Regional inequality putting brakes on Haryana’s growth rate

HARYANA has been among the states with the highest per capita income since 2005. It ranked fourth in attracting foreign direct investment from October 2019 to March 2024 (Invest India, GoI). In terms of ‘invested capital’, Haryana is at the sixth position, as per RBI data. Fixed capital as a percentage of the invested capital is 66 per cent in Haryana as compared to 78 per cent in Gujarat, 68 per cent in Maharashtra and Tamil Nadu and 58 per cent in Punjab. The lower percentage indicates higher investment in trade and service activities, the multiplier effect of which is much less than fixed capital investment. It may be one of the reasons that the growth rate of the Gross State Domestic Product (GSDP) in Haryana during 2022-23 was 11.7 per cent, less than that of Maharashtra (14 per cent), Gujarat (13.1 per cent) and Karnataka (14.2 per cent). Even the growth rates of the GSDP of Rajasthan, West Bengal and Uttar Pradesh were higher during 2022-23.
The question is: what factors are dragging Haryana’s growth rate down despite its proximity to the big consumption market of Delhi, a good electricity position and a network of national highways and railways linking it to other states?
One of the reasons is the unequal district-wise development, which brings down the average of the state. This issue was highlighted in the ‘white paper’ of the state government in March 2015. The districts of Hisar, Bhiwani, Charkhi Dadri, Mahendragarh, Palwal and Nuh had just about 20 per cent per capita income compared to the districts of Gurugram and others on the Delhi-Chandigarh National Highway (NH-44). Despite frequent announcements of inclusive development in the state, regional inequality has not changed much in the last 10 years. The state has hardly set up any new industrial estate, industrial model township or food parks in the southern districts. Even the industrial estates and model townships set up before 2014-15 at Rohtak and Barhi are yet to be optimally utilised. New investments in recent years have taken place along NH-44, in the districts of Sonepat, Panipat, Karnal, Ambala and Gurugram. Thus, regional inequality may have further accentuated.
The second reason could be the flawed policies. For instance, instead of capturing the Delhi consumer market, the industrial estates and food parks in Haryana are used by Delhi traders and others without benefiting Haryana and its people. In 2015-16, while surveying some food processing units in the food park at Rai in Sonepat, a few flour mills and dal-processing units reported that they were only doing the work of Delhi traders to avoid taxes in Haryana. Some big traders from Delhi were processing their products with separate processing and user units. Even the labourers employed in these units were from outside Haryana. The big businessmen/entrepreneurs persuade the state government to create industrial estates near Delhi instead of distant places like Charkhi Dadri, Bhiwani, Hisar, Nuh and Loharu, despite relatively cheaper land in those places. Owing to policy loopholes, these districts have lost many old units — big oil-expellers and Delhi Cloth Mill from Hisar, guar and niwar units from Bhiwani, Dalmia cement factory in Dadri, Atlas Cycles in Sonepat, and scientific instruments units in Ambala, which have mostly shut shop or shifted out of the state.
The third key reason is the poor enforcement of law and order, coupled with a negative work culture and the aggressive stance of workers’ unions. Many units in Jind and Bahadurgarh that were set up in the 1980s were closed due to combative union activity. There have been recent reports about the killing of a financier in Rohtak, the murder of a shopkeeper in Hansi and extortion threats in Hisar and other places. Gangs of youth in pursuit of quick money are an obstacle to attracting big investors in the interiors of Haryana. Even a High Court Bench for southern districts — promised in 2014 for the purpose of speedy justice — is still a distant dream. These districts are also located far away from the administrative offices and credit institutions situated in Chandigarh and Panchkula.
Even 58 years since its creation, Haryana does not have its own capital and is being administered from one corner of the state. At least director-level offices can be shifted to suitable central places — for example, agriculture and electricity departments in Hisar, the industry department in Panipat or Gurugram, and that of irrigation at Kurukshetra.
Haryana does not lack entrepreneurs; what it needs to improve is its work culture. Many Haryanvis are well established in businesses and industries in other states, including Sikkim. Several have become big industrialists or traders after migrating to Gujarat in the past 40 years or so. One of the reasons for their rapid growth, they claim, is that having paid taxes to the government, there is hardly any disruption to their business activity by non-state actors. These realities do not get highlighted in the media perhaps on the pretext of promoting the ‘good governance’ image of states, including Haryana. But this is the critical factor that affects investment.
To illustrate this point, I quote the late Rashpal Malhotra, founder of CRRID (Centre for Research in Rural and Industrial Development): “Once Lalu Prasad Yadav, then Chief Minister of Bihar, invited Ratan Tata and asked him why he was not investing in Bihar, which had ample raw material and even a cheap labour force. Tata replied, ‘Sir, industrialists are like pigeons who fly away at the slightest thud.’” If there are continuous thuds and disruptions in a region, investors prefer to stay away.