The Hindu Business Line : Maharashtra, Gujarat fuel India Inc’s dreams

A file picture of the Gujarat Chief Minister, Mr Narendra Modi (left), and the Maharashtra Chief Minister, Mr Vilasrao Deshmukh, at a meeting in New Delhi.

Amit Mitra

The duo emerged out of the same womb in 1960. From day one, their eyes gleamed with steely determination and passion to excel. And, from day one, they went about charting their course towards their common goal. The biggest asset the siblings shared was the rich legacy handed down to them by their mother, the erstwhile Bombay State.

Twin States

Today, the twins — the States of Maharashtra and Gujarat — are competing with each other to fuel the corporate India’s dreams of going global and, in the process setting new standards in industrial and economic excellence.

After India unleashed the economic reforms, business houses briskly expanded operations, even while newer entities and MNCs queued up to hang their shingle in the two States. With both States gifted with natural resources and, more importantly, entrepreneurial prowess, the road ahead looks to open newer avenues for the chugging growth engines.

While Maharashtra surged ahead in sectors like automotive, textiles and pharmaceutical, its neighbour excelled in the realms of power, oil and gas, chemicals and petrochemicals. What drove the two States forward is the business acumen of the people, which was backed by pro-active governments.

Automative hub, Pune

Sample these: Iconic automotive brand General Motors is setting up a new vehicle manufacturing facility in Talegaon, near Pune, in Maharashtra with an investment of over $300 million and production capacity of 1.40 lakh vehicles. Volkswagen is set to invest Rs 2,450 crore to set up a plant at Pune with a capacity of 1.10 lakh units annually. DaimlerChrysler has started construction of its new plant for Mercedes-Benz vehicles at Chakan in Pune, which will roll out 15,000 cars every year. Mahindra Renault, the joint venture between Mahindra & Mahindra and Renault of France is rolling out Logan from the Indian partner’s Nashik plant. Pune is surely emerging as India’s automotive hub.

Gujarat ranks first

Take Gujarat. According to a recent study on the “Outlook for corporate investments”, conducted by the Reserve Bank of India, Gujarat ranks first in India with the proposed investments of $17.8 billion in 86 projects, comprising 25.8 per cent of the total investments of $69 billion received in India during 2007. With five per cent of India’s population, the State accounts for 16 per cent of industrial production, which stood at $44.4 billion in 2005-06. It boasted of a per capita income of $ 630, against the national average of $516.5. Over 41 persons out of 1,000 in the State had cellular connections (National average: 26 out of 1,000) and 118 out of 1,000 persons owned motor vehicles (National average: 57) by the end of that year.

These are but some indicators of the achievements notched up by the two States since they were born in 1960 and the potential they out for investors.

Achievements Maharashtra

Let us take Maharashtra first. With a share of 10 per cent of India’s geographical area, the State contributes over 13 per cent of the National GDP, with a per capita income that is about 39 per cent higher than the country’s. Its services sector accounts for over 61 per cent and its industry base over 26 per cent of the GSDP, while it contributes 40 per cent of the National fiscal receipts. Maharashtra is now planning to prepare a comprehensive master design for the State, for which it plans to contract the services of an international consultant.

Highest FDI

According to the State Government’s Industrial policy document, it attracted the highest foreign direct investment at 22 per cent as compared to other States between 1991 and March 2006 with 3,893 proposals having committed investments of a staggering Rs 56,628 crore. For the last decade, the State accounted for an average of 20 to 22 per cent of total FDI inflow in India.

Says Mr V.K. Jairath, Maharashtra Industries Secretary: “Our policy is that we are committed to own a project that comes up in the State. Our responsibility does not end after signing of MoU — in fact it starts from there.”

In the IT sector, the document claims that 25 per cent of the top 500 software companies in India are based in Maharashtra, while 10 of the top 20 software and services exporters have operations in the State. No wonder that it contributes over 20 per cent of the country’s total software exports.

The State Government has initiated measures to lead the State into the next phase of economic reforms, with emphasis on structural changes in addition to fiscal incentives for the promotion of industry and balanced regional growth.

The new Industrial, Investment & Infrastructure Policy of Maharashtra, unveiled last year, aims at an industrial growth rate of 10 per cent, service sector growth rate of 12 per cent and additional employment generation of 20 lakh by 2010.

