(Courtesy: Financial Times)
Polling ended on Feb. 25 in the Indian state of Gujarat, but business leaders there are confident the state will continue to be conductive to in- vestment whether the ruling Congress party retains power in the regional legislature or is ousted by the Hindu right-wing Bharatiya Janata party. Gujarat, in the west of India, is the country’s most industrialized state after Maharashtra, which has Bombay as its center. Between August 1991, when economic reforms began, and December 1994 Gujarat approved industrial investments worth Rs597bn (£12bn), second only to Maharashtra’s tally of nearly Rs680bn.
Shashikani Lakhani, the state’s industry minister, says: “Investors need power, political stability, industrial peace, ports, and ready availability of raw materials, and we offer all these.” Cashing in on its natural resources and geographical strengths which includes a long coastline, Gujarat has focused on the petroleum, petrochemicals and pharmaceuticals industries. These account for nearly 60% of the investment approvals.
Reliance Industries, the country’s largest company, has located its 700 acre petrochemicals complex in Hazira near Surat in south Gujarat. Reliance will invest over Rs 90bn in bas! the state in the next 10 years, most of it to build an oil refinery in Jamnagar. “The positive industrial climate, strategic location and excellent market potential for the end use of our petro- chemicals products made Gujarat most attractive as a location for our projects,” says Anil Ambani, joint managing director of Reliance. And according to Uday Shah, who returned to the state after 20 years in the US to establish a small pharmaceuticals business; “There is a positive attitude towards business across the board, from the ministers in the state government, to the lowest levels of bureaucracy.” He adds: “The state’s record for industrial peace is unblemished, and there is less red tape here than anywhere else in the country.” Gujaratis are legendary for their business acumen and have a long tradition of trading. Many Indian businessmen abroad are from the state, which unsurprisingly attracted as much as R$21.9bn from a national total of Rs72.5bn of investment from non- resident Indian businessmen between August 1991 and December 1994. Gujarat remains the country’s largest cotton grower and Ahmedabad, its capital, was once known as the 1 Manchester of the East, but the textile industry has been in a long decline. Textiles now account for about 10% of industry in the state, a level these days matched by the engineering sector.
Funds from abroad have not been as easily forthcoming as domestic in- vestment. The number of foreign in- vestment approvals by the state amounted to just over Rs3bn in the year to last March, a fifth of Maharashtra’s Rs15bn.
Government officials say the focus is not on foreign investment. “We want to get Indians here first,” says Lakhani. But state bureaucrats are happy that General Motors of the US recently agreed a $100m project with Hindustan Motors to manufacture its Opel Astra model at Halol near Vadodara in the state.
Chimanbhai Patel, the state’s chief minister until he died last year, was credited with drawing up the blue- print for industrial development in the state Chhabudas Mehta took over from Patel and has maintained his policies. Some businessmen in Gujarat see the rival BJP is even more pro- business, and the Hindu party has commuted itself to encouraging in- vestment in infrastructure.
The government under Patel recognizing that infrastructure, rather than tax incentives and subsidies made the most effective bait for big business, developed a strip of land 450km long and 40km wide, and aggressively marketed it as India’s “Golden Corridor.”
The stretch of coast south of Bharuch is absorbing more than 70% of Gujarat’s industrial investment currently being implemented. Unlike other parts of the state, which have severe water problems, the area is fed by two rivers. It connects in the north to Vadodara and Ahmedabad, the state’s biggest cities, and its southern tip, Vapi, is a few hours’ drive from Bombay, India’s commercial hub. Officials admit that industrial development in the state is skewed, with the corridor becoming overcrowded. The government will have to develop infrastructure to make the rest of the state viable for industry. This will not. be easy much of the northwest of the state is wilderness inhabited largely by tribal groups.
“Gujarat could be a show window for India’s economical reforms-if we act now, and invest in infrastructure,” says a senior official in Gujarat industry ministry.
Article extracted from this publication >> March 10, 1995
