GUJARAT Accelerating Towards a Knowledge Economy
GUJARAT Accelerating Towards a Knowledge Economy
General Director & Project Coordinator Javier Jileta Edition Javier Jileta Jorge Cabrera Román Meyer Eduardo Castro Research & Content Development José Carlos Barranco Alejandro Cabrales Abraham García Kenneth Lazo Luisa Mancera Jorge Luis Salas David Sánchez Translation Kenneth Lazo Luisa Mancera Art Direction Eduardo Castro Design Eduardo Castro Danira Espinosa Romina Rivera Photography Shutterstock Ilustration Emilio Cantón Renders Alejandro Cabrales Román Meyer Daniel Ceceña Alberto Lara Reproduction of all or part of this work by any means, including electronic, is prohibited without the express permission from the copyright owner. Copyrights of the published texts are the property of Cientika, AC, unless otherwise specified. The US Dollar amounts published were calculated on the Exchange rate in effect as of May, 2012. Most amounts may be rounded in order to facilitate Reading comprehension.
GUJARAT Accelerating Towards a Knowledge Economy
“Knowledge and information represent the economy of the future� S a m P i t ro d a
CHAPTER
1
CHAPTER
2
Introduction
Knowledge as Economy Driver
10
India in a Global Context
18
What is a Knowledge Economy?
12
Indian Cities and Economic Indicators
20
Knowledge Economies Around the Globe
14
India Towards a Knowledge Economy
22
What is a Knowledge City?
24
Knowledge Cities Around the Globe
26
Knowledge Cities vs. IT Parks
28
A Knowledge City: Main Components
30
A Knowledge City: Street-Level View
32
A Knowledge City: Lifestyle Impact
INDEX
CHAPTER
3
CHAPTER
4
Gujarat’s Economic Profile
The Smart Mix for Guajarat
36
Gujarat: Prime Indicators
54 Global Macro Policy for Economic and Social
38
Industrial Sector in Gujarat: An Overview
40
Industrial Sector in Gujarat: A Closer Look at Industries
44
Service Sector in Gujarat: An Overview
46
Service Sector in Gujarat: Close-up of the Main Components
48
Logistics Infrastructure in Gujarat
50
Gujarat’s Main Cities
Development
56 Successful Policies for Economic and Social Development in India
58 Current IT and Economic Development Policy in Gujarat
60 Strategic Policy Opportunities to Drive Gujarat Towards a Knowledge Economy
62 DMIC: A Case Study of Economic Development and Infraestructure
64 Special Investment Regions: Case Study for Economic and Industrial Development Policy
66 Investment Opportunities in Gujarat 68 Knowledge City: Opportunities within Gujarat 70 Conclusion
INDIA IN A GLOBAL CONTEXT In the next two decades, India will have the 5th largest consumer market in the world1. Main indicators are: • Household income growth will accelerate 5.3% across India. • Rising income levels will lift 291 million people out of poverty and create a 583 million-strong middle class. • The shape of India’s income pyramid will change dramatically as incomes grow. From aspirers seekers and strivers. • India’s share-of-wallet is shifing from basics necessities to discretionary items. From food to health care, education, transportation, and household products. • Per capita GDP has been increasing steadily over the past two decades with averange annual growth rates of 3.6%. Brazil, Russia, India and China (BRIC) currently make up one of must important economic blocks in the world, accounting for 15% of global GDP with higher economic growth rates than the U.S. or Japan.2
*
**
BRAZIL Population
194 millions
Population
Distribution
1210 millions
Distribution
84% urban
3.7%
INDIA
16% rural
GDP Economic Growth Rate US$
$2,087 billion
Literacy Rate
32.2% urban
69.6% rural
8% Economic Growth Rate
Employment Rate
64% 91.7%
253 universities 40.6 Internet Conectivity
Employment Rate
9000 universities 7.5Internet Conectivity
Per 100 inhabitants
Per 100 inhabitants
104 Cellular Subscribers 48 FDI Equity Flow 54.7 GINI Index Development 0.718 Human Index Per 100 inhabitants
3
US$ billion
4
1
$1,727 billion
Literacy Rate
90%
12
GDP US$
61.4Cellular Subscribers 24 FDI Equity Flow 37.8 GINI Index Development 0.547 Human Index Per 100 inhabitants
US$ billion
McKinsey, “The ‘Bird of Gold’: The Rise of India’s Consumer Market”, 2007.
2
Goldman Sachs. “Dreaming with BRICs_ The Path to 2050”. 2003.
3
The GINI Index measures how far from an ideal wealth distribution a country is. A 0 on the GINI Index would indicate ideal wealth distribution, a 100 indicates unequal wealth distribution.
95.6%
Introduction GUJARAT
INDIA a land of opportunity and cultural wealth
***
****
CHINA 1347 millions
Population
RUSSIA Population
Distribution
142 millions
Distribution
47.8% urban
52.2% rural
12.4%Economic Growth Rate
GDP US$
73.2% urban
$5,926 billion
Literacy Rate 94%
6.7% Economic Growth Rate
Employment Rate
**
World Bank, Government of India,
ITU, UNDP UN, ITU, UNDP ***
World Bank, UN, ITU, Government of China, UNDP
****
World Bank, UN, ITU, Government of Russia, UNDP
$1,479 billion 100%
95.7%
Employment Rate
2236 universities 34.3 Internet Conectivity
400 universities 43 Internet Conectivity
64 Cellular Subscribers 18.5 FDI Equity Flow 41.5 GINI Index Development 0.687 Human Index
166 Cellular Subscribers 42 FDI Equity Flow 42.2 GINI Index Development 0.755 Human Index
Per 100 inhabitants
World Bank, Government of Brazil,
GDP US$
Literacy Rate 64%
94%
*
26.7% rural
Per 100 inhabitants
US$ billion
4
91.8%
Per 100 inhabitants
Per 100 inhabitants
US$ billion
The Human Development Index, measured on a scale of 0 to 1, is an aggregate of three indicators: longevity, knowledge, and the command over resources needed for a decent life. For longevity, the UN team uses life expectancy at birth. For knowledge, the use adult literacy and mean years of schooling. And for the command over resources, the use gross domestic product (GDP) per person after adjusting for purchasing power.
13
INDIAN CITIES AND ECONOMIC INDICATORS According to BBC, India has the 2nd highest population density in the world. Trading Economics states that India’s GDP grew 6.1% from the third quarter of 2010 to 2011.5 The Indian economy is based mainly on agriculture, manufacturing, industry and services. The main indicators of growth during 2011 were:
+4.3% real estate market +16.3% petroleum derived exports +9.8% basic services (water, gas and electricity distribution)6 Stock Marketing India ranks Gujarat as the best state for local investment, receiving 13.2% of investments coming from within India.7 Gujarat has become increasingly well positioned over the last decade due to its rapid industrial and service sector growth. The state is home to the world’s largest oil refinery in Jamnagar as well as strong textile, petrochemical, precious stone and processed food industries.8
5
BBC. India Profile. 2011
6
Trading Economics, “India GDP Growth Rate”
7 “
14
8 9
Top 5 investment states in India”, 2011.
“India’s Top 20 states by GDP”, 2011.
Government of India, IBEF, VMW Analytics, India Text, Institute of Competitiveness, UN. Representing technical framework of the information society
10
Introduction
DELHI 472 miles
1hr. 10 mins. GUJARAT AHMEDABAD
KOLKATA 1,009 miles
2hr. 15 mins.
MUMBAI
Clusters of prosperity throughout the country
309 miles
46 mins.
CHENNAI 859 miles
1hr. 55 mins. 9
Gujarat (Ahmedabad)
Delhi (New Delhi)
60.3
16.7
112.3
91.3
72.13
31.34 / 52.56
77.03 / 5.63
36.57 / 49.63
24.55 / 63.21
38.09 / 48.40
12.21%
10%
14.23%
10.76%
17.94%
90.5 billion
45.9 billion
190.1 billion
84.4 billion
97.8 billion
Literacy Rate Annual Employment Growth
79.3%
86.3%
82.9%
77.1%
80.3%
2.3%
12%
1.25%
.41%
.37%
Communication Infrastructure10
54.64
73.43
72.19
66.28
58.63
GSM Cellular Subscribers (% of all India) FDI Equity Flow (US$ billion)
6%
4.2%
10.8%
7.34%
9.59%
7.2
26.1
45.8
1.6
7.3
Number of Universities
11
8
19
18
65
Human Development Index
0.621
0.789
0.689
0.635
0.675
Innovation Infrastructure Index 12
57.81
62.97
70.64
59.61
67.45
Income Distribution
59.48
65.03
65.77
58.71
60.73
State Population (million) State Population Urban / Rural Distribution (%) Economic Growht Rate GSDP (US$)
11
13
11
Maharashtra West Bengala Tamil Nadu (Mumbai) (Chennai) (Kolkata)
RThe Human Development Index, measured on a scale of 0 to 1, is an aggregate of three indicators: longevity, knowledge, and the command over resources needed for a decent life. For longevity, the UN team uses life expectancy at birth. For knowledge, they use adult literacy and mean years of schooling. And for the command over resources, they use gross domestic product (GDP) per person after adjusting it for purchasing power. Cities that achieve more innovation outputs surmounting weaknesses from the input side – the efficient innovators – and
12
those that lag behind in fulfilling their innovation potential. Innovation performances are analyzed in reference to the income and regional groups. Refers to how evenly the total amount of income in an economy is divided between members of the workforce.
