Accelerating growth in Gujarat
A discussion note
KPMG IN INDIA
Foreward Gujarat : A holistic growth story Growth accelerators Building a success story The way forward 1 2 5 7 22
The success story of Gujarat stands out amongst the Indian states as one of the most dynamic growth stories. This was evident during the Vibrant Gujarat Summit, where the State attracted nearly USD 100 billion investments in January 2007 This figure is more than what China attracts as FDI in a year! . Gujarat’s State GDP has grown by 12 percent in real terms in the last 12 years. This State is one of the key drivers of India’s growth, where GDP is growing at a rate of 9.2 percent. However, the State needs to benchmark itself with the best in the world – Dubai, Singapore, China – and not become complacent by doing better than other Indian states. Gujarat, therefore, should consider such growth accelerators that will enable it to draw the best in class and bring about a paradigm shift in the State. This needs to be fleshed out further to facilitate growth and become the economic driving force for India. Clearly for India to grow at 10 percent, Gujarat needs to grow at 15 percent. This discussion note put forward by KPMG and CII identifies focus areas and an approach to make Gujarat 2015 vision a ‘reality’. Pradeep Udhas Head – Markets KPMG in India
Gujarat : A holistic growth story
Gujarat continues to occupy a distinctive position in the Indian economy. With 5 percent of the country’s population and 6 percent of the country’s geographical area, Gujarat contributes to about 16 percent of industrial production in India. The State has witnessed an annual average growth of 9 percent in the last three years (GDP is estimated at USD 38.4 billion) and an average industrial growth of 15 percent for the same period. However, these macroeconomic statistics look much more impressive on a closer look at the industrial landscape of the State. Accounting for 16 percent of the industrial production of India, Gujarat has demonstrated leadership in many areas of manufacturing and infrastructure sectors. Almost 50 percent of the country’s refined petroleum products and 45 percent of the drugs and pharmaceuticals is from Gujarat. The State’s exports stand at 14 percent of India’s total exports, exhibiting a strong global orientation of the industrial structure. The above indicators are a result of robust foundation of Gujarat’s economy. At a broad level the following four components have been primarily responsible for the economic vibrancy of the State: Investment: Traditionally, Gujarat has been able to attract significantly highest levels of investments, including Foreign Direct Investments (FDI) in India. In 2006, over INR 229,928 crore worth of investments were made across 8,126 sectors. In the last five years, Gujarat has attracted highest investment among all states in India and is worth INR 1,82,998 crore. The fixed capital investment of the State stands at USD 18 billion, accounting for 18 percent of the fixed investment of India. This impressive investment focus has been a prime driver for Gujarat to generate and sustain accelerated economic growth Demographic: The people of Gujarat are globally recognized as highly entrepreneurial and industrious. The risk taking ability, along with the mature level of commercial knowledge, has made the State the fountainhead of a new enterprise. The labour force in Gujarat is reasonably skilled in areas such as diamonds, chemicals, petrochemicals and pharma sectors. The cost of labour is also competitive in Gujarat, which along with the impressive infrastructure adds to the overall productivity of the State. Gujarat is one of the most urbanized states in the country with nearly 40 percent of population residing in urban areas. This has had a positive influence on the growth of industry in the State Manufacturing: The share of manufacturing sector in the GDP of Gujarat is nearly...
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