Brokerage comes away impressed from a ‘Vibrant Gujarat’   

September 7, 2010

Motilal Oswal's team visited CM Narendra Modi and the heads of a few apex industrial and infra bodies in Gujarat including Sardar Sarovar Narmada Nigam and the ambitious GIFT City. Here are their observations...

A team from leading Indian brokerage Motilal Oswal Securities Ltd (MOSL) which visited Gujarat recently for a first-hand study of the progress is impressed by the enormous growth in the state.

The MOSL team met with the senior managements of apex bodies like Gujarat Infrastructure Development Board, Gujarat Industrial Development Corporation and Gujarat Industrial Extension Bureau, and interacted with representatives of Sardar Sarovar Narmada Nigam and the ambitious GIFT City. The most important meeting was with chief minister Narendra Modi and the brokerage team has published a report that lists the significant advance Gujarat has made in several key areas.

The report, titled 'Vibrant Gujarat', notes that the state has one of the highest agricultural GDP growth rates of 9% in the country (the national average is 2%). It is one of the few states where the ground water level has actually increased over the last decade, driven by the state government's efforts to interlink rivers.

The MOSL report pointed out that the state's leadership has succeeded in turning around fiscal management and from a deficit of Rs67 billion about a decade ago it now has a surplus of Rs5 billion. Even state electricity boards have started to show profits despite tariffs remaining unchanged in this period.

Some of Gujarat's village development schemes have been so successful that they are being emulated by other states, the report said. Among these are the tribal development model, the Jyotigram Yojana through which uninterrupted three-phase power has been made available across all 18,000 villages, the evening courts, and the Chiranjeevi project that is focused on reducing infant mortality.

The state has become a national hub for industries such as ceramics, power
generation equipment and petrochemicals, and it aims to become a hub for manufacturing solar power equipment too. It is also promoting shipbuilding.

The MOSL report says that Gujarat expects to benefit significantly from the interlinking of the Delhi-Mumbai industrial corridor.

The Delhi-Mumbai Industrial Corridor. Source: MOSL report

It expects "its special investment regions to promote large-scale development of industries in a cluster approach, optimising infrastructure and resources (such as disaster management and water treatment for chemical industries) and addressing issues like environment impact and quality of life."

Interestingly, Gujarat seems to be also the best in managing labour relations, which is indicated by the zero man-days lost. The second best state stands at 13 man-days lost.

In education also, the chief minister's office gives some amazing figures. "In terms of women's education, Gujarat was one of the most backward states 10 years ago. Now it has 100% girl children enrollment and the dropout rate in primary schools has declined from 40% 10 years ago to 2% currently," the report says. The state has added 14 new universities over the past decade.

The MOSL team gathered some more notable facts during its meetings with senior management of Gujarat Infrastructure Development Board, Gujarat Industrial Development Corporation and Gujarat Industrial Extension Bureau. Take for instance the Blueprint for Investment in Gujarat 2020 (or BIG 2020) that envisages investment of around Rs12 trillion in 19 infrastructure sectors. The state has 5% of India's population but contributes 16% of the country's total industrial production, it accounts for 16% of industrial investment, 15% of exports and 30% of the country's total market capitalisation. The state expects to become power surplus by the end of this year.

Among the large investment regions in Gujarat are the Delhi-Mumbai Industrial Corridor, the Ahmedabad-Dholera Special Investment Region, a petroleum, chemicals and petrochemical investment region and the Gujarat International Finance Tech City (GIFT City).

The Sardar Sarovar Narmada Nigam project is set to become the biggest achievement. Already, it has helped Gujarat sustain 9-10% agriculture growth. "The dam across the Narmada River which is the largest in the world, will, when complete, create irrigation potential of 1.8 million hectare, or about 25% of the target under Bharat Nirman. The project has helped Gujarat create about a million jobs in rural areas, increase rural incomes and also helped in lowering the dropout rates in schools. The Rs700 billion project, expected to be complete in 2012, will have a 458-km main canal, 75,000 km of feeder canals and capacity to generate 1,450 MW of hydro power." The report does not comment on the environmental impact of the project which has been controversial.

MOSL also met with top representatives of the GIFT City project, which many believe could draw nearly half of the corporate offices (mainly financial companies) from Mumbai. "The Master Plan for the 62 million square feet (msf) project is complete. The initial phase of four msf is to be completed by 2012. The target segment is core financial services, IT/ITES for financial services, capital market and trading. IL&FS has signed up as the anchor tenant. Initial rentals are at Rs50-55 per square feet a month," MOSL says in the report.

Gujarat International Finance Tech City (GIFT City), coming up near Ahmedabad, is only 12 km from Ahmedabad airport. Source: MOSL report

GIFT City is located near Ahmedabad, on the left bank of the Sabarmati river, and is only 12 km from Ahmedabad airport. It will be connected to the airport by a metro service. It is a 50:50 partnership between Gujarat Urban Development Company and Infrastructure Leasing and Finance Services. While the government of Gujarat will develop the infrastructure outside the City and GIFT will provide inter-city infrastructure, commercial development will be left to end-users and real estate developers. — Munira Dongre