Gujarat leads in growth, South India needs to catch up: Mckinsey

As a result of its focused growth initiatives, Gujarat has leaped ahead of other Indian states in growth, whereas the states in South India are witnessing a slump in growth, according to a report.

Gujarat has witnessed growth at the rate of 11 per cent as compared to the all Indian growth average of nine per cent, states the report by Mckinsey & Co.

However, South India has seen a slow down in GDP growth rate, despite its overall strong position, McKinsey & Co Partner Mr Ananth Narayan said.

Mr Ananth Narayan was present at the conference “The Next Wave of Growth-South India”, organised by the Confederation of Indian Industry, where the McKinsey report was released.

In the recent years (2005-10), the real GDP growth in Gujarat has been 11.3 per cent as against 11 per cent in Haryana, 9.6 per cent in Bihar, 8.5 per cent in Karnataka, 8.1 per cent in Kerala and 7.4 per cent each in Andhra Pradesh and Tamil Nadu.

Quoting the report, Mr Narayan said Gujarat has achieved leadership in the chemicals industry, with 35 per cent share of all investments in this sector over the past five years.

He added, Gujarat had made use of its long coastline and had announced India’s first state policy on the development of new minor ports.

This has been followed with the “Jyothigram Yojana” for uninterrupted power supply and easing out business creation through a single window clearance system.

The state has also taken steps to market itself as an attractive investment destination through the “Vibrant Gujarat” summits held annually for the past eight years, he said.

He added that industry leaders attribute the slump in the South Indian region to factors such as rising land prices, significant shortage in the availability of labour, infrastructure bottlenecks including port capacity and growing urban congestion in Bangalore, Chennai and Hyderabad, for the slump.

While on one hand goverment policies — particularly on land acquisition — are still an issue, paucity of employees at all skill levels is the main concern for the industry, he said.

The constraint on labour supply and low employability due to lack of skills drives up wage levels. This is growing into a major concern in Tamil Nadu and metro areas of Bangalore and Hyderabad.

Though South India has the highest number of professional college seats, the quality of graduates from these colleges has not been at par with industry expectations, he said.

Overall, talent availability and management is a top priority for South India in the coming years, he said.

Regarding the power generation situation in South India, he said its total power demand is 26 GW base, peaking to 37 GW, while available capacity is 30 GW.

Above all, policy-making and implementation has not been conducive to growth with cumbersome and time-consuming business processes and slow pace of policy execution and project implementation, being the major constraints.

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