13
15
INDIA TOWARDS A KNOWLEDGE ECONOMY The Indian labor force represents the second biggest in the world after China with 487.6 million workers (CIA World Factbook). Their specialized universities are also producing an increasingly educated labor force.14 Since India’s economic liberalization in 1991, the incentives for ICT development have grown at an average annual rate of 7%. The government hopes to have growth rates of 10% over the coming years.15
1980
India (current prices)
GDP GDP Per Capita Annual Economic Growth Percentage of World GDP Global Economic Ranking Percentage of Services GDP Growth in IT-BPO Sectors
$181 billion USD $265 USD 5.6% 2.2% 11 38% ---
2011 $1,727 billion USD $1,470 USD 8% 5.6% 9 57.7% 6.2%
16
Sectorial % of GDP 2011 SECONDARY
28% 58% 14%
PRIMARY
14
16
15
CIA. “The World Factbook”.
World Trade Organization, IMF, 2009.
16
Government of India. “Economic Survey 2011-12. State of the Economy and Prospects”.
TERTIARY
Introduction GUJARAT
“India will become the fastest growing economy with 9-10% growth over the next 20-25 years” (Morgan Stanley) Promotion of scientific and industrial research in engineering, electronic hardware, textiles, biotechnology, pharmaceutical and ICT is crucial. If investment in these sectors continue, they will propel India’s continued growth at a rapid pace. If these growth rates are maintained over the next decade, India could be well-positioned to become the world’s largest economy.
Growth Rates 2011 / Sector
17
23.0% Bio Services 21.5% Biotechnology 20.5% Bio Industrial 16.0% Textile 15.7% Pharmaceutical 6.7% ICT 6.6% Agriculture 5.8% Industrial sector 4.9% Bioinformatics 17
Ministry of External Affairs, ITP Division, Government of India, 2011.
17
Knowledge encourages countries development by optimizing the use of human resources
WHAT IS A KNOWLEDGE ECONOMY? In the last few decades, the most advanced economic models have moved away from industrial production and services and moved towards the creation of wealth through less tangible means. This emerging structure is called a knowledge economy, characterized by its use of technology and information to generate value and wealth. Strategies focused on strengthening education, sciences, industry and new technologies are common.
The Knowledge Paradigm A new global community is now connected 24/7 and sharing information across borders. The creation of wealth by communities worldwide is closely tied to their ability to become part of this new comprehension of human development and economic growth. Investment is key in areas such as education, health and telecom provide the groundwork for an effective incursion into the highly productive and profitable knowledge paradigm. A knowledge economy can be easily conceived as an environment in which different institutions, organizations and individuals use, create and share knowledge to foster sustainable technological, social and economic development of their communities. A knowledge-based economy has to constantly look to the future in order to strengthen the present abilities, capacities and adaptability of the people actively participating. Investment in research and applied sciences is the key igniter of progress for those communities that want to lead in today’s world.
20
Knowledge as Economy Driver
Knowledge Pentagram* Access to Knowledge
CON
ACCESS
Access to knowledge must be seamless; databases, digital libraries and networks must be available to everyone.
Knowledge Concepts
S
SERV
ICES
CEPT
AP
ON
TI A E
LIC
AT IO
N
CR
Conceptualizing knowledge through education and investigation.
Creation of Knowledge Letting the creation of knowledge yield intellectual property, innovation of processes and entrepreneurs.
Knowledge Applications Developing applications for all kinds of knowledge.
Delivery of services Knowledge creates a competitive advantage in the commercialization of products and services.
An economy that fosters sustainable social, technological and economic development 21 * National Knowledge Commission. Government of India.
KNOWLEDGE ECONOMIES AROUND THE WORLD In the last 20 years, knowledge has helped humanity more fully capture the potential of its human assets as well as technological communication systems to create cutting edge technologies. Biotechnology, nanotechnology and advanced telecom are just a few examples. Knowledge economies foster inclusive economic, political and social agendas. The World Bank created a Knowledge Economy Index (KEI) that measures a country’s ability to generate, adopt and diffuse knowledge based on four pillars.18
1
Economic and Institutional Regime: based on tariff and non-tariff barriers, regulatory law, and rule of law.
2
Education and Human Resources: based on average years of schooling and secondary/tertiary enrollment.
3
Innovation Systems within research centers, universities, consultants, etc. tap into the global knowledge and adapt it to local needs.
4
ICT based on phone, computer and internet usage.
SWEDEN
Number 1
Sweden has one of the most well developed innovation systems in the world. 2011 GDP was $US 544.71 million and grew 3.8% from 2010-2011. Sweden’s population is among the most educated in the world and they produce the highest per capita ratio of science and engineering degrees in Europe. Their strongest sectors of production and patent creation are radio, television and telecom equipment.
22
• Economic and Institutional Regime – 9.58 • Education and Human Resources – 8.92 • Innovation Systems – 9.74 • ICT – 9.49
18
World Bank. “Knowledge Economy Index”, 2012.
Knowledge as Economy Driver
GERMANY
Number 8
INDIA
Number 110
Germany’s primary industries are automotive, electrical engineering and chemicals. Production of research-intensive goods ranks 2nd after only the U.S., with 15.6% of the global share. Research budgets grew by 3.1% annually between 2000 and 2002. Germany’s GDP in 2010 was $US 3.519 trillion with a 2.5% growth rate in 2011.
India is ranked 110 on the list. While clearly indicative of a developing economy, is also indicative of growth and new market opportunity. Changes in public policy and innovation systems as well as improvements in education and ICT infrastructure would drive the growth of an inclusive and sustainable economy, profoundly impacting India’s future.
• Economic and Institutional Regime – 9.10 • Education and Human Resources – 8.20 • Innovation Systems – 9.11 • ICT – 9.17
• Economic and Institutional Regime – 3.57 • Education and Human Resources – 2.26 • Innovation Systems – 4.50 • ICT – 1.90
The potential driver of the future world order
SINGAPORE
Number 23
TAIWAN
Number 13
Singapore is ranked among the world’s top 10 countries for science and technology integration in education. In 2002, a highlevel economic review committee was organized by the government to increase innovation and position Singapore as an innovation hub for Asia. As of 2010 the estimated GDP was $US 253.177 billion with growth of 5.2% in 2011.
Taiwan has gone through major economic development changes over the last decades. Taiwan’s main industry is electronics, although they also have a strong services sector. There have been concerted private and public industry efforts focused on R&D programs and education systems have been heavily bolstered. Taiwan’s GDP in 2010 was $US 503.94 billion with 5.4% growth.
• Economic and Institutional Regime – 9.66 • Education and Human Resources – 5.09 • Innovation Systems – 9.49 • ICT – 8.78
• Economic and Institutional Regime – 7.77 • Education and Human Resources – 8.87 • Innovation Systems – 9.38 • ICT – 9.06
23
WHAT IS A KNOWLEDGE CITY? Knowledge cities are environments that attract highly creative and productive companies and human capital. They possess economies driven by high-value added products and services created through research, technology and brainpower. Public and private sectors come together to nurture knowledge creation and support learning and innovation, harnessing knowledge to create wealth. One of the most important factors in the transition towards a knowledge economy is having the appropriate spaces for business, government, academia and society to interact and form a fully functional system of collaboration. These pieces come together in what are known as knowledge cities: urban centers where people can live, study, work, create, share and transform knowledge. These cities are created in order to consolidate scientific and technological innovation and catalyze a country or region’s economic development. Knowledge-based communities require education, infrastructure and private sector initiatives to be aligned, creating clusters that accelerate technological and research breakthroughs. They act as magnets of talent and drive economic growth and progress, representing an exciting business opportunity where new partnerships can be explored and developed. Knowledge cities are intrinsically intertwined with their surroundings. Their configuration, growth and success are dependent on how well they integrate with the surrounding communities. Knowledge cities have five defining characteristics that collectively determine value creation.
Key Characteristics19
1 2
Manage and nurture research and innovation
3
Infrastructure optimization
4
Preservation and nurturing of the natural environment
45
Key geographic location in relation to nearby cities
19
24
Public and private sector participation
National Knowledge Commission. Government of India.
