Underdog defeats champion; David beats Goliath; Jack slays the giant... These are the stuff of dreams and the story of countless fables. J. Jayalalithaa, Navin Patnaik and Mulayam Singh Yadav may not quite fancy themselves as fairy tale heroes, but the bottomline is that their states are attracting investments by the shovelfuls. In the process, traditional favourites Maharashtra, Gujarat and the other big boys of the investment game are feeling the heat. West Bengal, Madhya Pradesh, Rajasthan and Kerala have also joined the gold rush and the race shows all the signs of being too close to call. Which state will edge ahead of the others? For a ringside view of the unfolding story, read on...

UTTAR PRADESH

A World Bank study on "Investment Climate in up'' this September didn't have too many charitable things to say. It listed high taxes, policy instability, skill shortage, absence of reliable power supply and poor transport infrastructure as impediments to sustained growth. So, why are we so optimistic about the state?

UP has attracted over Rs 25,000 crore of fresh investments since the Mulayam Singh Yadav government assumed charge on August 29, 2003, in such diverse fields as power, information technology and healthcare. The figure rises to Rs 50,000 crore if investment in housing is included (see Graphic). The state government has formulated new policies to facilitate private investments in power, housing and sugar. A new it policy is pending clearance with the state Cabinet.

The results are already showing: Reliance is planning a Rs 11,500-crore gas-based power plant at Dadri, the largest such project in the world, and Grasim is eyeing a Rs 1,000-crore power plant at the same location. Gujarat Ambuja Cements and Apollo Hospitals have lined up Rs 1,000-crore plans each in the power and healthcare sectors.

There is also a new sense of urgency in the way in which the state is setting about its task. When the Uttar Pradesh Development Council (UPDC) came to know that Sahara Computers, a South African company, was planning to set up an it hardware factory in neighbouring Uttaranchal, it immediately dispatched a team of three officials to Johannesburg under its Executive Director Deepak Singhal. "Four meetings over a week (August 11 to 17, 2004) were enough to convince Sahara Computers to change its mind and locate its Rs 250-crore joint venture with Sahara India Parivar in up," informs Singhal.

Sitting around the UPDC table with Amar Singh, who is the chairman, are Anil Ambani of Reliance Industries, M.S. (Vindi) Banga of Hindustan Lever, K.V. Kamath of ICICI Bank, Nandan M. Nilekani of Infosys, Ramdas Pai of Manipal Academy, Pratap C. Reddy of Apollo Hospitals, Subrata Roy of Sahara Group and film star Amitabh Bachchan. Their work ethic has obviously rubbed off on the council.

Some local industrialists are not impressed. "Crony capitalism," they scream. The charge: People who frame policies are also the major beneficiaries. But not everyone agrees. Says Kushagra Nayan Bajaj, CEO, Bajaj Hindustan Limited: "Our decision (to invest Rs 530 crore in the up sugar sector) was guided by factors such as high cane yields and recovery, and its proximity to the western and northern sugar markets."