Vibrant Gujarat: For years, businesses have been ditching Maharashtra in favour of Gujarat

Representative Image

Representative Image

Launching the “I made Gujarat” campaign for the Bharatiya Janata Party (BJP) ahead of Assembly elections in the state, Prime Minister Narendra Modi highlighted the progress that the state had made in the past two decades, a time when he had served as the chief minister of the state for about 12 years and then as prime minister of the country.

While Modi spoke of the overall development in the state, the Annual Survey of Industries (ASI) shines the spotlight on how the state had transformed into becoming a favoured business destination in the past two decades, edging past Maharashtra, its rival and neighbour.

According to the findings of the Survey, the state has been more competitive than its peers in attracting investments. In the last decade, the state had aggressively pursued and attracted investments from major players such as Tata Motors to invest in a plant in Sanand when it faced hostility in Singur in West Bengal. However, it is the recent commitments made by Vedanta and Tata Group that are expected to figure more prominently in the ruling party’s campaign to return to power for the third consecutive term.

The companies had considered Maharashtra for both these projects, before they finalised on Gujarat. The Vedanta joint venture with Foxconn of Taiwan has proposed to set up semiconductor and display fab units in Ahmedabad with investments of Rs 1.54 lakh crore, while the Tatas, in partnership with Airbus Defence, intends to manufacture the C-295 transport aircraft for the Indian Air Force at Vadodara. These projects are expected to serve as the leitmotif of the Atmanirbhar Bharat campaign.

Number of factories: While these two high-profile investments will add heft to Gujarat’s image as an investor-friendly destination, the state had begun to enjoy an advantage over Maharashtra in attracting investments several years earlier, helped by campaigns such as Vibrant Gujarat. It overtook Maharashtra to emerge as a state with the second-highest number of factories in the 2017-18 survey. That survey, conducted many months after the demonetisation of the Rs 500 and Rs 1,000 banknotes and implementation of the Goods and Services Tax (GST), saw the number of factories in Maharashtra contract. Gujarat registered an increase of 620 factories between the surveys of 2016-17 and 2017-18, while Maharashtra experienced a drop of 617. At the end of 2017-18, Gujarat had 193 more factories than Maharashtra.

That gap had widened to 2,869 by 2019-20, as the number of factories in Maharashtra continued to decline, while the numbers in Gujarat grew. In 2002-03, the first full year that Modi governed as chief minister of the state, there were 13,180 factories in Gujarat, according to the survey. Gujarat was in the fourth position, with the undivided Andhra Pradesh being home to more number of industrial units. Tamil Nadu had the highest number of factories in 2002-03, and it continues to maintain its lead.

The ASI covers all factories employing 10 or more workers and using power, and those employing 20 or more workers without using power. It also includes units that are engaged in cotton ginning, salt production, workshops for maintenance and repair of motor vehicles, warehouses, and motion picture/video and television programme production and post-production units.

number-of-factoriesGujarat saw the fastest rise in the number of factories between 2002-03 and 2019-20, climbing 116 percent, compared to 99 percent and 46 percent in Tamil Nadu and Maharashtra, respectively. As a result, the proportion of factories in Gujarat climbed from 10 percent in 2002-03 to 12 percent in 2019-20, while it declined from 14 percent to 10 percent in Maharashtra.

Employment: Gujarat was also the second-largest employer of factory workers. Together, the factories in Gujarat employed 15.90 lakh factory workers and another 4.79 lakh in clerical, supervisory and managerial roles as well as proprietors and their family members. Tamil Nadu was the largest employer, and Maharashtra the third-largest. But Maharashtra scored higher on the number of jobs front for those in clerical, supervisory and managerial roles, as also proprietors and their family members. Maharashtra was the second-largest employer back in 2002-03.

number-of-factories (2)The rise in factory employment between 2002-03 and 2019-20 was the sharpest in Gujarat. The number of workers employed in factories climbed 201 percent, compared to 140 percent in Tamil Nadu and 75 percent in Maharashtra.

On average, factories in Gujarat, Maharashtra and Tamil Nadu employed 56-57 workers in 2019-20. That was a significant improvement from 2002-03 when the average number of workers per factory in Gujarat was 40, compared to 47 in Tamil Nadu and Maharashtra.

But many of these factories were not found to be in operation or their owners were untraceable during the survey. When only the factories that were technically in operation were considered, the average number of workers per factory in Gujarat climbed to 71 in the 2019-20 survey. Maharashtra reported a better ratio of 75.

The 2019-20 survey also found that Gujarat had a larger share of factories that employed 100 or fewer workers, compared to its closest competitors. Nearly 80 percent of the operating factories in Gujarat employed 100 or fewer workers, compared to a little over 73 percent in Maharashtra and about 76 percent in Tamil Nadu.

The number of units that could be referred to as large employers was fewer in Gujarat and Maharashtra than in Tamil Nadu. Just about 517 (2.3 percent) factories in operation in Gujarat employed 1,000 or more workers in 2019-20. Maharashtra was a little better at 538 (2.8 percent). Tamil Nadu, with its much larger industrial base, had as many as 1,270 units (4 percent).

Investment and output: Gujarat attracted more investment than Maharashtra and Tamil Nadu between 2002-03 and 2019-20, with fixed capital investment jumping 809 percent, compared to 607 percent in Tamil Nadu and 450 percent in Maharashtra. The share of Gujarat in the fixed capital investments made in the country – investments in fixed assets, such as land and building, plant and machinery, furniture and fixtures, and transport equipment – climbed from 19 percent to 21 percent. Maharashtra’s share declined from 17 percent to 12 percent over the same period.

This helped raise the value of output generated by the factories by almost 800 percent between 2002-2003, which was about a 14 percent compound annual growth rate (CAGR). The growth in output in Maharashtra was less energetic at 11 percent CAGR, but Tamil Nadu managed to keep pace with Gujarat.