Knowledge as Economy Driver
Key Components High connectivity and efficient transportation systems Energy-saving systems and water treatment plants Mixed-use complexes
BASIC INFRASTRUCTURE
Pedestrian zones, walkable distances and integral city planning Public areas for interaction, ammenities and green areas
Talented and highly skilled human capital Horizontal structure linking different stakeholders Promotion of leadership among peers
HUMAN RESOURCES
Creative and innovative key individuals Multidisciplinary teams
Political: government support Incentives: promote investment Security: guarantee safety and investment stability
ECOSYSTEM
Diversity of population and disciplines Cultural spaces and activities
High speed fiber optic internet access 24/7 connectivity and support City’s own productivity platform, shared by all its users
ICT
Online education and entertainment
A city that harnesses knowledge to create wealth 25
KNOWLEDGE CITIES AROUND THE GLOBE
The Research Triangle Durham, USA • 10.93 sq. miles • One of the most prominent high-tech R&D centers in the U.S. • Population of 1.7 million • Created in 1959 by local government, nearby universities and private sector • Hosts 2nd largest IBM operation after India and one of GlaxoSmithKline’s largest R&D centers in the world
Harnessing the power of collaboration to foster economic growth Ciudad del Saber Panama City, Panama • 0.5 sq. miles • Education, ICT, biosciences and environmental management • Government-sponsored cluster of academia, technology companies and NGOs • Created to foster innovation, entrepreneurial culture and sustainability
26
Knowledge as Economy Driver
22@Barcelona Spain • 1.28 sq. miles • Aims to develop the region’s talent pool and nurture UAE’s knowledge economy • Over 450 business partners • Shared work campus for multi-industry collaboration
Dubai Knowledge Village United Arab Emirates • 1.28 sq. miles • Aims to develop the region’s talent pool and nurture UAE’s knowledge economy • Over 450 business partners • Shared work campus for multi-industry collaboration
Suwon South Korea • 46.8 sq. miles • Acts as a major educational center – home to 14 university campuses • Population of 1.1 million • Widespread transport links drawing inhabitants from all over the country • Home to Samsung headquarters
Bentley Technology Park Australia • 1.24 sq. miles • Transformation of the industrial urban fabric into a knowledge based center of commerce, innovation, and hi-tech opportunities. • 130,000 new jobs
27
KNOWLEDGE CITIES VS. IT PARKS
While IT parks and knowledge cities both focus on R&D, knowledge creation and value-added products and goods, knowledge cities take a more collaborative, integral approach in terms of both inter-sectorial collaboration and urban community life.
IT Parks Economy based on heavy industry, manufacturing and services.
Knowledge Cities
Advantages of Knowledge Cities
Economy based on knowledge, research, services and light industry.
Knowledge is an unlimited resource and creates better quality jobs.
Collection of various industries in related sectors with close ties.
Joint development between government, By grouping government, private sector and private sector and academic academia, a symbiosis catalyzes better economic institutions. Heavy industry replaced by development in the city. science and tech research.
Normally concentrated in a determined area outside the city.
Immersed in the city itself or on the outskirts. Has its own community, as people live and work there.
Inhabited during work hours.
Constant movement, as inhabitants live and work here.
May or not be located near universities and research centers.
Located near universities and research centers, and have their own research institutions.
Full of instruments that help make knowledge more accessible.This benefits scientific and technological investigation as well as training of human capital.
Requires human resources with technical abilities.
Requires human resources with a wide range of specialties and capabilities.
Attract human resources that currently have a small job market, so they choose to leave in search of other options.
Creation of technical jobs.
Creation of high-qualification jobs.
Work generated by knowledge cities offers better remuneration.
Knowledge cities create spaces for economic, social and cultural development.
Allow for more interaction, thus attracting talented individuals.
India’s IT strength can be leveraged through a knowledge economy 28
Knowledge as Economy Driver
QUALITY OF LIFE
s job g yin pa
IC OM ON EC
s ce
s
renewal and beautificatio urban n pr s e t ogr a am ton e s D e i t s i a c s s g n l o o i t y b i a s t l o i P v p o w n o e ti rhouse ti innova s t n n o o c m e e i s c r a e n g d g Inc i m Tr en ocial development e s r ti a tw C r g e ate in nd sm pe
LTH
A HE
BENEFITS
reating les, c esty s r lif e ieti hie alt soc he er i systems es lth ergy viz hea t en ien ffic ee or
brain drai n tr
evels of education by cr e higher l re highly-educate ating mo for the mo d re jo bs ns to solve environ o i t u l o s ment e t a e r o m n ic problem al, ps c social and eco s Hel
zes ntivi Ince
end Integrates sb educa yc tion a rea nd p tin rofe gs ssio pe cia nal Genera liz tra tes n i ed ew h nin ,b ighgw et val ith te ue Strengt rl a a hens dd b ed com or peti go m tive ar od k sa nes Greater nd s in inter se nati glo ona rv ba i l ne lm t w ar Attract o r ke s mo ka re F t nd ore co ign nn D Incentiviz ec ire es lo ct call Inv y-d es eve t lop Attracts a e nd in ds cre of ase sR &D s
et
Counte racts
ies sit s ce ne
29
A KNOWLEDGE CITY: MAIN COMPONENTS Natural Elements
Transportation
Ecological Facilities
Architecture and Urban
Amenities
Green Areas
30
Mixed Use
Various Residencial Spaces
Vehicle-free Zones
Parking Lots and Meters Urban Fabric
Public Spaces
Knowledge cities represent the dynamic of the surrounding ecosystem
A KNOWLEDGE CITY: STREET-LEVEL VIEW
Vegetation
Climate Protection
Trees, bushes, flowers and other plants create shade and oxygen while cleaning the air. They also generate an overall sense of wellbeing.
Elements that block direct sunlight and wind to make moving around the city more enjoyable.
Urban Furniture a Benches b Lighting c Garbage bins d Sculptures and monuments
32
Rainwater Separation System Special Drainage Systems to Control Flow of Rainwater
Public Amenities
Types of Paved Areas and Circulation
a Theatres b Parks c Cultural centers
a b c d e
Commerce on Lower Levels
Wide sidewalks Car lanes Pedestrian walkways and crossings Confined street lanes for exclusive use of public transporation Bicycle lanes
Cafes and Restaurants Urban Security Systems
33
A KNOWLEDGE CITY: LIFESTYLE IMPACT Compact City The concept of a compact city relies on efficiency achieved through shortening travel distances. This creates more vertical, dense cities. This type of urban planning incentivizes use of public transportation and other alternative transportation methods such as walking or biking. Mixed-use development means residential, office and commercial spaces all coexist in the same buildings. Compact cities are less dependent on cars, having rapid access to multiple urban facilities, less pollution and a more collaborative community life. Commute times are also shorter and transportation expenses fewer. These factors have a positive impact on quality of life. People inhabiting a compact city have a different urban experience. They feel safer as there is 24/7 activity and they enjoy more free time, all factors that contribute to a more cohesive sense of community.
New York
Los Angeles
Population
8,175,133
3,792,621
US CENSUS Bureau
People using public transportation
52.80%
10.20%
Pricewaterhouse Coopers
People enrolled in college
593,664
287,532
The Open Space
Median Household Income (per year)
Urban Sprawl These cities are zoned so that each area functions independently of the others – residential, office and commercial areas are all separate. These cities sprawl over large areas of land, with core central areas concentrating office and commercial areas and residential areas located in the peripheral suburbs, meaning inhabitants are extremely dependent on cars. They also work with a specific schedule, with daytime activities being concentrated in the central core and nighttime activities in the periphery. This creates a higher risk of insecurity in deserted areas and a sense of disconnect with the greater community.
$48, 631USD
$31, 870USD MTA
Green spaces per capita
10-12 sq. m
4-6 sq. m LAMetro
Apartment Purhcase Price per sqm
$10,000USD
$ $4,700
Avg. Monthly Rental (apartment)
$2,538.80USD
$1,351.54USD Skyscrapers
34
USD
Compact City New York Knowledge as Economy Driver
Urban Sprawl Los Angeles
35
Gujarat dynamic multi-sectorial economy places it as the fastest growing economy in India
GUJARAT: PRIME INDICATORS Gujarat Potential / Strength to Become a Knowledge Economy Business Environment Gujarat produces20
Gujarat breeds entrepreneurship and industrial vitality. There is a strong network of wealth creators and renowned Gujarati businessmen that have led companies throughout the state, which demonstrates the entrepreneurial success in various sectors as well as the presence of significant wealth creators within the state. Gujarat is also home to:
6.05% od National GDP
* India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011.
State Government Involvement The Gujarati government famously unveiled its plan in 2009 to develop industrial corridors known as Special Investment Regions (SIRs) and lure investors towards Special Economic Zones (SEZs) aimed at bolstering its already thriving industrial sector. The plans have already incited precipitous growth and diversified investments across the state thanks to an effective bureaucracy and loose limitations on business development.
