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Several factors contribute to making a state an attractive investment destination. Major factors impacting evolution of industry in Gujarat are:
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Proactive policies: The policy the State Government adopts towards a sector directly affects investment. For instance, the investment in infrastructure can be related to the government policy seeking private investment. This has given the state a head start in the sector.
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Availability of natural resources: CCertain industries like petrochemicals have a high dependence on availability of natural resources. The recent discoveries of gas reserves have provided a fillip to the industries in the state.
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Capability: The gems and jewellery industry in Gujarat relies on the skilled manpower available in the state. The state is a leader in terms of labour productivity. This has been a major factor enabling the success of Gujarat in sectors like engineering, petrochemicals and gems and jewellery.
Based on an assessment of the above factors, some of the industries with
potential for investment and growth in Gujarat are depicted in the graph.
This is a qualitative assessment to highlight relative attractiveness of
different sectors. A case by case analysis is necessary before investment
decisions are made.
Source: KPMG analysis
Key industries
Chemicals
Gujarat contribute about 58 per cent to national production of chemicals (2005-2006). it is the highest
contributor to total national production of petrochemical products. Its chemicals and petrochemicals industry account for 60.3 per cent of state’s total industrial production. It has over 3,12,782 registered Small Scale Industrial (SSI) units focusing on production of chemicals (March 2007). It is the highest producer of major chemicals, including alkali, g p j , g , and organic, inorganic, pesticides, dyes and dyestuff. It has 1,867 factories manufacturing chemical products employing over 0.8 million people (2004-2005). Major companies in Gujarat are Reliance Industries, Nirma, Lanxess ABS Ltd., Gujarat Alkalies and Chemicals Ltd. (GACL), Gujarat State Fertilizer Company (GSFC) etc.
Gems and Jewellery It contributes 90 per cent of total diamonds processed in India and has around 10,000 units in Surat. Eight out of 10 diamonds in the world are polished in Surat. It is the world’s second largest producer of gold jewellery. It has the largest5 contribution to the total national jewellery of almost 85 percent. The state boasts of its highest labour productivity in the jewellery sector in India. The palce is worldwide popular for production of unique hand-made silverents (85 per cent of total silver jewellery production of India). It contributed 80 per cent to national diamond exports (2004-2005). it laso has some of the most popular institutions such as Indian Diamond Institute, Gujarat Hira Bourse, Gems and Jewellery Export Promotion Council.
Mines and MineralsVast reserves of limestone, bauxite and natural gas have enabled the mineral-based industry in Gujarat to flourish. Today, this sector accounts for 12.4 per cent of the total sales by industries in the state. Processed minerals such as kaolin, chalk, fire clay, bentonite, silica sand are consumed by glass, ceramic, plastic, paint and rubber industries, which are mostly small-scale in nature. Gujarat's advantage lies not just in the availability of raw materials but infrastructure, skilled manpower and natural gas.
Mining clusters have flourished in Junagadh, Kutch, Bharuch, Vadodara and Mehsana districts and small-scale entrepreneurs have made major inroads into the processing of mineral resources. They export low-grade bauxite, cement clinker, decorative and dimension stones (e.g. marble, granite, sandstone) to south Asian markets.
The State Government has been actively promoting the development of clusters within this sector. The idea behind it is to promote new businesses, which will process these raw materials and develop products that will fetch a better price in international markets.
Textiles
It is the highest contributor of man-made fibre (31 per cent) and man-made filament yarn (38 per cent) in the country. It contributes 12 per cent to national textile exports; over 40 per cent of country’s art-silk fabric produced at Surat. Over 35 per cent of fabric comes from organised sector and 25 per cent fabric from the decentralised power loom sector is from Gujarat. Gujarat is Asia’s largest denim producer ( Arvind Mills).
It has the ighest number of state-owned looms for cotton and man-made fibre (6,888 as on March 31, 2006); and second-highest number of privately owned looms (11,963 as on March 31, 2006). ith as approximately 3 million spindles in the cotton/ man made fibre mills
Agro and food processingAgro and food processing sector has a significant share in national production of principal crops. It has
the highest production of groundnut (3.39 MT), cotton ( 6.77 MT) and the second highest production of onion (2.13 MT0. It has a strong marketing network and its annual average growth rate – 24.11 per cent (2001-2005). It has nearly 204 market committees, 193 main yards and 207 sub-market yards. The state has significant number of well established food processing units with 3,700 small scale industrial units. There are around1,875 working factories and 150 large and medium scale units.
