Skip to main content

Gujarat's growth story: Per annum net value added 22%, job generation 3%, tax collection 3%, R&D 1%

By Rajiv Shah
In one of the most significant critiques in the recent past, Gujarat’s well-known industry consultant Sunil R Parekh has said that though Gujarat’s industries may have grown faster than most states, this has failed create matching jobs, generate enough taxes for coffers, and provide safe environment. Worse, he finds Gujarat’s performance in the area of innovations discouraging. Despite 17 per cent of industrial output of India, in patent filing, Gujarat accounted for less than 1 per cent of national filings; “Maharashtra, Delhi, and Tamil Nadu, together contribute 60 per cent of national filings.”
In his well-research paper, “Some Facets of Industrialization in Gujarat”, which is part of the new book, “Growth or Development: Which Way Is Gujarat Going?”, Parekh says, the fixed capital in Gujarat “went up from Rs 120 crore to an impressive Rs 2,40,000 crore, registering a compound annual growth rate (CAGR) of 22 per cent.” Of this, he adds, “Rs 2,40,000 crore fixed capital, the last decade alone accounted for Rs 1,74,000 crore, a surge in growth as high as 72.5 per cent over the earlier four decades.”
While “this speaks volumes for the state emerging as one of the choicest locations for investors”, and the “period 2000-10 could be considered as most significant in terms of the flow of investment to industry”, Parekh points out, “Industrial employment has grown from 3.5 lakh to 11.5 lakh—a CAGR of just 3 per cent in the same year period. In absolute numbers, the state witnessed new job opportunities of 4,70,353 during the first four decades as against 3,36,355 in the last decade”, which “does not represent a significant figure.”
Saying that this has happening because “more industries in Gujarat have now become technology-driven with the introduction of automation”, and also because “excess labour has been laid off in several industries and sectors”, Parekh adds, Gujarat’s “gross output has gone up from Rs 365 crore to Rs 6,42,000 crore, registering a CAGR of 22 per cent. The last decade alone accounted for a share of over 81 per cent. The reasons for this high growth could be the emphasis placed on the manufacturing sector by the policymakers”.
Value added: Different sectors
Parekh suggests, the quality of industrialization also shows things are going: “Out of a total annual output of Rs 6,42,000 crore in 2009–10, the petrochemical industry accounted for the highest output of Rs 2,20,000 crore (34 per cent) followed by chemicals with Rs 96,000 crore (15 per cent), basic metals, food and beverages, textiles, and other important sectors. These five sectors together contribute about 69 per cent of the state’s total industrial output.”
He adds, “If machinery, fabricated metals, pharmaceuticals, metallic and non-metallic minerals, plastic, and electricity are included, these 11 sectors contribute 86 per cent of industrial output. Petrochemicals and chemicals together account for 50 per cent of the output, which once upon a time constituted the dominating sector, and has now become the mainstay of Gujarat’s industrial scene, replacing textiles.”
The type of industries that have come has had a heavy toll on environment, Parekh suggests. According to Parekh, “Though Gujarat enforces systems like common effluent treatment plants (CETPs), and propagates clean technology and clean energy, it has a long way to go in controlling industrial pollution in the state. Gujarat has the largest number of CETPs (18) in India (obviously because it has the largest share of polluting industries), and two more are being added—the combined capacity of all these plants is only 211 million litres per day (MLD) with a membership of only 3,606 factories.”
VAT to industrial output ratio
Indicating the inadequacy, Parekh says, “Gujarat has over 2,50,000 functioning factories across the state. It produces all categories of the most hazardous industrial products. There is a need to move from end of the pipeline solutions (EOP) to cleaner technologies. However, the path to this goal appears very bumpy and uncertain. In recent years, larger industries have started to embrace cleaner technologies, particularly in new investments. Micro, small, and medium enterprises (MSMEs), however, continue with the EOP solutions.”
Coming to value added tax (VAT), Parekh says, “though Gujarat is one of the most industrialized states in India, the VAT collected to annual survey of industries (ASI) output ratio is one of the lowest in the state. In fact, at 3 per cent, it is the lowest among the six major states in India. In spite of Gujarat contributing 17 per cent of the industrial output in the country, its ratio of VAT to output is only 3 per cent, one-third that of Maharashtra.”
Finding this amusing, Parekh says, this has happened despite the fact that “Gujarat has one of the highest rates of VAT, 14 per cent as against 12.5 per cent in other states.” Giving reasons, he believes this is because “the state government is not keen to tax medium and large industries, as it is more interested in giving them subsidies as an incentive to invest in the state.” Also, “industrial growth in Gujarat has poor value added, as in many cases it produces raw material for outside industries rather than undertake value addition within the state.”