Skilled Labor Force Not only does Gujarat boast one of India’s premiere research universities, MS University of Badora, but the state also prides itself in a highly technical and advanced network of technical colleges, trade institutions, and advanced research graduate programs that enroll over 7 million students each year. Other prestigious education institutions include:
38
1
BK School of Business Management
2
Sardar Valabhbhai National Institute of Techonology
3
Nimra University
Gross State Domestic Product 21 (%) by sector 14.2%
Primary
38.6% 47.2%
Secondary Tetiary
Gujarat’s Economic Profile
Public and private sectors align with a wealth of talented human capital
Medical tourism
IT/ITeS services
BioTech
Agro and food processing
India has attracted nearly $50 billion in Foreign Direct Investment, a 25% increase largely brought on by multinationals bringing operations overseas. Specifically, India’s R&D spending has expanded to become the fourth largest in Asia constituting 1% of its GDP. Such indicators suggest an opportune time for investors to seek out new and diverse opportunities in a burgeoning technical and industrial economy.
GUJARAT 2020
GUJARAT 2012 1 Critical mass of skilled, English-speaking knowledge workers
GDP
90.6 billions
2 Functional democracy 3 Large number of Indians, namely Gujaratis, living overseas creating
a vast network abroad 4 Diversified science and technology sectors 5 A dynamic private sector and a free market economy 6 A well-developed financial sector
20 21
+50% GDP Increase
India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011. Directorate of Economics and statistics Gujarat, “Socio-Economic Review 2010-2011” Gujarat State, 2011.
39
INDUSTRIAL SECTOR IN GUJARAT: AN OVERVIEW Main Industries and Economic Production in Gujarat22
Textiles 4.97% Factories
1,522
Workers employed
197,483
Net Value Added
US $588 million Value of out
US $5.67 billion Fixed capital
Pharmaceutical 6.64% Factories
550
Workers employed
63,061
Net Value Added
US $771 million Value of out
US $2.7 billion Fixed capital
US $2.5 billion
US $1.2 billion
In 2008-09, Gujarat was the highest exporter of cotton in India with 60% exports. It was also the highest contributor of man-made fibre (31%) and man-made filament yarn (38%) in the country.
The industry in Gujarat grew by 88% between 2005 and 2006 compared to 18% growth across the rest of India.
Over 40 per cent of the country’s art-silk fabric is produced in Surat; Gujarat is the largest producer of denim in India (65 to 70%) and the third largest in the world.
Around 3,500 drug manufacturing units in Gujarat.
Textiles account for 21% of total employment in the state; in 2008-09, the state contributed 33% of mill-made fabric and 25% power-loom fabric to the total fabric produced in the country.
6 industries concentrated
83% of Industrial output Manufacturing & Engineering 18.91%
(Machinery, Equipment, Metal products, and Basic Metals) Factories
5,436
Workers employed
322,581
Net Value Added
US $2.2 billion Value of out
US $18 billion Fixed capital
US $7.7 billion
22
40
http://www.vibrantgujarat.com
Agro and Food Processing 4.77% Factories
1,412
Workers employed
93,917
Net Value Added
US $564 million Value of out
US $11.1 billion Fixed capital
US $946 million
Chemical
Petrochemical 26.26%
21.32%
Factories
Factories
59
1453
Workers employed
Workers employed
28,218
132,231
Net Value Added
Net Value Added
US $3.1 billion
US 2.5 billion
Value of out
Value of out
US 25 billion
US 1.7 billion
Fixed capital
Fixed capital
US $8.2 billion
US$7 billion
30% of fixed capital investment is in the manufacturing of chemical and chemical products.
Contributes to more than 62% of national petrochemical production and 51% of national chemical sector output.
Manufacturing of chemicals and chemical products contribute to around 1/5 of the state’s total employment.
Mehsana
Kutch Ahmedabad Anand Rajkot
Jamnagar
Jetpur
Vadodara Bharuch
Bhavnagar Amreli
Dahej
Ankleshwar
Manavadar
Pipavav
Hazira
Surat
Valsad Vapi Umargam
41
INDUSTRIAL SECTOR IN GUJARAT: A CLOSER LOOK AT INDUSTRIES23 Petrochemicals24
26.26% of industrial output
Market Leaders Reliance Industries Haldia Petrochemicals Ltd. Indian Oil Corp Gas Authority of India Ltd. Oil and Natural Gas Corporation Indian Petrochemicals Corporation Ltd.
Gujarat has been labeled as the new “Petrocapital of India” by KPMG. Currently, the state leads with 54% of India’s onshore crude and 39% of onshore natural gas production. The supreme infrastructure allows for the annual production of 5,944 thousand tons of crude oil with a net value of US$5.9 billion; Rs. 3311 crore. This is in comparison to the net production of the United Kingdom, which produces about 1,502,000 barrels/day or 1.78% of the world’s supply as opposed to India’s 1.04%. The petrochemical industry is well connected as well with a strong educational infrastructure that is oriented towards chemical engineering. As of 2009, petrochemicals have garnered heavy attention through the SIR Act, which has designated blocks of Vagra and Baruch (South Gujarat) as a special investment region for petroleum, chemical & petrochemical. This region will benefit from the state’s friendly investor policies including fiscal incentives. The fact that its oil production has reached all time highs suggests to industry analysts that natural gas, biodiesel, and alternative fuels will play a significant role in the growth of this industry, which sets itself up to be strongly supported by a knowledge economy that can push these sustainable practices even further.
42
23
Vibrant Gujarat, Chemicals and Petrochemicals, January 2011.
24
KPMG Accelerating Growth 2007.
Gujarat’s Economic Profile
Chemicals
21.32%
Gujarat accounts for about 20% of India’s total chemical production. 30% of fixed capital investment is in the manufacturing of chemical and chemical products. Manufacturing of chemicals and chemical products contribute to around 20% of the state’s total employment. Gujarat contributes significantly to the country’s: Soda ash production
Diamond processing
Salt production
India 2%
India 20%
India 22%
(rest)
(rest)
(rest)
Gujarat 98%
Gujarat 80%
Gujarat 78%
Gujarat has a strong base of diversified chemical industry, with approximately 700 large and medium scale units and 31,000 small scale and other factory sector units. Over 1,300 projects of the chemical and allied sectors have been commissioned.
of industrial output
Major Players Lanxess Bayer Nirma Dow Cheminova Indian Oil Reliance Industries Huber Essar Basf
There are over 39 schools specialized in chemical engineering, most notably:
1
MS University of Baroda
2
L.D. College of Engineering
3
Nirma University of Science & Technology
A varied and well-seasoned industrial hub 43
INDUSTRIAL SECTOR IN GUJARAT: A CLOSER LOOK AT INDUSTRIES Pharmaceuticals25
6.64%
of industrial output26
The pharmaceutical industry in Gujarat has two essential segments: Generics, Research and Development of New Chemical Entities (NCE), and Contract Research and Manufacturing Services (CRAMS). This is attributed to a number of reasons:
Market Leaders Zydus Cadila Cadila Pharma Jubilant Dishman Pharma Chemicals
1 2
Pharma has integrated itself with other important sectors such as higher education and R&D. Spread throughout the state clusters - a strategy allowing it to:
• Reach more customers
• Recruit skilled labor
• Share regional infrastructural facilities
• Take advantage of close proximity to raw materials
Gujarat’s pharma industry has:
1 2 3
Leading infrastructure nationally Human capital for substantial growth Backed by strong policy initiatives bringing foreign investors and local expansion
Gujarat’s pharmaceutical, manufacturing and engineering sectors are among the strongest in the country 44
25 26
Vibrant Gujarat, Chemicals and Petrochemicals, January 2011. KPMG Pharma Industry Profile 2008
Gujarat’s Economic Profile
Manufacturing and Engineering27
1
The manufacturing and engineering sector make the core of industrial output for Gujarat. Engineering represent 9% and manufacturing industries 18.91%. The strongest areas include:
• Automovile
• Electronic Engineering
• Plastic Engineering
• Construction and Textile Engineering
2
Gujarat is the only state in India with framed policies in almost all key sectors such as industry, power, ports, road, IT, agriculture, minerals and tourism.
3
Gujarat’s 2009 Industrial Policy offers attractive incentives for prospective investors.
4 5
It is the first state to formulate an SEZ policy, which includes flexible labor laws and exit options for investors. SEZs in Gujarat get a 100% tax break for the initial five years and 50% for the next five years.
18.91%
of Industrial output
Major Players Ford GM Hitachi Tata Rexroth Bosch Group
Highlights Tata Nano Project: an integrated project in Sanand, near Ahmedabad. About 1,100 acres in size with a total investment of $380 million USD. General Motors has set up its automotive manufacturing facilities in Gujarat, providing a boost to the auto ancillary industry.
