GUJARAT

INTRODUCTION

PREAMBLE

Gujarat has been the front-runner in the overall economic development of the country all these years, as is evident from the fact that with mere 6% of geographical area and 5% of the population of India, the state contributes to 21% of the country’s exports and 6.42% of the national GDP at constant prices. If the decadal growth of performance of some of the Indian states vis-à-vis other Asian economies with that of Gujarat is compared, one gets quite an encouraging scenario. The industrial growth of Gujarat with a figure of 8.52% could be way ahead of many Indian states and other Asian Tigers viz. Singapore, Malaysia and Korea.

Gujarat - A leading state in manufacturing sector

Over a period of time, the state has established itself as second to none, especially in case of manufacturing sector. The State has successfully carved out a formidable position for itself on the national map of manufacturing sector, as is reflected from the status of dominance in many areas pertaining to manufacturing. The illustrative list of some of the selected products, wherein Gujarat contributes significantly is as under:

Policies in Retrospect : A strong foundation for a brighter tomorrow

The erstwhile policy initiatives shot the state into prominence on the industrial map of the country with a well-diversified base from a lone base of textile and its auxiliaries when formed in 1960. The earlier policies including the policies of the first decade of post-liberalization period were primarily incentive centric to attract investments in the developing areas of the state. These policies have also served the purposes but this instrument since 2000 was no longer available, the state came out with a different policy initiatives in 2000, primarily focusing on strengthening the manufacturing sector with emphasis on strengthening existing and creating new clusters, promotion of IT and knowledge based industries, enhancing exports, development of small and service sector, technology upgradation programme, R&D, setting up of Industrial Parks, upgradation of infrastructure, support for environmental protection measures, etc. Since then however, certain new developments especially in the form of markets increasingly getting integrated with global economy and the state emerging with substantial reserves of gas which would transform the economy of the state to flourish on the basis of cheaper and cleaner source of energy. These developments necessitated fine-tuning of the policy initiatives.

Process of Economic Reforms : Gujarat the Leader

Gujarat being a leading state in terms of economic development in the country is watchful on the internal and external environment governing any change and accordingly, wherever required implements the reforms quickly. As a result, the state has earned the distinction of being the first state to advance the reform process in the country. When the economic regime in India was under protective environment and most of the activities were under the Government control, Gujarat first time in the country had stepped in the direction of privatization. Today when the Union Government and other state Governments have initiated the process of privatisation, Gujarat has already started enjoying the sweet fruits of it. In the decade of 80s, a large number of industrial enterprises were set up in the joint sector in Gujarat. In spite of the Government partnerships in these ventures, most of them turned out to be blue chip companies. As and when these ventures turned viable, the Government withdrew its investment from them. Thus, Government of Gujarat had played a role of financial promoter and facilitator to remove other bottlenecks in establishment of these projects. The responsibilities of day to day operations of these ventures were assigned to the private sector partner. Today most of these ventures are under the management of private sector companies. Similarly, Government of Gujarat for the first time in the country, had enacted Gujarat Infrastructure Development Act which not only facilitated but accelerated the process of setting up infrastructure projects with the help of private sector investment. Gujarat Disaster Management Act is yet another example through which the state is now capable of facing the challenges of any type of disaster. The state Government has also initiated the process of reforms in power sector and as a result in the coming years, the consumers of electricity will certainly be benefited. On implementation of provisions of the Gujarat Gas Act enacted again for the first time in the country, the economy of the state is slated to be transformed into a gas-based economy. Labour reforms will also become an important attraction for investment in the state in the coming years and other states will be inspired to emulate the same. In the recent times, Government has promulgated ordinances to facilitate speedy establishment of Special Economic Zones and Industrial Parks. These SEZs will prove to be ideal destinations for industrial investment on account of the flexibility in terms of the provisions of labour laws associated with them. Gujarat has brought about important and revolutionary reforms in its taxation regime for the first time in the country, which had landed simplification, transparency and harmony in the taxation system for the taxpayers. Some of the reforms have resulted in the reduction of tax for the taxpayers. Government of India sometime back had constituted a committee to explore the possibilities of linkages of river waters, but in Gujarat the process of linkage has already been initiated by transferring waters of Narmada in the rivers of Mahi and Sabarmati through canal network. Thus, any developmental reforms considered by Gujarat today is followed by other states in the country later. Like a leader in any other sector, Gujarat is way ahead of other states in India in the reform process too.

