Several states are wooing Tata Motors after its bold decision to move the Nano plant out of West Bengal. They will undoubtedly offer the company incentives to close the deal.
Critics do not like such competition between states to attract investment. They say that it constitutes a race to the bottom: Governments give too much away in a bid to attract large projects. We have few such worries. Tax breaks alone rarely do the trick. States are forced to build infrastructure, invest in education and maintain industrial harmony to attract marquee projects. So, such competition between states can be a catalyst for reforms and better governance.
Yet, it is also a good idea for state governments to tell citizens the incentives they have offered an investing company.
One positive from the Singur controversy is that West Bengal made public several details of its deal with Tata Motors—subsidized loans, cheap power and low lease rents on land. Such disclosures should become standard practice for the benefit of taxpayers and citizens.