Comments

Muni Raja said…
This post most impress me because your writing skills are awesome....easily understanding and super navigation in this blog. Thanks and regards :sarkari result
Sandya Kumari said…
Thanks for giving Sarkari Result Great article you write.

TRENDING

World Bank clarifies: Its 26th rank to India not for universal access to power but for ease of doing business

By Our Representative
In a major embarrassment to the Government of India, the World Bank has reportedly clarified that it has not ranked India 26th out of 130 countries for providing power to its population. The top international banker’s clarification comes following Union Power Minister Piyush Goyal’s claim that India has “improved to 26 position from 99” in access to electricity in just one year.

"Misleading" satellite images being shared on Balakot surgical strike on Jaish camp

By Dr Vinay Kate*
With every passing day more questions are being raised about the surgical strike India did in Balakot as a response to Pulwama attacks. So far the Indian media has claimed mass casulaty of 300+ terrorists of Jaish-e-Mohammad in this surgical strike, but there is hardly any report from foreign media about the same.

Extreme repression, corporate loot, cultural genocide "characterise" India's tribal belt

Counterview Desk
As Lok Sabha polls approach, there is considerable ferment in one section of the population -- India's Adivasis, forming about 8.6 per cent of India's population. Things became particularly critical following the February 14, 2019 Supreme Court order, allegedly seeking to evict lakhs of tribals from their forest lands.

Industry in India "barely growing", export growth 0%, whither moral anchors?

Counterview Desk
In a sharp critique of the Modi government, the Indian Institute of Management-Ahmedabad (IIM-A), one of world renowned economist Prof Kaushik Basu, who is Professor of Economics and Carl Marks Professor of International Studies at Cornell University, has told students at the IIM-A’s 54th Annual Convocation on March 16, 2019 that they have a “special responsibility” on their shoulders, “the responsibility to reject narrow sectarianism, uphold scientific thinking, openness to new ideas, and freedom of speech.”

Congress would win just 9 of 26 Lok Sabha seats: Gujarat Assembly segment-wise analysis

By Rajiv Shah
Even as the Congress plans its first working committee meet in Gujarat on February 28 after an almost 58 year gap, there is reason to wonder what is in store for India’s grand old party in a state which has been long been a BJP bastion – in fact ever since mid-1990s. Ahead of the then assembly polls in late 2012, talking with me, a senior Gujarat Congress leader, currently Rajya Sabha MP, frankly said he saw no reason why Congress would win.

Financial inclusion? Not micro-loans; India's poor "need" investment in health, education

By Moin Qazi*
India has grown into a global powerhouse. Its economy is soaring but the picture on the ground is still quite arid. The green shoots that you see are only a patch of its landscape. Most Indians are hapless victims of inequity. India is one country where intense poverty abounds in the shadow of immense wealth.

"Pro-corporate" Supreme Court order on FRA would further marginalize Adivasis

By VS Roy David, JP Raju*
For millions of Adivasis and other traditional forest dwellers February 13, 2019 will go down in history as the day of apocalypse. This is like the proverbial Black Friday where millions of most marginalized people of India were ordered by malicious anti-people draconian Supreme Court order depriving them the life and livelihood by evicting them from their habitats.

India, Pakistan told to eliminate nuclear weapons: N-war "would kill" 2 billion

Counterview Desk
The International Physicians for the Prevention of Nuclear War (IPPNW), a non-partisan federation of national medical organizations in 64 countries, representing tens of thousands of doctors, medical students, other health workers, and concerned citizens, claiming to share the common goal of creating a more peaceful and secure world freed from the threat of nuclear annihilation, has warned that “an unprecedented global catastrophe” awaits the globe against the backdrop of warmongering in India and Pakistan.

Modi wants Pak govt be held responsible for JeM terror strike: World doesn't agree

By Sandeep Pandey*
I went to participate in a candle light homage paying event at Dr BR Ambedkar's statue organised by about 200 Dalit students on Hazratganj main crossing in Lucknow on February 16, 2019 evening, two days after the dastardly terrorist act in Pulwana, Jammu and Kashmir (J&K), in which 44 Central Reserve Police Force (CRPF) personnel was killed.

Women, business, law: India scores worst among all BRICS, several African nations

By Rajiv Shah
A new World Bank report ranks India 125th in its Women, Business and the Law (WBL) index among 187 economies it seeks to analyse across the globe. The report's main aim claims to be to "gain new insight into how women’s employment and entrepreneurship choices are affected by legal gender discrimination. On a scale of 100, India's score is 71.25, worse than the global average of 74.71.