Centre should come up with action plan to evenly distribute industries across States: Standing Committee

The Standing Committee on Finance has recommended that the Government consider an action plan to evenly distribute industries across all States, for “more balanced and equitable economic development”, it said in a report submitted to the Lok Sabha. 

This comes at a time when the Congress has accused the Centre of being “biased” against opposition ruled States and forcing new investments to move out of them. 

The Standing Committee on Finance is chaired by Bharatiya Janata Party MP from Odisha Bhartruhari Mahtab. In its report, the Committee also pointed out that the Government’s disinvestment plans had not progressed since they were announced and that the investment rate in India needed to be higher than it currently is.

“In the context of industrial policy, the Committee note that while industry is a State subject, the Central Government’s initiatives are vital,” the report said. “Therefore, the Committee recommend the Government to consider an action plan for the even distribution of industries across all States for more balanced and equitable economic development.”

Congress general secretary in-charge communications Jairam Ramesh on August 14 took to the social media platform X to accuse the Central Government of approving investments by companies only if those investments are moved out of Opposition-ruled states. 

“The PM speaks of competition among states that will make India strong,” Mr. Ramesh said. “But if the umpire is so blatantly biased, the competition becomes a farce.”

The Committee also highlighted the Centre’s Public Sector Enterprise (PSE) Policy, which envisaged that loss-making public sector companies in non-strategic sectors be considered for privatisation or closure, with the aim “to promote fiscal prudence and efficient resource allocation”. 

“However, not much headway has been made in this regard as the proposal for disinvestment of any non-strategic CPSE has not been approved since the guidelines were issued in December 2021,” the report noted. 

The Committee recommended that the Government accelerate the implementation of the PSE Policy by speeding up the process of identifying and seeking approval for the disinvestment or closure of non-strategic, loss-making CPSEs. 

The Committee also noted that the Central Government currently assists States in this process by offering incentive packages from central funds to those that undertake similar reforms for their state-level PSUs. 

“The Committee desire that the incentive package may be reviewed to make it more attractive and effective for States to participate in the process,” the report said.

Further, the Standing Committee noted that the investment rate in India “must increase to around 35% of GDP from the current 31%” in order to achieve the “ambitious” growth target of 8% annually for at least a decade.

It acknowledged that financing this investment would be challenging in this current global environment, but recommended that tailored fiscal reforms be promoted in highly indebted States to improve their fiscal health while maintaining their capacity to invest in critical infrastructure and social development.