Skip to main content

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

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

TRENDING

Dalit rights and political tensions: Why is Mevani at odds with Congress leadership?

While I have known Jignesh Mevani, one of the dozen-odd Congress MLAs from Gujarat, ever since my Gandhinagar days—when he was a young activist aligned with well-known human rights lawyer Mukul Sinha’s organisation, Jan Sangharsh Manch—he became famous following the July 2016 Una Dalit atrocity, in which seven members of a family were brutally assaulted by self-proclaimed cow vigilantes while skinning a dead cow, a traditional occupation among Dalits.  

Global NGO slams India for media clampdown during conflict, downplays Pakistan

A global civil rights group, Civicus has taken strong exception to how critical commentaries during the “recent conflict” with Pakistan were censored in India, with journalists getting “targeted”. I have no quarrel with the Civicus view, as the facts mentioned in it are all true.

Whither SCOPE? Twelve years on, Gujarat’s official English remains frozen in time

While writing my previous blog on how and why Narendra Modi went out of his way to promote English when he was Gujarat chief minister — despite opposition from people in the Sangh Parivar — I came across an interesting write-up by Aakar Patel, a well-known name among journalists and civil society circles.

Remembering Vijay Rupani: A quiet BJP leader who listened beyond party lines

Late evening on June 12, a senior sociologist of Indian origin, who lives in Vienna, asked me a pointed question: Of the 241 persons who died as a result of the devastating plane crash in Ahmedabad the other day, did I know anyone? I had no hesitation in telling her: former Gujarat chief minister Vijay Rupani, whom I described to her as "one of the more sensible persons in the BJP leadership."

Why India’s renewable energy sector struggles under 2,735 compliance hurdles

Recently, during a conversation with an industry representative, I was told how easy it is to set up a startup in Singapore compared to India. This gentleman, who had recently visited Singapore, explained that one of the key reasons Indians living in the Southeast Asian nation prefer establishing startups there is because the government is “extremely supportive” when it comes to obtaining clearances. “They don’t want to shift operations to India due to the large number of bureaucratic hurdles,” he remarked.

Unchecked urbanisation, waste dumping: Study warns of 'invited disaster' as khadi floods threaten half of Surat

An action research report, “Invited Disaster: Khadi Floods in Surat City”, published by two civil rights groups, Paryavaran Suraksha Samiti and the People's Union for Civil Liberties, Surat, states that nearly half of Gujarat's top urban conglomerate—known for its concentration of textile and diamond polishing industries—is affected by the dumping of debris and solid waste, along with the release of treated and untreated sewage into the khadis (rivulets), thereby increasing the risk of flood disaster.

Two decades on, hunger still haunts Gujarat: Survey exposes stark gap behind poverty claims

A Niti Aayog report , released about two years ago, estimated that in Gujarat — which our powers-that-be have long considered a model state — 11.66% of people are "multidimensionally poor," a term referring to an index that seeks to estimate "multiple and simultaneous deprivations" at the household level across three macro categories: health, education, and living standards.

Boeing 787 under scrutiny again after Ahmedabad crash: Whistleblower warnings resurface

A heart-wrenching tragedy has taken place in Ahmedabad. As widely reported, a Boeing 787 Dreamliner plane crashed shortly after taking off from the city’s airport, currently operated by India’s top tycoon, Gautam Adani. The aircraft was carrying 230 passengers and 12 crew members.  As expected, the crash has led to an outpouring of grief across the country. At the same time, there have been demands for the resignation of Prime Minister Narendra Modi, Home Minister Amit Shah, and the Civil Aviation Minister.

English proficiency for empowerment: Modi’s SCOPE vision contrasts Amit Shah’s remark

While Union Home Minister Amit Shah may have asserted that soon a time would come when those speaking English in the country would “feel ashamed”, it is ironic that Narendra Modi, when he was Gujarat chief minister, had launched what was called the SCOPE programme, actively involving the University of Cambridge to provide opportunities to the youth of Gujarat to "become not just job seekers but job creators (entrepreneurs)."