Nitin Shukla, MD & CEO, Hazira LNG; RS Sodhi, MD, Gujarat Co-operative Milk Marketing Federation (GCMMF); Ashish Soparkar, MD, Meghmani Organics; Sebastian Morris, faculty, IIM Ahmedabad; and Chandan Chatterjee, director, Centre for Entrepreneurship Development (CED) met at the Business Standard Round Table to discuss the topic, ‘Gujarat: Its Growth Challenges’. The discussion, organised in Ahmedabad, was moderated by Shyamal Majumdar. Excerpts:
Having established itself as a premier investment destination, Gujarat has earned accolades from outsiders who say, “it is easy to do business here”. The state has consistently clocked over 10 per cent growth per annum for the past few years.
It is also one of the few states to register a sharp improvement in what is called economic freedom. Yet, during the seven-year period from 2004-05, Gujarat has been the last of only six states to clock double-digit growth in its gross state domestic product. Ahead of Gujarat’s 10.08 per cent are the likes of Uttarakhand (13.2), Bihar (10.9), Maharashtra (10.7), Tamil Nadu (10.4) and Haryana (10.1).
While one end of the spectrum highlights Gujarat being an investment haven, at the other, there are voices that claim that much of the state’s growth has been manufacturing-led and has accentuated inequalities.
In his opening remarks, Shukla praised the state government for developing infrastructure that has helped industry “save millions of dollars”. For Shukla, the state has scored well with regard to ports and a gas grid. “Gujarat was one of the few states to develop top-class ports on a PPP basis. The Government of Gujarat gave infrastructure status to the gas grid and that is the reason why gas accounts for 23-25 per cent of the energy basket in Gujarat, as against the 9-10 per cent national average.”
According to Shukla, there are only two LNG terminals in India and both are in Gujarat — one in Hazira, the other in Dahej. “By using LNG, industries in Gujarat have become more competitive and are able to compete not only at the national level but even abroad.”
Answering claims over Gujarat’s skewed growth, Shukla said that there were inherent inefficiencies in the system which will have to be reduced as much as possible and a systemic approach adopted to incentivise efficient use of resources.
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“For efficient use of resources, we will have to climb the value addition ladder. We will have to make Gujarat a livable state for youth. Most of the IAS officers who retire, even if they are from other states, stay back here. This can happen through improvement in quality education, social life, law and order, entertainment and social infrastructure. We will need these things if we want to sustain double digit growth,” he said.
Seconding Shukla’s views, RS Sodhi emphasised the need to improve living conditions in Gujarat. More than GDP data, said Sodhi, an investor would look at confidence and trust in the place where he/she is going to invest. However, Sodhi disagreed with the view that much of Gujarat’s growth has come from the manufacturing sector alone. “I don’t agree that only manufacturing industry has grown. It is just that the manufacturing industry is more vocal than the rural (agrarian) people. In the last 10 years, while milk production grew by 4 per cent in India, in Gujarat it grew by 6.5 per cent. So growth is there in rural areas as well,” said Sodhi.
Despite growth in rural areas as well, the panelists agreed that much still needed to be done to achieve sustainable growth. The panelists talked about how an investor looks for infrastructure, stable leadership and skill development while contemplating investing in any state.
On his part, Soparkar dismissed comparisons of Gujarat with other states while demanding a “better benchmark” like other countries. “For the progress of any industry or state, we need to take a telescopic as well as microscopic look — telescope for the vision and microscope for implementing what we have seen as a vision/policy. And in Gujarat it has been done. In future, availability of land for all types of industries will be an issue. Looking at future requirements, if certain industries can be clustered together, their raw material availability will improve and costs can come down,” Soparkar suggested.
Throwing further light on social infrastructure development in Gujarat, Soparkar cited a real-life example. “One of my senior banker friends after retirement went to settle down in Lucknow but his daughters pulled him back to Gujarat because they preferred living here. We need to make Gujarat more livable for youth,” he added.
On the other hand, according to Morris, Gujarat cannot have sustainable growth in isolation. “The sustainability will not come from Gujarat-level factors. If Gujarat has to be sustainable, we need to ask: will there be national-level sustainable growth? So when the national economy goes up and down, Gujarat also goes up and down, but with a higher average. So now that we have seen low national growth, growth will come down in Gujarat too,” he said.
When asked whether a mere 15 per cent of commitment-to-investment ratio at Vibrant Gujarat Summits indicates hype being created over Gujarat’s growth, Morris said, “The fact that only 15 per cent of investment has been realised is no critique, because you don’t expect more than 15 per cent to happen. Nowhere in the world can 100 per cent of investment commitments be realised. Gujarat has done pretty good on the investment front.”
Offering his views on skill development, Morris said that the quality of education will also have to be enhanced.
“The Gujarat society has not taken to education the way South India has done. Taking the way of education leads to upliftment, which has not happened in Gujarat. The model present in Gujarat is entrepreneurship, which by its very nature is limiting. The bigger option for most kids in Gujarat is to take to education, find employment and thereby grow in equity. The government could perhaps encourage better-quality schools and colleges. The overall quality of education in Gujarat, barring a few, is very poor. It comes from two things — quality of teachers is very poor and so is English education. You need to hire more quality teachers,” Morris elaborated.
In other words, Gujarat requires investment in hard infrastructure as well as in promoting think tanks that can argue in favour of the state.
Defending the state government’s efforts at skill development, Chatterjee lauded Gujarat’s efforts in collaborating with industry for setting up training centres. “Skill development is the subject of the education department or the technical department. But Gujarat is the first state where its industry department also started talking about availing the right kind of manpower. In Gujarat, we ask industry to come forward and set up a skill development centre and 50 per cent of the cost will be subsidised by the government,” said Chatterjee.
Today, close to 100 such skill development centres in participation with industry have been set up by the state government. “So the government is ready to work on education,” Chatterjee added.
Talking about labour issues, Chatterjee said that conventional industries will need to upgrade themselves. “Many a time a conventional industry like textiles should match other industries, which it might not have done. This leads to labour unrest,” he added.
With availability of land set to be an issue in Gujarat in future, Soparkar also suggested zoning of industries. “In future, availability of land for all types of industries will be an issue. We require a zoning type of concept where you locate all types of dyestuff or pigment industries at one single place so as to save on transportation, infrastructure and logistics near the port. That will yield faster growth in future,” said Soparkar.
In conclusion, the panelists agreed that social infrastructure and skill development would play a pivotal role in Gujarat if the state was to overcome challenges and sustain double digit growth.