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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: Certain 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
The chemicals industry is the core of Gujarat's industrial activity and the
sector accounts for 34.5 per cent of the total sales by industries in the state.
Since August 1991, chemicals and allied sectors has accounted for investment
worth US$ 32.57 billion, 50.3 per cent of the total investment in the state.
Of the 1,497 projects in the sector, investment worth US$ 12.04 billion have
been commissioned. Another 398 projects, envisaging an investment of US$ 5
billion are under implementation.
Gujarat boasts of the world's largest grass-roots refinery in Jamnagar, which
was set up by the Reliance Group. Essar and L&T are some of the other major
industrial units in the chemicals sector in Gujarat.
The state's small-scale industry in the chemical industry's sub-sectors such
as dyestuff, Pharmaceuticals, paints and fine chemicals has put in an impressive performance.
Drugs and Pharmaceuticals Gujarat has about 3,267 registered pharmaceutical industrial units
involving a capital investment of about US$ 1.6 billion. Most of these are small
and medium enterprises.
 At present 295 large scale projects involving an investment of US$ 533
million have been commissioned while I 14 large scale projects envisaging an
investment of US$ 225 million are under various stages of implementation.
The state's pharmaceutical industry contributes substantially to the
production, domestic consumption and the export basket of the country's drug
sector. Gujarat is home to large pharmaceutical units belonging to Sarabhai
Chemicals, Cadila, Torrent, Symbiotics, Cynamide India, Aventis, Abbott Lab, Atul Ltd, Rallis,
among others.
Gems and JewellerySince the early seventeenth century, Gujarat has been the diamond-processing
hub of the country. Today, Gujarat accounts for 80 per cent of the diamonds
processed in India. In fact, 55 per cent of the global diamond cutting and
polishing takes place in the 10,000 diamond units in Surat. In 2003-04, the
state exported cut and polished diamonds worth US$ 5 billion. Gujarat also
houses some primary gold markets around Rajkot and Ahmedabad. The gems and
jewellery industry is also the second largest employer in the state, generating
over a million jobs.
Mines and Minerals
Vast 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.
TextilesThe textiles sector is critical to the state's economic growth as it
contributes 23 per cent to the state's GSDP. Gujarat's fabric process houses are
concentrated in Ahmedabad and Surat. The state accounts for 12 per cent of the
total textile exports from the country. It produces about 30 per cent of woven
fabric in the country and Surat alone produces over 40 per cent of the country's
art silk fabric.
A large number of garment and garment processing units have developed in
urban areas. Some of the key textile manufacturers in the state are Arvind
Mills, Mafatlal and Digjam.
Agro-basedGujarat is keen to promote the agro-processing industry, which currently
consists of small and medium enterprises producing a wide variety of products.
It has about 16,400 small enterprises in food processing, beverage and
tobaccoprocessing. Gujarat is well known for its success in dairy cooperatives.
Amul, a brand owned by the Gujarat Cooperative Milk Marketing Federation, enjoys
a significant market share in the processed foods sector.
Another 224 large and medium enterprises with an investment of US$ 508
million have been commissioned. The state is actively encouraging the production
of derivatives based on castor seeds and psyllium husk. The agro-processing
sector also accounts for a significant proportion of the working population in
the state.
Exports
In 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.
Source: CMIE
Investment
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.
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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
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.
Source: Projects Today
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.
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