Gujarat on top, again

It’s raining investments in corporate India and Gujarat seems to reaping the benefits. A Reserve Bank of India (RBI) bulletin for August 2007 places the total value of all investment proposals for 2006-07 in Corporate India at Rs 2,83,440 crore. That’s a 116 per cent increase over the figure for 2005-06.

Gujarat, which was ranked #2 in 2005-06 with investments of Rs 24,531 crore, has emerged as the most preferred destination last year, trebling this figure and comfortably pipping the second-placed Andhra Pradesh. Interestingly, the number of projects proposed in Gujarat has fallen to 86 last year from 95 in 2005-06 but what has worked well for the state, which accounts for 25.8% of total investments in the country, is that the average investment per project has increased dramatically to Rs 851 crore from Rs 258 crore.

Videocon Group Chairman Venugopal Dhoot thinks the high quality of infrastructure and a proactive government are primarily responsible for this impressive performance. “The government welcomes industrialists who are not from Gujarat. So, Gujarat will be the first choice for all our future projects,” he says emphatically.

Maharashtra, which has ceded its pole position to its neighbour, has had a pretty ordinary run. The number of projects coming up there increased from 121 to 142, but the value of proposed investments dropped marginally to Rs 24,330 crore from Rs 24,828 crore. The worrying part, though, is not this fall or even its loss of its numero uno status as an investment destination. What should worry the Vilasrao Deshmukh government in Maharashtra is the fall in the state’s share of the all-India investment pie.

From a level of 18.9 per cent in 2005-06, when it was ranked #1, the state’s share has fallen by more than half to 8.6 per cent. Result: It now lags behind Andhra Pradesh, is at par with Tamil Nadu and just ahead of Karnataka.

All these states have registered impressive numbers. Karnataka is scheduled to get investments of Rs 19,930 crore, which is a 400 per cent jump over the figures for 2005-06. Gujarat and these three southern states have accounted for over half of the proposed investments for 2006-07 against 40 per cent in the previous year. For a while now, there has been a competition between Gujarat and Maharashtra for the label of “best investment destination”.

But RBI’s bulletin puts the argument to rest, claims Gujarat Chief Minister Narendra Modi. “The mandays lost due to labour unrest in Gujarat is only 0.65 per cent against 5 per cent in Maharashtra,” Modi recently told BT.

It is also hard to miss the progress made by a former laggard like Orissa, which saw a threefold rise in investments to about Rs 15,000 crore, driven mainly by the giant, albeit controversial, plans of steel majors Posco, Tata Steel and a host of smaller steel companies. Overall, the size of projects has increased. “The sharp increase in the total cost of projects in 2006-07 was, to a great extent, due to the presence of 88 large projects each with costs exceeding Rs 500 crore.

These projects aggregated to Rs 2,01,356 crore and accounted for more than twothirds of the total project cost, compared to 49 large projects amounting to Rs 74,988 crore in 2005-06” states RBI’s bulletin. That’s good news for India. And for now, it’s Gujarat that’s the clear leader of the pack.