The key thrust area that Mantralaya has identified is infrastructure development, encompassing power, roads, railways, communication, airports and ports.

Says Mr Rajiv Jalota, Chief Executive Officer of Maharashtra Industrial Development Corporation (MIDC): “Infrastructure and communication are the key drivers of industrial growth and therefore these are our focus areas.” He said MIDC would give special emphasis on cluster-based development, which would be done through developing appropriate infrastructure based on the needs of specific industries and provision of common facilities. The industrial policy has announced a string of promotional and financial incentives to investors in Maharashtra. For example, new projects, under the small scale, medium scale and large-scale sectors, will be eligible for industrial promotion subsidy (IPS), with the quantum of subsidy linked to the fixed capital investment. Payment of IPS every year will be equal to 25 per cent of any “relevant taxes” paid by the eligible unit to the State or to any of its departments/agencies.

The thrust is also on single-window clearances. Recent surveys have indicated that it took almost 89 days to start a business in India. “The State Government realises that it is necessary to streamline and simplify the process for granting licences and permissions. Effective steps will be taken towards providing single window clearance,” the policy states.

Further, in order to increase the FDI inflow, Mantralaya has already set up a separate cell, which will function as a single point contact for all inquiries from foreign investors. Also a high level committee has been set up to accord fast track clearances for proposals involving FDI.

Special Economic Zones

An aerial view of the Gateway of India.

With Maharashtra accounting for over 45 per cent of the total exports from the country, the State Government has rightfully accorded significant priority to development of SEZs, both multi-product and product specific zones through public-private partnership.

According to Mr Jalota, the State will see the emergence of about 93 SEZs, out of which MIDC would be developing 22 on its own involving 7,300 hectares of area. Five such zones are being developed in joint venture with private partners on 7,000 hectares, while another nine in MIDC area by private developers. “The expected investment on infrastructure and in industries in SEZs will be $22 billion and the expected employment in these zones will be 5.5 million. These SEZs will be fully developed within three to five years,” he said.

Out of the 93 proposed SEZs in the State, IT and ITES zones account for the biggest chunk (32), followed by multi-product/ services (22), textile and bio-tech (16) and auto/ auto components (2).

Airports

Development of airports is also high on the Maharashtra Government’s agenda. The State Government has decided to handover 14 small airports and airstrips in the State to private parties for development and maintenance, with tenders for privatising these airports to be invited soon. Currently, these airports are under the control of MIDC.

Mr Jalota the development of the airports would be on the public private partnership model. Airports at Kolhapur, Latur, and Yavatmal have significant traffic but other airports such as Ratnagiri, Nanded, Osmanabad, Sholapur, Karad, Sangli, Amravati, Gondia and Baramati are being developed.

Potential sectors

According to Mr Jairath, the emerging sectors that would see significant investments in the State include food processing, semi-conductors and retail. In order to ensure this, the government is planning to come out with separate agro-processing policy and infrastructure policy, he said.

Gujarat too is focussing on infrastructure development, although it has remained ahead of other States on this front for the last several years. Only last month the Centre announced sanction of Rs 3,990 crore for development of urban infrastructure in Gujarat, while promising to consider the metro rail project for Ahmedabad.

Like neighbouring Maharashtra, Gujarat too is according significant priority to development of SEZs, to boost exports. Exports from the State account for over 14 per cent of India’s total exports. The State is likely to see the emergence of 51 SEZs covering a total area of 16,500 hectares. In fact, companies like DLG, the Raheja Group, Adani Infotech and Kalika Constructions have submitted proposed to set up IT SEZs with an investment of Rs. 3,500 crore. The key initiatives enshrined in Gujarat’s industrial policy include provision of sound infrastructure, labour law reforms, single window clearance and development of thrust industries.

Indeed, during the “Vibrant Gujarat: Global Investors’ Summit 2007” held in January this year, Mr Ratan Tata, Chairman of the Tata Group, summed up the vibrancy of the financial scene in Gujarat and the businesscommunity’s reaction to it in these words: “You are stupid if you are not in Gujarat.”

Gujarat, already one of the most industrialised and economically vibrant States in India, has, in the three events of Vibrant Gujarat in 2003, 2005 and 2007,investments to the tune of about Rs 8 lakh crore have been promised in the State by investors, Indian and global. Many of these proposals are at various stages of implementation.

And that is the story of how these two States continue to fuel India’s dreams.

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