Driving the New India
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Driving the New India

State of Gujarat positions itself as a major player in the creation of a more modern, outward-looking economy

Known as the automotive hub of India and the birthplace of spiritual leader Mahatma Gandhi, Gujarat has long been at the forefront of the country's economic development.

A long coastline on the Arabian Sea offers this westernmost state a geographical advantage as a gateway to the country of 1.3 billion, fuelling economic expansion that is among the fastest in the world.

And now under the New India 2022 initiative of Prime Minister Narendra Modi, Gujarat is playing an increasingly important role in attracting foreign direct investment (FDI), smart city development, and leadership in exporting "Make in India" brands to international markets, government and business leaders say.

"Today, as India approaches the new era that Mr Modi is leading, Gujarat will be one of India's leading states, ushering in the new India to the world," said Ratan Tata, chairman emeritus of Tata Sons, the holding company for the giant conglomerate Tata Group.

Gujarat chief minister Vijay Rupani said that as India's leading growth hub, Gujarat is firmly committed to helping drive national socioeconomic growth, on a foundation of proactive governance, state-of-the-art infrastructure and complete ease of doing business.

"Gujarat has been a hub of trade and commerce for over 5,000 years, when the port of Lothal connected what was then India to the world. Today, driven by the entrepreneurial Gujarati spirit, the state acts as the world's gateway to opportunities in India," he said.

Home to 48 large ports, Gujarat currently handles 40% of the nation's overall cargo or 450 million tonnes in fiscal year 2016-17, said Rajkumar Beniwal, managing director of the Industrial Extension Bureau (iNDEXTb), who led Gujarati delegations to Thailand, Singapore and Malaysia in early October.

iNDEXTb is a state organisation that positions itself as a single point contact for entrepreneurs seeking to establish businesses in Gujarat.

"The state is a key part of Make in India. We are undertaking various reforms in terms of ease of doing business, simplifying our policies and procedures," Mr Beniwal said in an interview with Asia Focus.

"We are coming up with big infrastructure projects under development including estates and special investment regions for different sectors, and some other initiatives."

According to Mr Beniwal, Gujarat is the first state to have an operational petroleum, chemical and petrochemicals investment region (PCPIR) covering 453 square kilometres. It will serve a domestic chemical and petrochemical sector estimated to be worth US$250 billion by 2020, including $100 billion for petrochemicals alone.

Major infrastructure projects being developed in Gujarat with completion scheduled by 2022 include the world's largest solar park with a capacity of five gigawatts on 11,000 hectares in the Dholera Special Investment Region. Dholera is the country's largest greenfield development, covering 900 square kilometres and intended to be a smart city.

Gujarat International Finance Tec-City (GIFT City), meanwhile, is being touted as India's only hub with world-class infrastructure for offshore and international transactions in banking, insurance, and capital markets, he added.

Gujarat is a leading exporter of Make in India brands including products from the pharmaceutical, diamonds and gems, cotton and fertiliser industries. The state ranks first nationally for exports in three of those four categories and second in fertiliser.

Home to 60.4 million people or 5% of India's total population, Gujarat accounts for 7.1% of national GDP, 19% of industrial output, 22% of exports, and 53% of crude oil production. Gujarat was the third largest FDI recipient in India in 2016-17.

"There has been a continuous rise in FDI," said Mr Beniwal. "If you went there just two or three years ago, the perception has totally changed about the country and our state."

From just $483 million in 2012-13, FDI to Gujarat climbed to $3.3 billion in 2016-17, he pointed out.

The investment incentives offered in India differ among regions and industries, but Gujarat is among those offering the maximum perks for investors, he said. This has attracted a diverse range of investments in sectors including automobiles, telecommunication, cement, power and chemicals.

Home to leading global automobile manufacturers such as Ford, Honda, Tata, Suzuki of Japan and SAIC of China, the state realised more than $2 billion in investment as of fiscal 2016 with an additional $3.2 billion committed by 2020. Current automobile manufacturing capacity is 600,00 units per year but the figure is expected to reach 3 million units in the not-too-distant future.

Mr Beniwal said Gujarat was the key contributor to India Vision 2020 to expand national output of two- and three-wheelers by an annual average of 9%, and commercial and passenger vehicles by 16% each, from 2013 through 2020.

The automobile sector accounts for about 15% of all FDI received by Gujarat, where 30 clusters are now based in areas such as casting, brass parts, electric motors, bearings, and auto-ancillary products.

A strong focus on electric vehicles (EVs) is now emerging in Gujarat, said Mr Beniwal. Tata Motors is manufacturing the electric variant of its Tigor compact sedan at its Sanand facility. Suzuki, Toshiba and Denso are setting up India's first lithium-ion battery manufacturing plant in the state with an investment of $180 million.

As well, India's JSW Group is committing $165 million to manufacture battery-operated vehicles, electric battery, storage and charging infrastructure in Gujarat. The state government has signed a memorandum of understanding with Energy Efficiency Services Ltd (EESL) to procure 8,000 EVs, while Gujarat-based Electrotherm (India) Ltd was the first to introduce electric bikes and scooters (Yo Bykes) in India.

Meanwhile, more than 300 pharmaceutical and medical product manufacturing units are located across the state in four large clusters and five special economic zones, accounting for 53% of all the medical devices manufactured in India.

The Indian pharmaceutical market is expected to grow at about 22% annually to reach $55 billion by 2020 with exports hitting $40 billion, up from $15 billion in 2015. Up to 100% foreign direct investment is allowed, in this sector including the manufacturing of medical devices and equipment.

The Gujarat delegation was visiting Asean partly to promote the Vibrant Gujarat Summit 2019, the ninth edition of the event to be held in the state since it was first conceived by Mr Modi when he was chief minister there in 2003.

The previous summit, in January 2017, attracted 25,000 delegates from over 100 countries, including four heads of state, Nobel Laureates and leaders of global industry.

Thailand is the only Asean country to sign on so far as an official country partner of the ninth summit, though Singapore and Malaysia have also been approached.

Currently, top five foreign investors in Gujarat are the United States, Japan, Singapore, Taiwan and European Union countries such as France and the United Kingdom. Investments from Thailand are nearly at the same level as those from Malaysia. Sectors Gujarat aims to attract from Thailand are food processing, electronics and financial services.

During the mission to Thailand, the delegates met with chairmen of the agribusiness giants Charoen Pokphand (CP) and Thai Union (TU), both of which agreed to send representatives to the upcoming summit, Mr Beniwal noted.

India, as a country, has achieved cumulative FDI inflows of $376.85 billion from 2000 to 2018, of which $44.8 billion was attracted in fiscal 2017-18 that ended on March 31 this year.

With GDP growth forecast at 7.4% this year, India is undertaking structural reforms aimed at lifting growth to 8%. The country's economy, currently estimated at $2.8 trillion, is forecast to grow to $44 trillion by 2050, ranking it second in the world after China, according to a recent study by PricewaterhouseCoopers.

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