Gujarat benchmarking with Asian Tiger Economies

The State acknowledges this fact that given the position of strength it enjoys, complacency should not be permitted to set in and that the current position has to be leveraged to a level wherein the industries of Gujarat can successfully compete against their counterparts elsewhere in the world by benchmarking with the erstwhile Asian Tiger Economies. The Government of Gujarat thus proposes to achieve an average annual industrial growth rate of 15%+ on a sustained basis to fulfill the overall economic growth target of 10.2% set by the Government of India.

In the backdrop of this situation, the Government of Gujarat has decided to bring out the New Industrial Policy by spelling out its strategies keeping in mind the requirements of the present-day industries to not only strengthen its industrial base but also consolidate the gains achieved all these years in the interest of overall economic development of the state. The state is now determined to lead the rest of the country by emerging as a Model Industrialized State in Asia.

The Industrial Policy 2003 : Proactive Approach of the Government

The Industrial Policy of a state assumes the role of a lighthouse giving futuristic direction to the process of industrialization. In fact, it also reflects the commitment of the State towards the achievement of a sustainable industrial development. In the rapidly changing current scenario, it is more than imperative that the Industrial Policy adopts a pro-active approach rather than a reactive approach and that Government should encourage free market forces to decide the course of development and to intervene only when the interests of the society in general and investor community in particular are found to be at peril.

Hospitality of Gujarat : Government to act as a Facilitator

Nothing can give boost to the aspirations of an entrepreneur/investor than an access to concrete, speedy and authentic information. The mode of information dissemination and the usual courtesies associated with it are also equally important at all levels right from grass-root to the apex. Besides, the authorities and the staff at all levels should leave no stone unturned by assuming the role of friends, philosophers and guides by exploiting the technology at its fullest extent. In order to give a tangible form to the aspirations, the presence of sound infrastructure, encompassing the social and physical dimensions assumes utmost importance. All the facets of physical infrastructure should compete with the best in the world. At the same time, there is an increased sense of realization that development is not a subject confined only to Government. The representative bodies of Industries should also be empowered to become a partner-in-progress. The Policy would not serve its purpose if it does not bring us closer to the ultimate destination of our pursuit - Enhanced Quality of Life. Basic parameters serving as yardstick to determine the quality of life would be taken into consideration. Education is one of the important aspects leading to the empowerment of an individual to enable him to contribute to the society. An effort will be mobilized in the direction of strengthening linkages between educational institutions and industry.

Special Economic Zones : Paradise for Investors

The Government of Gujarat has recently promulgated ordinances to facilitate setting up of Special Economic Zones and Industrial Parks. As per the provision of this ordinance, the responsibilities of management of the Zone and all the permissions under Single Window to the industrial units coming up in the Zones are vested with the Development Commissioner of Government of India. In addition, all the powers, duties and responsibilities for compliance of provisions under various labour laws as available with Labour Commissioner, have also been delegated to the Development Commissioner. In order to attract entrepreneurs for investing in the Zones, the Government has also decided to offer certain incentives. The industrial units setting up a power plant for his captive requirements would be offered electricity duty exemption for a period of 10 years. The units coming up in the Zone are also exempt from the levy of stamp duty or registration fees on transfer of land, loan agreement, credit deeds, mortgage documents or any other contracts. Sales tax, purchase tax, motor spirit tax, luxury tax, entertainment tax and other taxes are also exempted for the units set up in the Zone. The Government has also exempted the tax on the supply of raw materials from the domestic tariff area to the units located in the Zone. In Gujarat, at present, Special Economic Zones at Kandla and Surat are already in place. The State Government also plans to set up such SEZs at locations like Dahej, Hazira and Mundra in the near future, of which permissions for SEZs at Dahej and Mundra from Government of India have already been received. The facilities being developed in the Special Economic Zones in Gujarat are going to prove to be paradise for the investors in the times ahead and as a result, a sizeable investment is expected to be materialized. At present, this ordinance has been sent for Presidential accent through Central Government which is expected to be received soon.

Flexibility of Labour Laws: A unique feature of Gujarat

Gujarat is one of a very few states, which has embarked upon the path of labour reforms. The ‘flexibility’ aspect of labour reforms of Gujarat might strengthen its position as an ideal destination for investment besides other factors, in the coming years. In addition, initiatives like Self-Certification and Single Business Act would leave an indelible mark as one of the best in the contemporary environment. The Government however reiterates its faith in the statement that - Development should not be at the cost of Environment. At the same time, it should not be used as an alibi for stalling the developmental pace. An honest attempt would also be made to organize the agriculture commodities business by inculcating the element of professionalism and by extensive use of modern technology in the processing.

