Gold rush to India's
Gujarat By Sudha Ramachandran
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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