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Jaya’s jailing will upset investor sentiment, worry business circles

The political turmoil in Tamil Nadu after ruling party head and state chief minister J Jayalalithaa’s jailing will upset investor sentiment, worry business circles.

Business Standard spoke to representatives from industries based in Tamil Nadu, multinational companies which have invested here, other stakeholders and state government officials.

On condition of anonymity, the investor community said there was worried uncertainty among them. On the other side, while acknowledging it was a valid fear, state government say all processes are system-driven in the State and they need not worry about the political developments.

A chief executive officer of one of the large business houses in this city, with interests in both manufacturing and services, said there was a big diferrence from Jayalalithaa’s earlier unseating from the CM’s chair by a court order, in 2001. She had not been jailed at the time and was accessible to the man she nominated as replacement, the same one as this time, O Panneerselvam. Ths time, she is not only jailed but in a Bangalore prison.

Another industry leader said the impact depended on when Jayalalithaa would get bail. Another company head said if she got bail or was even shifted to a Chennai prison, it would ease the situation. The focus of the new CM and his ministry should be to bring their leader out of this mess and till then, it would not be a smooth drive for industry.

A senior official from a foreign embassy said he was putting some proposals showing interest in Tamil Nadu on hold till the political situation stabilised.

None of them have said investments will be diverted to other states, thanks to a favourable system such as availability of both skilled and unskilled labour, pro-industry policies and access to export markets.

One problem for Tamil Nadu is competition for inverstors from neighbouring states. For instance, the Andhra Pradesh government had announced clearance of investment proposals in cement worth Rs 9,200 crore. To which, industry representatives said even if the current situation hadn’t arisen, those investments would have gone there, as the needed raw material, limestone, was available in that state.

“Andhra Chief Minister Chandrababu Naidu is also known for his strengths in attracting investors,” said an industry leader. Telangana and Andhra Pradesh are already competing each other and with neighbouring states for attracting investments. The new political situation offers an advantage to these states, said the source.

A senior government official, while accepting these as geniuine apprehensions, said the worries would be belied. “Yes, the current situation has created some uncertainties among investors and they are valid. But if you look at the procedures of clearance, its all system-driven and any such political developments will not put any clearances on hold for any projects,” said the official.

Highlights

Tamil Nadu one of the top 3 investment destinations in the country; has attracted $ 13 billion.

Total number of foreign companies are around 3,000, including Fortune 500 ones such as Ford, Delphi, Visteon, Hyundai, Daimler, Dell, Nissan, Toshiba, Yamaha, Mitsubishi

Total number of factories 42,288

Second largest economy and one of the fastest growing states in India. In 2012-13, Gross State Domestic Product was $ 145 billion, 7.8% of India’s GDP

In 2013-14, exports from here were Rs 2,15,400 crore, about 11.5% of total Indian exports

Average yearly growth was 9.75% in the past nine years. This year’s target is 11%.

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