SME Sector : The backbone of economic development in Gujarat

The industrial landscape of the state is comprehensively coloured by small and medium sector enterprises of different hues and shades. It is this sector that has contributed significantly to the state, in wealth creation as well as employment generation all these years. Taking a clue from the winds of change that are sweeping the entire globe, the Government wishes to strengthen the clusters by sensitizing and encouraging them with the issues like use of advanced technologies, importance of patents and quality, virtues of ‘collectivism’ etc. Efforts will also be directed towards curing and subsequently eradicating Industrial Sickness.

Cluster Development Approach for Small and Medium Enterprises

In Gujarat, there are 76 industrial clusters at 90 different locations. In order to further strengthen the existing clusters, the State Government plans to offer assistance under the policy. Apart from this, the Government would also like to take measures for promoting new clusters in the state so as to enable the member units in the clusters to avail of the common facilities developed. The State Government through the policy, therefore proposes to empower the clusters. In order that the clusters will be in a position to avail of the assistance from the Government, the definition of the cluster has been spelt out. Accordingly, cluster would be defined as a group of industries manufacturing identical and complimentary products. The Government has decided to recognise a cluster with a critical mass of a minimum of 50 units located within the radius of 10 kms at a particular location. Under the scheme, assistance will be given to Cluster Association for carrying out certain activities leading to further strengthening of the clusters.

Gujarat Synonymous with Quality : Developing a Global Brand Image

In today’s world, it is difficult for a product to be sold by itself unless concrete marketing and promotional efforts back it. Going by the concept, the Government would tread on an ambitious path of positioning the image of Gujarat as a producer of quality goods on international platform by extensive and focused marketing through promotional efforts. The realization of the above will be pretty easier given the fact that the industries in Gujarat would be recharged by the cost-benefits accruing due to easy availability of cheaper and cleaner fuel in the form of gas. The gas-based economy of Gujarat will be the differentiating factor from its competing economies. Taxation has always been used as an instrument to correct price disparities and for protecting the interest of customers. A reiteration of various measures taken to benefit the industrial community has been made. As mentioned earlier, the State plans to continue its march towards the path of Reform Agenda.

Other Initiatives: Complimentary to Industrialisation

There are some other initiatives, which also need special attention. The issue of promotion of investment from NRIs and FDI would be undertaken in a more focused manner. In order to ensure holistic development, regional imbalances are proposed to be corrected. Studies on special focus sectors like fisheries, tribal area welfare, Development of Kutch etc. would also be undertaken to get a broader perspective.

Effective Policy Monitoring System

Last but not the least, the policy would invariably fail to serve its purpose, if it is not supplemented with an effective policy monitoring system. Thus, an effective and efficient monitoring system would be put in place.

To sum up the above, these steps would position Gujarat as a state of front- reckoning at global level.

THE VISION

To be the Asian Leader in Industrial Growth and to transform Gujarat to be a major player in the Global Arena.

THE APPROACH

The Government of Gujarat would achieve this vision through an approach of ensuring a very high standard of business-friendly environment in terms of providing all systemic support, while limiting its role primarily to that of being a facilitator.

While strongly projecting the achievements of Gujarat in terms of its ongoing exercise of industrial growth, the Government proposes to lay down an overall macro approach on each and every aspect relating to the industrial development in the state.

Good Governance : A way of life for Government in Gujarat

The Government strongly feels that good governance is very essential for achieving the vision that has been conceived. Through this policy, the Government would like to lay down clear principle of good governance in terms of a transparent, focussed and accountable approach.

Information : The Key to Success for any Business Enterprise

The basic approach in formulating the INDUSTRIAL POLICY 2003 is to comprehensively address the requirements of new entrepreneurs right across the entire value chain from initial information needs to marketing of the product covering all intermediate stages right from selection and formulation of project proposal, to acquisition of infrastructure including land, finance, environmental compliances, skilled human resources, raw materials sourcing, technology and process selection, patenting, branding and all other relevant issues.

The State Government would thus strive to support an entrepreneur at every stage of the project implementation - from conception to commissioning and thereafter.

Simultaneously, the Government would also propose to address all the issues of the existing industries to create the most conducive environment for the business to flourish. In effect, the Government would encourage increased autonomy and free competitive market operations in all the business functions to assist industries.