Gold rush to India's Gujarat
By Sudha Ramachandran
Nov 27, 2007

BANGALORE - The northwestern state of Gujarat - notorious for horrific communal violence in 2002 in which over a thousand people, mainly Muslims, were killed - has emerged as India's favored destination for investments. Its dazzling economic success is being highlighted by Chief Minister Narendra Modi in his election campaign as he makes a bid for a third straight term in office in upcoming assembly elections in the state.

According to a recent study by the Reserve Bank of India, the country's central bank, Gujarat stood first in the country with investments of US$17.8 billion in 2006-07 or 25.8% of India's total investment of $69 billion during the year.

The southern state of Andhra Pradesh stood a distant second having attracted $6.1 billion in 2006-07. Last year's leader in the race for investment - Maharashtra - slipped to third place. Gujarat moved up from second place in 2005-06 having tripled its investments in a year.

Gujarat stands fourth in the country with regard to the number of new projects it attracted. The number dipped from 95 new projects in 2005-06 to 86 in 2006-07. However, it more than made up for the dip in the number of projects by increasing the average investment per project dramatically from $64.5 million in 2005-06 to $213 million the following year.

Situated in western India and bordering Pakistan, Gujarat is among India's most prosperous states. Its per capita GDP is 2.4 times the Indian average. It is India's most industrialized state and accounts for 20% of the country's industrial output, 25% of its textile production, 40% of its pharmaceutical production and 47% of its petrochemical production. The state accounts for 21% of India's exports.

Gujarat's economic success has come despite serious disasters - natural and manmade - that the state has suffered over the past 15 years. In 1992, the city of Surat - the center of India's diamond cutting and polishing industry - was hit by a plague epidemic. Then in January 2001, an earthquake measuring 7.9 on the Richter scale flattened Gujarat's Kutch region. A year later, the state was rocked by Hindu-Muslim riots that were aided and abetted by sections in the Gujarat government including Modi.

But business analysts point out that Gujarat has in fact reaped fortune from adversity. This is evident from Kutch's spectacular rise as India's new gateway to riches.

As part of its efforts to rebuild quake-torn Kutch - 95% of Kutch district was destroyed by the earthquake - the government granted a series of concessions, including a tax holiday to attract industrial houses and corporations lined up to take advantage of them. Today Kutch is at the forefront of Gujarat's economic boom.
A report in Times of India describes the Gulf of Kutch as India's "Gulf of Riches". Four top business houses - Reliance Industries, Essar Group, Adani Group and Tata Group, have invested about $34 billion along the Gulf of Kutch's 700-kilometer long coastline. Other corporates, which had invested over $3.26 billion since the 2001 earthquake have investments worth another $19.5 billion in the pipeline. Ten special economic zones (SEZs) near Jamnagar, a 4000-megawatt power project and five private shipyards are coming up. And massive expansion is being undertaken of the Mundra and Kandla ports.

Gujarat's 41 ports handle 80% of India's port traffic and 20% of its cargo. It is estimated that by 2015, Gujarat's ports will handle 39% of India's cargo.

Not only has Gujarat unseated Maharashtra as India's number one investment destination but also, it is threatening to dislodge Mumbai, Maharashtra's capital and the financial and business capital of India, as the trade gateway to the country.

Gujarat is aggressively promoting four private ports - Mundra, Pipapav, Kandla and Dholera. And Mundra port where Indian Oil Corporation and Hindustan Petroleum are setting up giant oil storage capacities has already emerged as India's largest private oil storage tank farm. Sixty percent of India's coal imports enter via Mundra port. Mundra’s importance is likely to soar further with the completion of mega power plants being set up by Adanis and Tatas.

The volume of cargo handled by Mundra and Kandla ports alone has outstripped that handled by Mumbai’s ports - the Mumbai Port Trust and the Jawaharlal Nehru Port Trust.

And now Gujarat is nursing ambitions of dislodging Mumbai as India's financial hub. Its government recently announced the setting up of an international financial services center, the Gujarat International Finance Tech-City with an investment outlay of $6 billion in Ahmedabad.

"Gujarat has emerged as India's special economic zone [SEZ]," Modi boasted in his speech at a recent meeting of the World Economic Forum at Dalian in China, referring to huge success that Gujarat has experienced in attracting domestic and foreign investment.

Gujarat's experience with setting up SEZs has been pretty smooth. Unlike in other parts of the country where land acquisition for SEZs has encountered massive protests, in Gujarat where 33 SEZ proposals have been approved since the state's SEZ Act was passed in 2004, the process has been largely trouble-free. Barring the case of Reliance's SEZ near Jamnagar, where farmers went to court, and some protest in Por near Vadodara, Gujarat has seen little protest over land acquisition.

This is because Gujarat's port-led development of SEZs involves setting up SEZs along its 1,600-kilometer-long coastline. SEZs are located on large tracts of fallow and saline land in Kutch and Saurashtra. This is arid land that had no takers earlier; but the SEZs now hold out the promise of economic activity and are welcomed by the locals.

The Mundra SEZ, for instance, is being built on land virtually unfit for human habitation and it has brightened economic prospects immensely. A plot here which might have fetched a price of $2,500-$5,000 a few years ago now sells at $250,000. Farmers are eager to sell their land. This is not the case in other parts of India where SEZ developers are eyeing rich agricultural land that farmers are reluctant to sell.

Another reason for the trouble-free land acquisition in Gujarat is that the government has left it to the SEZ promoters to purchase land directly from farmers. So, the farmer can demand market price for his property and not settle for the lower prices offered by the state when it acquires land.

In his election campaign Modi has been boasting of his government's achievements on the economic front. His political opponents argue that his government has merely built on a trend that was set in motion two decades ago.

His critics point out that Gujarat's booming economy might be generating millionaires every month but inequality is increasing as well. Only pockets in Gujarat are glowing, they argue. Infrastructure in cities is improving. Roads are being widened, malls and multiplexes are mushrooming and flyovers and mass rapid transit systems are being built in cities like Ahmedabad. But conditions outside these cities are poor. Unemployment is rising as small-scale industries shut down and capital-intensive projects are not filling the gap.

But even Modi's worst critics will find it hard to dispute the fact that he has given investment a safe port in Gujarat.

If only he would make Gujarat's religious minorities feel the same way.

Sudha Ramachandran is an independent journalist/researcher based in Bangalore.

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Source: http://www.atimes.com/atimes/South_Asia/IK27Df01.html

if india does not make leaps and strides in infrastructure we will not develop .......... everything needs to be concentrated on infrastructure, population control and education..........

infrastructure is crucial otherwise it will not work .............

Getting rid of corruption is big too, it's out of control in U.P. and Bihar. Grassroot movements are developing flush these types of people out. Effiency in the bureacracy needs to improve before any of those things you stated happen there. Bihar is basically ran by an organized crime syndicate.