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Economic
Development Policy |
| INDUSTRY |
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THE
NEW INDUSTRIAL PARADIGM
The
Indian economy has undergone substantial changes since 1991, with
liberalisation of Government policies along multiple dimensions.
One of the areas on which the process of liberalisation has had a
profound effect has been the flow of investments. From the
licensing era where the flow of investments was directed by policy
makers at the central level with a view to ensuring industrial
dispersal, to the current scenario, where restrictions on
investment destinations have largely been removed, a number of
paradigm shifts have taken place. The significant ones among these
are:
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Market
forces rather than Government have begun to dictate
investment flows across industrial sectors, geographic
locations and scale of investment
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States
are now playing a substantial role in wooing the investor
as opposed to lobbying with the Centre for the grant of
industrial licenses
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States
are competing aggressively to enhance the offer to
potential investors, across the areas of infrastructure,
incentives, setup facilitation and investment promotion
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Investors
now have greater choice in terms of project location,
leading to increased objectivity in the location decision
process
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There
is increased clusterisation of investments around
locations that offer the greatest economic benefits.
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States
are formulating focussed strategies for investment
attraction, based upon natural locational advantages,
resource endowments and industrial linkages.
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Shift
in investment attraction strategy from tax based
incentives to provision of infrastructure |
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ADVANTAGE
MADHYA PRADESH
Madhya
Pradesh, the third largest Indian State covering 9.5% of the
country’s area is endowed with rich natural resources,
salubrious climate and fertile agro-climatic conditions. The
economy of the state is largely agrarian,employing 77% of the total
work force and contributing 40% to the State Domestic Product.
Continuous efforts have been made towards industrialisation of the
state. The industry
sector contributes only 8% to employment of the state work force
and 23% to state GDP. The rate of annual Industrial growth in the
recent past has varied from 4% to 6%. In the short to medium term,
the state needs to concentrate on industrial development as a
source for value generation along with agriculture, before
services can start playing a pre-dominant role in the State’s
Economy.
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Value
of Investments in MP during the 1990’s (upto May ’00) |
| IEMs |
1749
(Rs. 69000 Cr.) |
| FDIs
(approved) |
183
(Rs.
6580 Cr.) |
| LOI’s |
180
(Rs. 3995 Cr.) |
| Source:
Dept of Commerce & Industry - Annual Report |
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Economic
Structure- Benchmarking |
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India
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MP
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AP
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TN
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| Agriculture |
29% |
32% |
31% |
21% |
| Industry
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20% |
25% |
23% |
30% |
| Services
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51% |
43% |
45% |
49% |
| Per
Capita Income |
11649 |
6518 |
8615
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10222
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| Per
Capita Income for 1995-96. All other data for 1998-99 at
93-94 prices. |
| Source:
Economic Survey of MP 1999 - 2000 |
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CURRENT SCENARIO
Industry in Madhya Pradesh is
largely resource driven, leveraging the states natural wealth in
the form of limestone, coal, Soya, cotton, bauxite, iron-ore,
silica etc. Therefore the state has a strong industry base in
sectors like textile, cement, steel, Soya processing and optical
fibre.
However there have been a few exceptions to the resource driven
industrialisation rule and the State as a result of its aggressive
incentive policies and strong solicitation / facilitation in the
past has developed strong Auto, auto ancillary and pharmaceutical
sectors.
Large Medium Industries
There are 952 industrial units in MP set up with an investment of
Rs. 16,237 Cr. and employing 3,12,231 workers. Since 1994, 235 new units with an investment of Rs. 8832
Cr. have been set up, providing employment to 38,051 workers.
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Four major Central Government Undertakings BHEL, National
Fertilizers Limited and Nepa Mills are located in the state.,
There is a Bank Note Press located at Dewas.
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Large
& Medium Industry in MP
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Source:
Commerce & Industries Dept. GoMP
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Small Scale Industries
The State has a large presence of SSI’s. However owing to lack of
demand from mother units, fierce global competition, general
economic slowdown and a paucity of finances a number of these
units have become sick and in many cases non-viable. In the past
five years, 99,484 SSI’s were set up with a
total investment of
641 Cr. In terms of investments the SSI’s do not play a
significant role in the state’s economy, however due to their
employment intensity
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In keeping with the changing industrial environment, SSIs need to
address themselves to global markets and demand conditions
through:
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Small
Scale Industry in MP
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Source:
Commerce & Industries Dept. GoMP |
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Institutional
capacity building |
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Organising
themselves into clusters |
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Expanding
themselves towards an Small Medium Enterprise (SME)
position
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Industry
in Madhya Pradesh is constrained by a number of factors and
shortcomings, as described below:
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There
is a low level of awareness of the industrial potential in
Madhya Pradesh among the investor community outside the
State. MP is believed to be primarily an agrarian economy.
Awareness of industrial development in the State is
restricted to a few mineral based industries like cement,
steel, aluminium and PSU’s like BHEL, Ordinance
factories at Jabalpur, Nepa Mills and Bank Note Press at
Dewas.
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Government
resource constraints make it imperative to shift to non-
incentive (fiscal) based investment targeting and offering
good quality infrastructure and an environment conducive
to growth as a stimulus for investment attraction. This
requires identifying and prioritising private investment
along Vibrant Industry and Geographic Clusters that offer
the highest potential for industry. Model Investment
destinations like Hyderabad and Bangalore for IT &
Electronics, Ahmedabad for Chemicals Pharma and Plastics,
Pune and Gurgaon for Auto etc. need to be evolved to give
a strong signal to Investors.
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Power
supply is generally inadequate and inconsistent for
industrial purposes in all parts of the state. Besides
affecting the performance of industry in general, this
problem assumes critical proportions for units, which are
engaged in the production of high technology products. The
constrained financial condition of MPEB and the transfer
of large power generation capacity to Chattisgarh create
supply-side constraints in the industrial power sector. An
improvement on this front is an immediate imperative if
locations like Indore, Bhopal and Gwalior are to be
positioned as investment destinations, with model Vibrant
Industry Clusters.
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As
Madhya Pradesh is a land locked state, industry suffers
from lack of a seaport and other forms of connectivity.
Physical connectivity in the form of roads and rail links
need to be improved for the inward and outward movement of
raw materials and finished goods. The lack of sufficient
cold chains, logistics infrastructure and air cargo
facilities is a deterrent for the state in leveraging its
central position within the Indian subcontinent and
therefore evolving as a hub for movement/distribution of
goods.
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Inadequate
development and O&M of industry growth centres and
industrial estates and the multiplicity of administration
is a strong concern area for existing industry. Industrial
areas lack specialised infrastructure like CETP,
warehousing, training centres, testing laboratories etc.
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Knowledge
intensive industries such as Pharmaceuticals,
Biotechnology, IT, Hardware & Software, etc have not
clustered in Madhya Pradesh in large numbers. Given that
Madhya Pradesh has high quality urban clusters in the form
of Bhopal, Indore, Jabalpur and Gwalior; where real estate
is available at low costs and is supported by a strong
presence of educational facilities, there is an enormous
potential for developing these industries. The “trickle
down effect” of these industries can assist the state
economy in increased wealth creation and better quality of
life for its people.
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It
is perceived that the institutional framework for industry
in Madhya Pradesh needs to be re-structured and re-organised
in line with the changing industrial paradigm. There needs
to be greater participation from industry in governance
and decision making. Procedures and systems need to be
re-structured and streamlined to take care of: |
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Inordinate
delays in processing applications |
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Obtaining
clearances, |
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Multiplicity
of administration, |
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