27
Vibrant Gujarat, Chemicals and Petrochemicals, January 2011. http://www.vibrantgujarat.com/images/pdf/ chemicals-petrochemicals-details.pdf
45
SERVICE SECTOR IN GUJARAT: AN OVERVIEW Gujarat’s Minister of Tourism and Health, Jaynarayan Vyas, stated that the services sector in India would propel the country to become the 2nd or 3rd largest economy in the world. Currently, the services sector contributes to 58% of the country’s GDP; by 2050, it is expected to increase to 80%. This shift in the economy signals a critical moment for development policies to focus on knowledge sectors that produce human capital.28
Healthcare
Industry valued Expected growth
1500 foreigners
2013
2012
2011
2010
2009
2008
The state healthcare budget has increased by 56%, now accounting for 6% of the total state budget.
8.4 million beneficiaries
$38 billion
school health program
$77 billion 15% annual growth rate
visit annually
for medical tourism
Tourism • Today it is growing at an annual rate of 20% (in contrast to India’s overall tourism growth rate of 7.9%) and its international tourism is growing by 45%. • International tourists spent US$220 million in 2007. • Almost 2% of tourists in Gujarat are international tourists (higher than the 1% figure for India).
16 million
tourists in 2008 Ahmedabad, Ambaji and Dwarka are the most important tourist destinations Account for over 30% of the total tourist flow in the state
Growth in healthcare, tourism, IT, banking and education sectors has strengthened Gujarat’s service industry 28
46
Vibrant Gujarat,Helthcare, Tourism, 2011.
Gujarat’s Economic Profile
Internet users 90,750 millions 2012
87%
237 million 2015
annual growth in software exports
Total landline connections: 1,778,193
IT/Telecom • Gujarat employs around 22,400 workers in its burgeoning IT sector. • IT companies in Gujarat have grown from less than 10 in 1996 to about 415 by the end of 2004-05.
1,407 Higher education
643,000
7,030
152%
Schools
MBA candidates
46,000 engineering
Higher education students
graduates
35,106
matriculation spaces for degrees in engineering
growth in number of institutions in the past decade
Education
Credit-Deposit Ratio 67.5%
Gujarat contributes about
30% of the total
market capitalization of India
2759 rural commercial banks; 1533 semi-urban; 981 urban and 818 metro
Banking • Per capita income rose from US$880 to US$954 between 2007-09, showing an 8.4% growth rate; signals a retail banking opportunity • Deposits with Scheduled Commercial Bank: US$26.6 billion; aggregate deposits have grown at a rate of 21% 47
SERVICE SECTOR IN GUJARAT: CLOSE-UP OF THE MAIN COMPONENTS Healthcare29
1
Gujarat is becoming a hub for medical care throughout India and Asia.
2
Growing demand for high quality tertiary care from non-resident Gujarati’s and foreign visitors.
3
Ahmedabad currently houses the largest hospital in Asia.
4
International recognition for renewed care in cardiology, neuroscience, orthopedics, and joint replacement surgery. i.e Apollo hospitals.
1
High demand for leading technical programs in engineering, medicine, IT, graphic design, and administration positions Gujarat as a hotbed for investment.
2
Higher education institutes have grown in all major urban centers, with engineering programs leading the way. Higher Education–Institutes
Top Universities in Gujarat
Dig. Eng.
Indian Institute of Management, Ahmedabad (IIMA) Ranked first in India by the Hindustan Times India’s top 50 business schools of 2011
Dip. Eng.
M.S University of Baroda Ranked 6th in top national universities; Alumnus Venkatraman Ramakrishnan, 2009 Chemistry Nobel Prize Winner Nirma University Ranked 27th in the top 50 private engineering schools Gujarat University Largest university in the state with 200,000 students
23 87 35 75
Dig. Pharmacy
Dip. Pharmacy
13 88 9 17
ME/M. tech. 5 M. Pharma 1
MBA
MCA 29
48
Vibrant Gujarat,Helthcare, Tourism, 2011.
Number of institutes 2001-2002 2009-2010
18 19 25 112 27 59
Gujarat’s Economic Profile
Tourism
1
Employs 1 out every 12 employed Indians (CAGR of 7.9% between 2010-2015).
2
US$3.7 billion of possible investments in 69 projects (Vibrant Gujarat Summit 2011).
3 4
8.7 billion USD in private investments for beach, rural, leisure business, tourism.
Hotels are putting forth
US$1.9 billion in investments
that are expected to generate
26,400 more jobs
Specialized Tourism Investment Regions are currently being settled. (8 tourism hubs alreay across the country).
IT/Telecom30
1
Important IT hubs in Ahmedabad, Gandhinagar, and Vadodara.
2
Exports in software have experienced 87% growth rate since 2007.
3
All major cities and 80% of townships covered with one the largest fiber optic networks in the country (60,000 km of cable) paving the way for digital expansion.
4
IT industry is at the forefront of Gujarat’s government strategic services growth plans. (fiscal exemptions, low real utility costs, and Special Economic Zones).
5
Growth in infrastructure and human capital positions Gujarat to be in its way to become a leader in the IT sector.
Strong services create the supportive framework a knowledge economy needs 30
India Brand Equiality Foundation, “Gujarat, The growth Engine of India” , 2011.
49
LOGISTICS INFRASTRUCTURE IN GUJARAT
Expansive multi-lane interstate highways, rail lines, seaports and airports have thrust Gujarat at the helm of infrastructure development in India. This has allowed the state numerous benefits in order to develop and reinforce a robust industrial sector and nascent knowledge economy. Clusters have been made possible because of easy access to roads and transportations systems. Overall the state is harnessing infrastructure to continue the spread of wealth brought on by heavy industrial investment.31
Airports • Gujarat has 13 domestic airports (the highest number in any state) and one internacional airport.
Ports • Gujarat has a 1,600 km coastline. • First state in India to have a chemical terminal. • In 2010–11, traffic at ports under control of state government showed a growth rate of 12.34%. • 34.5 % increase of intermediate & minor port total cargo.
Kandla Port Is the most important port in India
13%
of total traffic handled Over by all the Major Ports in India.
9%
of total traffic handle by all the ports in India.
Jamna
Railways • Gujarat has a 5,328 km of rail lines as march 2009. • Gujarat has direct connections to: Pune, Mumbai, Delhi,
Roads • Gujarat also has a road network spanning 74,000 km. • National highways crossing Gujarat: 3,260 km. • One of the highest networks of surfaced roads: over 95% (India’s average is 57%) • 98.8% of Gujarat’s villages are connected with motorable roads.
31
50
India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011.
Porbandar
agar
Sardar Vallabhai Patel Gujarat’s Economic Profile International Airport in Ahmedabad India’s eighth-busiest airport.
150 aircraft movements per day. 3 terminals Main Destinations: Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Kuwait, Singapor, Doha & Dubai. Main Airlines: Air India, Emirates, Goair, IndiGo, Qatar Airways, Singapore Airlines & SpiceJet.
Main Railways Stations
12 Platforms
Ahmedabad Junction Railway Station (Biggest railway station of Gujarat)
7 Platforms
Gandhinagar
Vadodara Junction Railway Station
Ahmedabad
4 Platforms
Surat Railway Station
Rajkot Vadodara
Bhavnagar
Surat
Airports Seaports Main Railway stations National Highway State Highway
51
60km
GUJARAT’S MAIN CITIES The following map portrays the array of industries and opportunities within Gujarat’s economy comprised of 6 main urban areas. Gujarat’s industrial strength lies in manufacturing sectors that require increased investment in technology and human capital. The goal of all infrastructure development taking place in Gujarat currently is to synergize a coastal to urbanized powerhouse such as Ahmedabad which has the research and education centers to produce the human capital needed throughout the state.
Jamnagar Population
600,411 people Área
98 sq km Density
61 p/ha Literacy rate, 7+ yrs (persons/per cent)
74.4%
Main industries
Oil refinery, textile and mining
Jamnagar
Transportation system
Rajkot Population
Surat
1,606,745 people
Population
Área
4,462,003 people
Density
330 sq km
133 sq km 120p/ha Literacy rate, 7+ yrs (persons/per cent)
82.2%
Área
Density Surat 135 p/ha
Main industries
Financial Services, Jewellery, Small Scale Manufacturing, Engineering, Auto and Textils. Transportation system
52
* India Brand Equiality Foundation, “Gujarat, The growth Engine of India” November 2011.
