted that in just one year, 2017-18, nearly 50,000 MSMEs had shutdown in the state. The closing down SMSE that generate bulk of manufacturing sector jobs is an indicator of how well the economy is doing besides adding to the workers’ woes.
The government admitted in a policy note tabled in the state assembly that there has been a reduction of registered SMSE units by 49,329 units. The number of people employed in this sector also recorded a significant drop – by over five lakh. As per the government data, the number of people employed in the sector is down by 5,19,075 to bring the total employed to 13,97,619.
The policy note 2018-19 said that the number of number of registered MSME units stood at 217981 in 2017-18, down from 267,310 units in 2016-17.
Investments in this sector also fell to Rs.25,373.12 crore in 2017-18 from Rs.36,221.78 crore.
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Industry sources describe it as the worst scenario in over a decade. Issues connected to GST, lack of orders and refusal by banks to lend to SMSEs largely led to this scenario. The big corporates also contributed to the mess by delaying payments for the work done by MSMEs, hurting them more.
Coming at a time when industrial climate in the state is under a cloud, the closure of SMSEs is bad news for the state, industry sources said.
“Delayed payment by big corporates for the goods supplied is a major issue faced by the MSME sector and GST related issues only added to the problems,” a trade body official said.
Input costs had risen, and the real estate prices overshot to such levels that they began piching the MSMEs.
Then the attitude of the banks, after Nirav Modi and NPAs, has also become very difficult and they insist on collateral though the schemes do not insist.
The state is hopeful that some big investment talk, made during the Global Investors meeting in Chennai two years ago, becomes a reality and Tamil Nadu can attract Rs 45,000 crore investment, mooted in the MoUs signed during that event.