Dairy sectorGujarat has 13 district milk producers’ unions and a vast network of 12,991 milk cooperative societies having 2.5 million members. Its total milk production is around18.97 million litres per day. National Dairy Development Board (Anand) is involved in promoting, financing and supporting milk distribution organizations in India.Gujarat Cooperative Milk Marketing Federation (GCMMF) a cooperative dairy giant, sells Amul and Sagar brands of dairy products through 5,00,000 unorganised retailers and 3,000 distributors. GCMMF has clocked a turnover of US$ 1.05 billion during fiscal 2006-2007 to become the first billion dollar cooperative in India.
Engineering and Auto
It contributes 15 per cent of total industrial production in and over 9 per cent to national engineering output to GSDP It has an average annual growth rate of 15 per cent. It has more than 600 medium and large sector units and over 75,000 small scale units and 30 engineering product clusters. Kutch is the third-largest steel hub in the world Brass parts cluster at Jamnagar has over 5,000 small units and meets the entire requirement for brass parts in India. General Motors has set up its automotive manufacturing facilities in Gujarat giving boost to ancillary industry.
Source: CMIE
Pharmaceuticals and biotechnology
Gujarat accounts for 28 per cent of national pharmaceutical production (2006-2007). It is the first state to manufacture APIs and finished dosage forms. It has 902 allopathic manufacturing units and 2,122 contract manufacturing units. Gujarat accounts for exports worth US$ 1.4 billion (2006-2007). It has the maximum number of clinical research organizations in India. Its academic and research institutions provide over 4,600 technically-skilled manpower per annum. India’s largest biotech park of 700 acres being developed at Savli, Vadodara.
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Major foreign direct investment in the state
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| Company |
Country of origin |
Segment |
Investment
(US$ million) |
| Royal Dutch Shell |
Netherlands |
Energy |
600 |
| ABB |
France |
Petrochemicals |
500 |
| E.I. Dupont |
UK |
Chemicals |
NA |
| General Motors |
USA |
Automobile |
185 |
| Bayer |
Germany |
Chemicals |
NA |
| AT&T |
USA |
Automotive |
NA |
| GE Plastics |
USA |
Plastics |
NA |
| British Gas |
UK |
Power |
NA |
| Siemens AG |
Germany |
Infrastructure |
NA |
Source: Media reports
ExportsIn 2003, Gujarat's exports stood at US$ 1.96 billion. Export earnings from chemicals accounted for 30 per cent of these revenues, buttressing the state's leadership position in this sector. Earnings from export of metals and metal-based products had the highest CAGR of 17.4 per cent between 1998-2003.
Gujarat has been at the forefront in attracting FDI. Between 1991 and 2004, Gujarat accounted for 6.44 per cent of India's FDI approvals.
The state offers investors a distinct advantage in terms of quality manpower and infrastructure facilities such as power and water supply, ports and now a gas grid. This is encouraging multinationals and leading Indian companies to turn their manufacturing plants in the state into global sourcing bases. For example, ABB plans to invest a further US$ 500 million in its Vadodara plant and use it as a global sourcing base for circuit breakers and other electrical equipment. Arvind Mills, the second largest denim manufacturer in the world has doubled its manufacturing capacity. Glaxo SmithKline India, plans to use its manufacturing plant in Ankleshwar as a global sourcing hub for an intermediary used in manufacturing Zantac. Aventis, an international pharma giant, will service its global requirements for glibenclamide from its plant in Ankleshwar, Gujarat.
Future InvestmentIn 2004, investment worth US$ 23.4 billion were planned for Gujarat. Of this, infrastructure investment alone amounted to US$ 17.5 billion and a majority of this was for developing the port infrastructure.
A number of multinationals are also investing in gas grids and building LNG terminals in the state. The minerals giant Hindalco intends to invest US$ 544 million for increasing its copper smelting capacity to 500,000 tonnes per year.
Source: Projects Today
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