With success stories of entrepreneurship and the expansion plans of MNCs in Gujarat piling up high, there is no way you can ignore the State's rapid rate of growth, says Huned Contractor

If there was one thing riding high during the Business Standard Gujarat Round Table 2012 held in August at Ahmedabad, it was positivity. In fact, this was to such an extent that the Gujarat government made it clear that it would not face any competition in the state in the years to come. "The most important thing for a State is to have a strong foundation of financial stability. Today, Gujarat is one of the most financially stable States in the country," said Saurabh Patel, Minister of State for Industries, Energy and Petrochemicals. Given the undeniable fact that Gujarat's budget plan size has risen from Rs 5,000 crore in 2002 to Rs 51,000 crore in 2012, Patel's statement that in the last five to seven years - because of political stability, clear-cut directions and a properly strategized road map, the State has been able to do better than any other State in the country - was more than justified.

Growth Indicators

The economic growth signs of Gujarat have been impressive with an achievement of an average annual growth rate of 10.4 per cent in the last five years. Gujarat contributes up to 16 per cent of the industrial production of the country and has also mobilised the highest share (12.7 per cent) of investments through OEMs in the country. Given the scenario, sights are now set for the next edition of 'Vibrant Gujarat 2013' to be held in January 2013 which will have a sharp focus on certain chosen sectors as manufacturing, engineering, automotive, gems & jewellery, technical textiles, specialty chemicals, pharmaceutical & biotechnology and renewable energy, among others.

Another indicator of the growth curve that Gujarat has been experiencing is the fact that there are as many as 55 special economic zones (SEZs) in the State covering an area of approximately 27,125 hectares. Compare this to Maharashtra, the next biggest industrial State in India, where, according to an estimate, only 18 of the 104 approved projects are currently operational. Out of the 143 approved proposals, 27 have submitted applications for withdrawal because of unfavourable economic conditions. Adding muscle to the SEZs in Gujarat is the development of special industrial corridors such as Delhi-Mumbai, Palanpur-Sidhpur-Mehsana, Ahmedabad-Dholera, Vadodara-Ankleshwar and Bharuch-Dahej, among others.

The Gujarat Tag

What is interesting to note is that global giants have begun to focus their attention on small pharmaceutical and healthcare firms in Gujarat for the unique products manufactured here. For instance, the world's largest retailer Walmart's toothpaste is manufactured at Sihor in Bhavnagar. Goran Pharma, which produces several other personal care products like hand wash, hand sanitizer, antiseptic, toiletries, shampoo and creams, also supplies products to two of the biggest retail chains in Australia and to companies in the United Kingdom and Germany. According to Hemant Dholakia, Managing Director, Goran Pharma, "This has been possible because of adherence to the best quality standards."

Another example is that of the food industry in Arab countries which relies on Patel Remedies, a Junagadh-based manufacturer of Papain powder, a papaya extract for softening meat, including 'halal' meat. The enzyme in the extract is also used in biscuits, beer, cosmetics and cancer drugs. The latex extract from papaya fruit, called enzymes, are supplied to a company called DSM, which markets the enzyme to the food, beer and drug industries. "We started exporting to some countries on a small scale a few years ago. Today, our exports are worth Rs 100 crore," says the company's managing director Maganbhai Patel. Taking note of such achievements, the Gujarat government is in the process of publishing a coffee table book profiling such companies in the state. The book will be launched and presented to multinationals during the Vibrant Gujarat summit.

Leading in Infrastructure

Analysts who have been studying the Gujarat model of industrial success have repeatedly said that it is the government's infrastructural vision that has made the growth mission possible. Recently, terming the Gujarat government as "fiscally credible", a two-year review of the Indian infrastructure sector conducted by London's financial district lauds the state's performance in implementing public-private partnership (PPP) projects. The review by the City of London said that the legal framework for PPP in the state is "solid" and that the Gujarat Infrastructure Development Act (1999) sets a "comprehensive framework" for a variety of projects.

During a seminar in London attended by leading personalities of India's business and financial sectors, the development in Gujarat was described as "amazing" by Nasser Munjee, Chairman, Development Credit Bank. "Institutionally, Gujarat has a strong system, with a clear delineation of responsibilities between the Gujarat Infrastructure Development Board (GIDB) and the line departments of procuring government agencies. The technical expertise of GIDB is also adjudged to be high," the report states, adding, "The GIDB provides a fair and clear mechanism for the selection of concessionaires and in practice this system typically works well." The Gujarat State Guarantee Redemption Fund (initiated in 2010) acts as a cushion for contingent liabilities arising out of State guarantees, the review adds, and quotes a recent report of the Asian Development Bank that the state is the "best destination" in India for PPP projects.

