Job creation and production will lag investment, and so the data can give only limited indications at this stage. The program’s target is 300,000 jobs across all parks<sup>36</sup> , as well as 350,000 indirect jobs. This translates into a target of 230,000 direct jobs for the subset of parks managed by IL&FS. In those parks 42,000 jobs have already been created, or 19% of the end-state target, which is promising given most of the parks are only now commencing production.

The crucial question remains whether (or how many) investments would have been made (and jobs created) in the absence of the policy and the public money spent, in other words, the question of “additionality”.<sup>37</sup> This might be posed locally, i.e., whether local entrepreneurs would have expanded anyway, or nationally, e.g., if investments which appeared new locally resulted in fact from crossstate raiding of firms. Unfortunately, the data available is insufficient to serve as a means to probe this question at the moment. The authors are not aware of an analytical technique that would yield a rigorous answer, even with a more complete dataset. As such, anecdotal evidence can, at this stage, only provide indications. In that regard, discussions with IL&FS and entrepreneurs suggest however that around two-thirds of capacity in the park is indeed additional.

While there would be an incentive for them to report this, individual entrepreneurs indicated, under repeated probing, that they would not have expanded or created their firms without the scheme. Some were already active in upstream parts of the value chain, such as machine sales, and entered the downstream segments through a park they came to know. Others had existing sites which had reached capacity and for which they said they had been struggling to find suitable expansion space. The machines visually observed in the park were new or of recent vintage, from high-end capital goods producers in Europe and the Far East. This was noteworthy in the weaving segment in particular, since textile weaving in India is little mechanized versus comparator countries, an acknowledged constraint on the sector’s growth.

Nevertheless, we are conscious this does not amount to proof that new investment would not have happened anyway, though it should be noted much of the investment, in both parks and machinery, took place in a period of falling macroeconomic investment rates, particularly in manufacturing. Private investment growth fell 6.2 percentage points and manufacturing growth 11.8 percentage points in the period<sup>38</sup> . In the same timeframe the textiles sector was widely reported to be undergoing difficulties, with reports of rising defaults and struggling exports.

In terms of public-private investment ratios, early indications are that the grants are relatively efficient. Rs. 7.4 lakhs (~ USD 15k) have been disbursed so far per job created in IL&FS parks (though no jobs have been created yet in 7 of these 30 parks), and, if the final targets are met, the final cost would be Rs. 1.1 lakhs (~ USD 2k) per job. Similarly, if the targets are achieved labor productivity in the IL&FS parks would be Rs. 20.3 lakhs (~ USD 40k), compared with estimates of approximately Rs. 1.2 lakhs for the Indian textile & garment sector in 2005-2006, the most recent figures available.<sup>39</sup> While, as mentioned above, the parks seem on track to meet their jobs targets, the current absence of production data prevents an analysis of whether the productivity targets are similarly in reach. One interesting observation is the especially high productivity target for Gujarat

> 36 The approximation remains the same whether the 2 IL&FS parks cancelled are not accounted for or not

> 37 Formally, transfers of capacity into the parks are forbidden.

> 38 Authors calculations from World Bank and OECD national accounts data for the period from fiscal year 2005/2006 to fiscal year 2011/20112. Private investment is measured as private gross capital formation in current rupees (the data was not available in constant rupees), while manufacturing growth is measured in constant rupees with base year 2004/2005.

> 39 Economic Services Group, National Productivity Council (2010). Productivity & Competitiveness of Indian Manufacturing Sector: Textiles & Garments. Report submitted to the National Manufacturing Competitiveness Council, Government of India.

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