Literacy rate, 7+ yrs (persons/per cent)
86.65%
Main industries
Gems and jewellery, Textiles, Petrochemicals, Engineering and Logistics. Transportation system
Rajkot
*
Gandhinagar Gandhinagar Population
301,045 people Área
72 sq km Density
41 p/ha Literacy rate, 7+ yrs (persons/per cent)
85.78%
Main industries
Services, Energy, Gubernamental, Software Transportation system
Ahmedabad Ahmedabad
Gandhinagar
Population
5,897,312 people
Ahmedabad
Área
410 sq km Density
143 p/ha Literacy rate, 7+ yrs (persons/per cent) Vadodara
86.65%
Main industries
IT and Electronics, Chemicals, Petrochemicals, Engineering Textiles & Apparel Transportation system
Surat
Vadodara Ahmedabad Population
1,602,424 people Área
160 sq km Density
100 p/ha Literacy rate, 7+ yrs (persons/per cent)
81.21 %
Main industries
Petrochemical, Energy, Chemical, Engineering, Auto and Biotech. Transportation system
53
Strategic investments and solid public policies leverage Gujarat to continue their streak of prosperity for upcoming years
GLOBAL MACRO POLICY FOR ECONOMIC AND SOCIAL DEVELOPMENT Public policy plays a vital role in a country or region’s economic and social development. Policy reforms can help create an “environment that will encourage innovation and the types of initiatives that will contribute to increased productivity”32 and economic growth. Following are different economic policies implemented around the globe during the last decades that have played a strong role in economic growth and social development.
ICT Development for Private Sector Growth Taiwan’s economy has been growing at a rate of 9.2% since 1960.33 Between 1952 and 2007, per capita income rose from $197 USD to $16,800 USD. Targeted government interventions have turned Taiwan into a global leader in ICT and electronics production. ICT exports increased from $12.15 billion USD in 1997 to $27.73 billion USD in 2006.34 In 2008 Taiwan ranked number one in the world for utility patent creation. 32
56
1
The Innovation Capacity Index (ICI) rankings for Taiwan: No. 1 in patent registration and internet in schools No. 4 in R&D expenditure, tertiary education enrollment and telephone penetration rates
2
Government leases land to new businesses that come out of Taiwan’s network of technology parks, shielding them from high property costs.
3
Educational systems moving away from traditional Chinese education models towards models that encourage innovative thinking.
Augusto López-Claros. “Policies and Institutions Underpinning Country Innovation: Results from Innovation Capacity Index”, 2011.
33 34
Council For Economic, Planning and Development, Economic Development Taiwan, Republic of China of China, 2002. Chung-hua Institution for Economic Research Taiwan, Shin-Horng Chen, Pei-Chang Wen and Meng-Chun Liu, Trends in the ICT Industry and ICT R&D in Taiwan, 2011.
The Smart Mix for Guajarat
Government Transparency35 The Chilean government has introduced a wide range of policies that have specifically sought to enhance the role of high technologies in creating a more transparent government. The use of high technology in Chilean government has achieved the following results:
Minimal Trade and Tariff Boundaries Hong Kong, the world’s freest economy, is characterized by low taxation and free trade. Per capita GDP has risen from $23,100 USD in 1999 to $45,900 USD in 2010.36 Hong Kong maintains virtually no public debt, a strong legal system, ample foreign exchange reserves, rigorous anti-corruption measures and close ties with mainland China.
1
E-government initiatives have created one of the most modern, efficient, high-quality taxation administrations in the world.
2
No. 1 in Latin America in the Innovation Capacity Index for government effectiveness, rule of law, absence of corruption, fiscal balance, number of schools connected to the internet, ease of paying taxes, broadband penetration and reliability of electricity.
3
Virtuous fiscal policy has reduced public debt from 90% of GDP to less than 7% in 2008.
4
Lower debt burden has allowed investments in education, public health and poverty reduction.
1
Taxes come from the sale and taxation of land, but not from industry and commerce. These revenues have been heavily invested in infrastructure facilities and services, expanding educational coverage from 9 to 12 years and granting students financial assistance upwards of $2.7 million USD.
2
Restraining public borrowing, credit expansion and inflation have all been held in check, keeping deficits to a minimum.
3
Restrictions on business, trade, investment, finance, property rights and labor are the freest in the world.
Public policy shapes the social and economic development of a country 35
Universidad Católica de Maule, Chile. Héctor Rival Oyarzún, “Tecnologías de la informaicón y comunicación en el sistema escolar chile no, aproximación a sus logros y proyecciones”,2010.
36
The Economic Research Services, United States Department Agriculture, Real Historical DGP per capita for Baseline countries and Regions
57
SUCCESSFUL POLICIES FOR ECONOMIC AND SOCIAL DEVELOPMENT IN INDIA As a result of the 1991 Economic Liberalization Reforms, after growing by only 0.8% in 1991-2, GDP grew by 5.1% in 1992-3. Annual growth rates are now at 8%37 and if sustained, would double per capita GDP in the next decade. Similar to initiatives in Taiwan and Chile, India made large investments in the ICT and telecommunications sectors and opened them up to the private sector, making India’s telecom sector the 3rd largest in the world and increasing the overall degree of sophistication in the private sector.38 Nowadays India is the world’s fourth largest economy in purchasing power parity terms39.
Pre-liberalization
Post-liberalization
Low, near stagnate, at 3.5% annual growth in India before 198040
Tariffs cut on most goods, from 87% in 1990 to 25% in 1999
External regulation, major controls on foreign direct investment and a high tariff wall then protected companies from foreign competition
In the 1980s, annual average foreign direct investment was $100 million, in 1995 $2 billion. In 2010 it was $44.8 billion and in 2011, $50.8 billion (USA, Japan and UK are main investors)41
Firms required licenses from up to 80 government agencies before being allowed to invest and develop
Is the second most important FDI destination (after China) for transnational corporations during 2010–2012 - UNCTAD42
Central pillar of policy was import substitution, attempting to make India self-reliant and cutting it off from global markets
54% of FDI funded projects are related to services and 34% were manufacturing-led43 $25.41 billion –financing by the world bank– Almost 50% allocated to transportation, agriculture, energy and mining
Milk Production – The White Revolution This policy bolstered the needed linkages between rural dairy farming producers and urban consumers. This policy fostered the production of milk from 17 million tons in 1950 to 84.6 million tons in 2002 and 120 million tons in 2012. The World Bank will inject $352 million USD for a second White Revolution, to fulfill the expected demand of 180 million tonnes in 2021.
1950 17 millon tn.
2002
84.6 millon tn.
2012
120 millon tn.
Expected demand for 2021 37
David Márquez Ayala, India Perfil Económico, Julio 2009
38
Ministry of Communications and Information Techonology of India
39
World Bank
40
Shankar Acharya, india´s Growth: Past and Future, January 2007. Ernest and Young, 2011.
41
58
42 43
United Nations, World Investment Prospects Survey 2010-2012.
UNCTAD
180 millon tn.
The Smart Mix for Guajarat
Aviation Industry India’s aviation industry is among the fastest growing in the world. Open government policies that encourage foreign investment have led foreign investors to take an interest in this sector, putting 75% of the industry in the hands of the private sector.44 Private investors are allowed to establish general airports with tax exemptions granted for up to 10 years. All the commercial aviation policies have been structured in such a way as to incentivize FDI, creating strong incentives for the involvement of foreign players in this high-growth industry.
75%
Of the industry in hands of the Private Sector
Other policies recently taken by India to excel growth (OECD)45
Retail In January 2012, the foreign ownership limit for the retail sector was raised from 51% to 100% (for single-brand retail stores).46
Capital Markets As of 2012, foreign individuales are allowed to invest directly in Indian capital markets.
Energy Government have deregulated energy prices, enhancing energy efficiency.
Free markets and solid public policy allowed India’s dairy and aviation industries to flourish 44
Dr. Jyotsna Mukherjee, Project on advertising and sales promotion strategies adopted by aviation sector
45
OECD
46
ICRA, India Reatil industry: An update. Relaxation of FDI norms for de Indian Retail sector, albeit continues to face politi-
cal roadblocks, 2011
59
CURRENT IT AND ECONOMIC DEVELOPMENT POLICY IN GUJARAT
Current government policy in Gujarat is largely focused on attracting more foreign direct investment as well as incentivizing corporate moves to the region through the creation of specific areas for growth such as SIRs and SEZs. Social development programs are being heavily invested in as well. Some of them are:
Economic: Industrial policies are aimed at facilitating investment in the state, creating duty free areas, generating employment and adhering to high quality standards. Some of the policies put in place to achieve this are: • Special Investment Regions (SIRs), Special Economic Zones (SEZs), industrial nodes, an industrial corridor connecting Delhi and Mumbai, and industrial parks for the convergence of industrial, social and urban infrastructure are being heavily invested in to incentivize participation. • Government Acts have already been put in place so to work jointly with the private sector to establish, operate and manage these megainfrastructure projects. • They will be developed through PPPs and over 12,500 km2 of land have been set aside already.