It is maintaining this lead that has been important for the Gujarat government. Recently, for example, it applied for a grant of Rs 11,000 crore from Japan for implementing various projects related to the Delhi-Mumbai Industrial Corridor (DMIC). During a meeting held in mid-August in Gandhinagar between top officials of the state government, the Centre and representatives of Japan government agencies, the GIDB proposed a number of new projects for Dholera. The development comes soon after Japan's offer of rupee loan of USD 4.5 billion (about Rs 25,110 crore) for corridor-related projects. "Gujarat has pioneer's advantage as it is moving faster than other states," said a senior government official. The Dholera plan is in the fast-forward mode with the State opting for a town planning route.

Textile Sector

Considering that the textile industry of Gujarat has been at the forefront among other sectors, a new and ambitious Gujarat Textile Policy has now been announced to establish the State's unique identity in national and international markets. The policy is expected to attract investment of over Rs 20,000 crore and will also increase the state's revenue and growth rate along with the growth of the textile industry for the rural and urban markets. In the last 10 years, Gujarat has recorded an exponential growth in raw cotton production. As Gujarat's farmers adopted new scientific methods of farming and BT cotton, raw cotton production jumped from 23 lakh bales to approximately 1.23 crore bales. The new policy is to enhance the growth of cotton farmers and ginners by way of better price realisation and to enable them to withstand uncertainties caused due to price fluctuation, nationally and internationally.

Automotive Sector

The scorching pace at which Gujarat has been attracting domestic and international automotive companies to set up their plants in the State is a sign of its emergence as a prime automotive hub. At a recent media conference held in Pune by DSK Motowheels to announce its acquisition of the Hyosung brand of superbikes from Garware Motors Limited, Shirish Kulkarni, director of the newly formed company, said he was exploring land availability for setting up a bigger plant to make the superbikes in either Gujarat or Karnataka. This came as a surprise for many of those present since the DSK Group is prominently a Maharashtra-based entity. The bureaucracy and political mismanagement in Maharashtra, according to Kulkarni, have reached such a messy level that entrepreneurs like him are left with no choice to but to look elsewhere, and Gujarat ranks high.

As far as the automotive sector is concerned, several domestic and foreign automobile manufacturers have either announced plans to establish manufacturing plants in Gujarat or are considering it as a possible location. Those establishing the plants include the US-based Ford Motor and PSA Peugeot Citroen from France, joining India's Tata Motors, General Motors of US, Bombardier of Canada and Asia Motor Works (AMW), a heavy commercial vehicle manufacturer. The State has a bright chance of beating all the other states in the automotive sector. That is because the automotive ancillary hubs are located within manageable distance at Rajkot, Ahmedabad, and Vadodara. There are more coming up in the Kutch and Sanand districts. A precision engineering park will soon be set up in Dahej.

Some of the domestic companies that are considering an entry into Gujarat include Hero MotoCorp, Bajaj Auto and Hindustan Aeronautics Ltd (HAL), a public sector company specialising in the production of aircraft and helicopters. The total installed capacity of Tamil Nadu, mainly around Chennai, is 1.28 million units, and is among the top 10 centres globally for car manufacturing, while that of Maharashtra, mainly around Pune, is 0.61 million units. With the entry of Ford and Peugeot, Gujarat's production capacity, mainly around Sanand, is projected at 0.76 million units by 2014. This will rise significantly if Maruti's production, largely for export, comes on stream.

The establishment of an automotive skills development institute at Sanand on a public private partnership basis by the Gujarat government and Peugeot Citroen is one such example. At the end of the day, this is not just about Gujarat though. The initiative taken by the State would assist India in progressing towards the goal of increasing the share of manufacturing in GDP from 16 per cent in 2010 to 25 per cent by 2022. It's also about realising India' Automotive Mission Plan 2006-2016 which states that India should emerge as the destination of choice in the world for design and manufacture of automobiles and automotive components with output reaching a level of USD 145 billion accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016. As an entrepreneur puts it, "Gujarat is like a genie that is making dreams come true."