When the National Council of Applied Economic Research came out with its State Investment Potential Index 2015, the idea was to address the opportunities that lie in Indian states. The states are, after all, competing with each other to attract investors and become Vibrant Gujarat or Happening Haryana or.... N-SIPI, as they called it, measured each state's investment climate to track it over time. Effectively, this index will reflect the outcome of changes happening on the ground, in the states, to woo investments.
The factors that drive this were pinned down to labour, infrastructure, economic climate and political stability and governance. But this time around NCAER came up with, what it calls, “the fifth pillar”, the earlier four being the other four “pillars”. While the four could be measured, the fifth one comprises perceptions. How does one measure perception? They went with response-based surveys.
And so, N-SIPI 2016 has two versions: one based on four pillars,without perceptions, and one based on five pillars—with perceptions factored in.
Gujarat ranks first, taking into account perceptions. People responding to the survey say yes, we see it as an investment destination. Leave the perceptions, and look at measurable ground realities. It is Delhi that tops.
Andhra Pradesh is perceived as a good state to invest in, but drop perceptions and it does not count among the top 5 states. Goa, on the other hand, is not at all perceived to be a great place to do business in, though people may love the place for fun, and more fun. But this small coastal state ranks fourth in terms of the four measurable pillars.
The lesson for Goa is that perceptions not just count, but are important. It is not enough for one to do well, it is important for one to be seen as doing well. Just as justice.
If perception boosted Narendra Modi's chances ahead of the Lok Sabha elections 2014, it is what Manmohan Singh—as prime minister—said had tarnished the image of his government. Famously, he said that history would judge him more fairly, leaving it to be inferred that he had become a victim of perceptions.
But Singh mentioned perception in yet another context. While the general perception was that the Congress party had never been able to run a coalition government, it had managed to complete the coalitions, not one but two terms, he said.
Perception counts so much that perception management is an important and fast-growing field. And it is not just image management. That is something the prime minister is slowly realising. For, perceptions are based on performance that is both, visible and measurable. The performance must also be credible. And more people must buy it.