60
47
Gujarat infrastructure Development Board
48
Gujarat, Official Gujarat State Portal (2009)
49
Public Private Partnerships in India, Ministery of Finance
Educational: Much of Gujarat’s current education policy comes from India’s National Policy on Education dating back to 1976. The Gujarati Government has embarked on a mission to turn Gujarat into an educational hub of India. Some of their education programs include:47 • Improving retention and decreasing dropout rates. • Boarding facilities set up in schools for poor girls. 63 have been built, enrolling 5,769 girls.48 • Up to $500 USD in Insurance schemes for accidental death of students in primary school (8.5 million students) • $20 USD bonds provided upon enrollment in primary education in villages where female literacy is over 35%. • Distribution of cost-free textbooks – $8.9 million USD invested in 2011. • Daily midday meal and transportation costs sponsored by government. 3.9 million childrencovered in 2010.49
The Smart Mix for Guajarat
Gujarat’s rapid growth is in part due to solid policy framework in key sectors
IT: Much of Gujarat’s IT policies are focused on closing the gap between human capital and training and industry labor needs. Training and development of skilled manpower as well as making the government more effective, efficient and transparent are both objectives. Some of the specific programs already implemented include: • Facilitating information outlets at the doorstep of the common man.50 • Over $830 million USD will be invested in IT related projects by 2020. • Setting up a high-tech InfoCity with facilities of satellite earth station in Gandhinagar and hubs at Ahmedabad and Baroda.51 • Gujarat’s Government plans to spend between 1% and 3% of their annual budget on IT. • Special incentives for mega-IT projects creating employment for more than 1,000 persons per IT unit and 1,500 persons per ITeS unit.52
Health:
Government health initiatives in Gujarat are largely focused on increasing access to healthcare as well as creating public-private partnerships to bolster access. Multiple programs have been put in place to attain these goals: • Widespread access to healthcare for schoolage children through school health check-up programs . • Unique Identity Number Program to collect health information from 850,000 children in 50,000 government and primary schools in Gujarat. • Centre-aided health insurance scheme has been launched in five districts in Gujarat and covers about 500,000 person with incomes-level in the below poverty line (BPL) category. Total insured amount is about $650 USD per family. • Toll-free tele-medicine number to provide medical assistance for cases ranging from minor health troubles to serious emergencies.
50
Business Knowledge Resource Online (2012)
51
Industrial Extension Bureau (a govt. of Gujarat organisation)
52
India Brand Equity Foundation. “Gujarat”. 2010.
61
STRATEGIC POLICY OPPORTUNITIES TO DRIVE GUJARAT TOWARDS A KNOWLEDGE ECONOMY Objetive The Gujarati government is betting on planning and infrastructure development as the driver of economic growth for the state. They’ve put into place a clear investment-focused growth strategy. Gujarat was the first Indian state to develop regulatory framework for public-private investment state’s PPP model and openness to investment create the optimal environment for mixed-use knowledgecentric development by 2020. Some of the strategies set out to achieve this knowledgecentric economic goal are:53
Cities
Safe, efficient, clean and green cities that offer high quality of life
Energy Needs
Securing the future energy needs of the economy
Transportation Networks
Seamless, efficient and highspeed integrated transportation networks
Industrial Infrastructure
Developing world class and globally competitive industrial infrastructure
Drinking Water
Targeted, strategic public investments for a bright future 53
62
Ensuring safe, reliable and affordable drinking water
Tourism
Making Gujarat a global tourism destination
Agro Infraestructure
Creating network of post-harvest agro infrastructure
Educational Institutions Healthcare
Table is based on planned Gujarat Government Investment Blueprint for 2020. For a complete breakdown, see annex.
Widespread network of educational institutions
Creating good healthcare infrastructure
The Smart Mix for Guajarat
Investment by 2020 in USD
$107 billion
Investments going towards: Efficient sources of energy Roads Urban infrastructure Education Healthcare
$66 billion
Power and gas infrastructure Developing solar energy Developing alternative energy sources Re-structuring of energy provision board
$56 billion
Expanding road coverage Accelerating development of ports Railways Airports Connectivity and transportation infrastructure
$49 billion
Creating and further developing SIRs, SEZs, industrial nodes and industrial parks Creation of PPP that can accelerate infrastructure creation
$26 billion
Developing water supply infrastructure
$9 billion
Investing in medical tourism Hiring Bollywood star, Amitabh Bachchan, as the state’s brand ambassador Better air connectivity Overall tourism projects
$3.7 billion
Agricultural infrastructure Creating better access to markets
$3.1 billion
Infrastructure Environment Students and their families Monetary and other incentives to keep children in school longer
$3 billion
Expanding coverage through construction of new medical centers Increasing number of mobile units Ramping up community involvement Increasing competitiveness Reducing barriers for foreign investment and foreign medical professionals
63
DMIC: A CASE STUDY OF ECONOMIC DEVELOPMENT AND INFRASTRUCTURE The Delhi Mumbai Corridor (DMIC) is a mega infrastructure project of $90 billion USD54. It passes through six states with theultimate goal of solidifying the state’s industrial backbone and integrating diverse sectors of the economy with advanced infrastructure to pursue five years goal such as:
14.87% CAGR*
24.57%
Double employment potential
CAGR
31.95% CAGR
Triple industrial output * CAGR: Compound annual growth rate
Quadruple exports from the region in five years
The DMIC is expected to have a profound change on the Gujarati economic landscape. The Gujarati government has planned IT and Bio Tech Hubs to cluster alongside knowledge cities, aiming to significantly boost R&D and education levels throughout the state. The corridor seeks to attract diverse firms to settle in the area from sectors including chemicals, IT, biotech, pharmaceutical, and petrochemicals . Dense and diverse concentrations of such industries will create environments predisposed to strong competition and efficient connectivity—all of which contribute to an ideal ecosystem of innovation and creative development, pushing Gujarat towards a knowledge economy.
54
64
Delhi Mumbai Industrial Corridor Project Goals (2008)
* In Gujarat
Delhi
38% corridor runs through Gujarat 9 Investment Regions to be developed under 200 kmbbv 15 Industrial Areas are to be developed under 100 km2 62% Influence zone of the state In India 1483 km project span
180 million people benefited
Foreign Investment allowed (Japanese already committed)
50% of the project fund through untied loans Palanpur Mahesana Ahmedabad Vadodara Bharuch
Valsad
3 million
* Delhi Mumbai Industrial Corridor Maps (2008)
Mumbai
jobs are expected to be generated
65
SPECIAL INVESTMENT REGIONS: CASE STUDY FOR ECONOMIC AND INDUSTRIAL DEVELOPMENT POLICY In 2009, the Gujarati Government instituted an aggressive policy for a new industrial and investment development program known as the Special Investment Region Act (SIR).
Anjar Ahmedabad
SIRs combine an eclectic symphony of industries clustered together within one geographic entity facilitating mobility, logistics, and accessibility to resources and infrastructure. These SIR projects constitute the groundwork for more synergies that are directly related to building a knowledge economy. The more clusters and links are created within these regions between different sectors and industries, the more the environment will be able to support the growth of knowledge industries and entrepreneurship.
Área
630 sq km Potential sectors
Port and port based industries, Mineral, Agro based and Engeneering.
Anjar
The Petroleum, Chemical, & Petrochemical Investment Region (PCPIR) is the first industrial region to see the benefits envisioned through the SIR Act through the following proposed projects: • 80 hectare logistic park • Marine shipbuilding park • Ahmedabad-Vadodara National Expressway to be extended to Mumbai (PCPIR loop planned)55
Okha
Employment: 13,220 jobs
expected within existing industrial units (46,270 indirect employment jobs)
30,000 jobs
to be created within upcoming units (90,000 indirect employement jobs)
Okha
13 areas
will see the rise of regional and local development agencies that will spearhead industrial development project, by the provision of infrastructure even before units become operational.
66
100 hectares in land area 55% SIR area
to be set for residential townships and other non-processing units.
Ahmedabad
Área
196 sq km Potential sectors
General Manufacturing, CRO, Pharmaceutical, Biotechnology and Biopharma, Auto and Auto Ancillaries, Tourism, Mineral based Industries.
Special investment regions leverage the industrial power of the region Changodar Ahmedabad Santalpur
Área
319 sq km Potential sectors
Agro based, Steel & Metal, Plastic, Pharmaceutical and oil & gas. Viramgam Navlakhi
Changodar
Dholera Ahmedabad
Savli
Área
500 sq km
Halol
Dholera
Potential sectors
Engineering, Manufacturing and Processing, R&D, Knowledge, Financial and Management Services and Hospitals.
PCPIR Dahej
Aliyabet Bharuch
PCPIR Ahmedabad Simar
Área
453 sq km
Pipav
Potential sectors
SIR 55
Gujarat Industrial Development Corporation. “Special investment regions”.
Operating Proposed
Refinery downstream, High Performance chemicals, Pigmens and Coating, Nanotechnology, Bio-refineries, Mineral resource based products.
67
INVESTMENT OPPORTUNITIES IN GUJARAT Investment Opportunities in Gujarat
12-15%
Economic Growth by 2015
Gujarat offers an exemplary model for economic progress and development, estimating economic growth of 12-15% by 2015. Gujarat has emerged as an investor-friendly destination within India, incentivizing multi-sector development and growth. One of the best examples of this growth is Ahmedabad, which is the 3rd most rapidly growing city in the world. The state government has put great emphasis on making Gujarat an easy place to do business through activities such as the simplification of procedures, investor support, industrial zoning, investment monitoring, and the creation of public-private partnerships (PPP’s). The following sectors show significant growth and offer strong investment opportunities for the private sector alone, as well as through joint ventures and PPPs.
54% 46%
of India’s onshore crude oil
Oil and Gas:
of India’s installed refining capacity
• Public investments of nearly $24 billion USD in the gas sector by 2020 to expand existing 550 km gas grid to 2,200 km • Logistical proximity to Middle East gas resources
39% 60%
of onshore natural gas production
on India’s total crude oil import facilities56
Ports and Logistics57
Over $56 billion USD
of public investments in transportation infrastructures by 2020
56
68
57
“Gujarat progress summary”
Gujarat Infrastructure Development Board
• Home to 41 ports • Ports handled 103.9 tons of cargo in 2005-6, estimated to handle 400 million tons by 2015 • India’s nearest maritime outlet to Middle East, Africa and Europe • Gujarat Maritime Board is seeking PPP to expand cargo handling ability for the state’s main ports, already having one project near completion modernizing the Alang shipping yard through technology transfer and financing with Japan
The Smart Mix for Guajarat
Gujarat’s Food Processing Sector58
13%
of manufacturing GDP
• 3,700 small scale and 150 medium and large-scale food processing units • Over $3.8 billion USD of public investments in agriculture and supporting sectors by 2020 • 3.6 million hectares of irrigated land
Employs over
12 million people
Infrastructure Renewal Comparison
USD per capita
2
USD total investment
Mumbai
$ 367 USD
$ 4.6 billion USD
Delhi
$ 292 USD
$ 3.2 billion USD
Vadodara
$ 263 USD
$ 0.4 billion USD
Bangalore
$ 255 USD
$2.1 billion USD
Ahmedabad
$ 246 USD
$ 1.5 billion USD
Regional Infrastructure Renewal59 To prepare Gujarat for such economic growth, urban infrastructure need to be vamped up in key sectors. Projected public investments by 2020 break down as follows:
$21.7 billion USD
Urban infrastructure
$14.3 billion USD Road networks
$0.834 billion USD $26.5 billion USD
$3.1 billion USD
Technology
Education
Water Systems
Gujarat is credited as Asia’s biggest center of investment opportunity 58 59
Public Private Partnerships in India, Ministery of Finance
Based on planned Gujarat Government Investment Blueprint for 2020.
69
KNOWLEDGE CITIES: OPPORTUNITIES WITHIN GUJARAT 21st century global economy speed demand countries to invest in topics related to the generation and proliferation of knowledge. Last decade, Gujarat’s economic growth, besides its growing human potential, have made it a proper environment to foster regions focused on the development of innovative resources. Gujarat’s infrastructure, its established industry and services, the state’s economic development public policy implementation, and strong private investments, allows the creation of areas where Knowledge Cities could be developed to leverage growth within the state. Possible polygons for the establishment of these regions are marked in red in the map. Potential sectors to be developed within those areas include: healthcare, IT / Engineering, chemical, Bio and Nano technologies.
Mundra Port Kutch H
Okha
Porbandar 60
POLYGON FOR POSSIBLE KNOWLEDGE CITY DEVELOPMENT
SEZ
Airport
Funcional
International Domestic
Railway
Notified and Operational
SIR Operating Proposed
70
Ports Major Port
CLUSTERS Petrochemical Chemical Pharma & Biotechnology Environment Technologies Food & Agro Textil Engeenering & Auto Industries
SERVICES INDUSTRIES IT B H E
IT / Telecomm Banking/ Finance Hospital Education
Mesana
Anjar
Gandhinagar Electronic IT B H E Kandla Port
Dishman Infraestructure Ltd Pharma & Fine Chemicals Changodar
Ahmedabad Apparel Park B H E
Surendranagar Anand
H E B H Jamnagar
Rajkot
B IT Vadodara IT B H E
Dholera
IT E H B Bhavnagar HE B
Dahej H
Aliyabet Bharuch
Amreli
IT B
Sur
H
60
http://www.mapsofindia.com/maps/gujarat/gujarat.htm
HE Surat Apparel Park
71 100 km
CONCLUSIONS India is in a privileged position globally and Gujarat plays an important role in this position. The business Gujarat has attracted, an economic development plan implemented by the local government in 2009 and the labor force coming out of Gujarat’s educational institutions position it as a potential investment destination to turn Gujarat’s economy into a knowledge economy. This would not only fortify the current economy, but also sectors like health, biotechnology and ICTs could represent 50% of Gujarat’s GDP by 2020.
India’s GDP
1,727 billion usd Gujarat, the best state for local investment (Stock Market India)
• India’s economy has grown by 7% annually since 1991. • 10% annual growth rates are expected for coming years.
Knowledge Economy Use, creation and sharing of knowledge to foster social, technological and economic development
Key Characteristic’s Manage and nurture research and innovation Public and private sector participation Infrastructure optimization Preservation and nurturing of the natural environment Key geographic location in relation to nearby cities
72
Gujarat: Gross State Domestic Product (%) by sector 14.2%
4%
Primary Secondary
38.6%
Tertiary
47.2%
of India’s total population
12.21%
economic growth rate
$90.5 billion USD
6 industries concentrated
83%
of Industrial output
Pharmaceutical
6.64%
Chemical
21.32%
Textiles
4.97%
Manufacturing & Engineering
18.91%
Petrochemical
The services sector contributes 60% of the country’s GDP
26.26%
Agro and Food Processing
4.77%
73
CHAPTER
1
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1
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2
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5
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6
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8
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9
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14
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15
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16
Sources and references 74
CHAPTER
2
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17
* National Knowledge Commission. Government of India. http://www.knowledgecommission.gov.in/
CHAPTER
3
India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011.
20
Directorate of Economics and statistics Gujarat, “SocioEconomic Review 2010-2011” Gujarat State, 2011.
21
http://www.vibrantgujarat.com
22
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World Bank. “Knowledge Economy Index”, 2012. http://info.worldbank.org/etools/kam2/KAM_page5.asp
18
National Knowledge Commission. Government of India. http://www.knowledgecommission.gov.in/about/ members.asp
19
KPMG Accelerating Growth 2007.
24
Vibrant Gujarat, Chemicals and Petrochemicals, 2011. http://www.vibrantgujarat.com/images/pdf/chemicalspetrochemicals-details.pdf
25
US CENSUS Bureau 26
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Pricewaterhouse Coopers Vibrant Gujarat, Pharmaceuticals and Biotechnology, 2011. http://www.vibrantgujarat.com/images/pdf/ biotechnology-details.pdf
27
The Open Space MTA LAMetro Numbeo
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28
Skyscrapers Vibrant Gujarat,Helthcare, Tourism, 2011. http://www.vibrantgujarat.com/
29
India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011
30
India Brand Equiality Foundation, “Gujarat, The growth Engine of India”, 2011.
31
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75
CHAPTER
4
Augusto López-Claros. “Policies and Institutions Underpinning Country Innovation: Results from Innovation Capacity Index”, 2011. http://www.innovationfordevelopmentreport.org/ papers/101_LopezClaros_Mata.pdf
32
33
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34
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35
The Economic Research Services, United States Department Agriculture, Real Historical DGP per capita for Baseline countries and Regions.
36
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37
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38
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39
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42
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43
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44
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45
76
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46
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47
Gujarat, Official Gujarat State Portal (2009), April 2012 http://www.gujaratindia.com/
48
Public Private Partnerships in India, Ministery of Finance http://india.gov.in/sectors/education/index.php?id=7
49
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50
Industrial Extension Bureau (a govt. of Gujarat organisation) http://www.indextb.com/conducive-policies/ information-technology-policy.aspx
51
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52
Delhi Mumbai Industrial Corridor Project Goals (2008), April 2012. http://delhimumbaiindustrialcorridor.com/dmicproject-goals.php
54
* Delhi Mumbai Industrial Corridor Maos (2008), April 2012. http://delhimumbaiindustrialcorridor.com/dmicmaps.php Gujarat Industrial Development Corporation. “Special investment regions”.
55
“Gujarat progress summary”, página 40.
56
Gujarat Infrastructure Development Board http://www.gidb.org/gidb/cms.aspx?content_id=13
57
Public Private Partnerships in India, Ministery of Finance http://www.pppinindia.com/business-opportunitiesgujarat.php
58
Based on planned Gujarat Government Investment Blueprint for 2020.
59
http://www.mapsofindia.com/maps/gujarat/gujarat. htm
60
GUJARAT Accelerating Towards a Knowledge Economy was printed in May 2012. CONTACT: + 52 (55) 5264 6235 www.scientika.mx contacto@scientika.mx
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Mexico City 2012