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EntrepreneurialIndia

SculptingtheLandscape

21-23December,2009-Mumbai

KPMG IN INDIA


2/592009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.

Foreword

EntrepreneurshipisthekeytoIndiaachievingherpromise

asaneconomyandasacountry.Unleashedafterdecades

ofslowgrowthandgovernmentcontrol,Indias

entrepreneurshavebeguntotakeadvantageofmanyofthe

opportunitiespresentedbythepostliberalizationbusiness

environment.However,foritssize,Indiahasstillhasmuch

todoinordertoharnessentrepreneurshiponabroader

level.Theentrepreneurialecosystemcandofarmorethan

todaytospurtheentrepreneurtogreaterheights.AkeypillarofthisecosysteminIndiaaregovernmentscentral,

stateandlocal.Governmentpolicies,incentivesand

programsplayasubstantialroleininfluencing

entrepreneurs.Thisplacesagreatresponsibilityon

governmentbodiestoenactpoliciesandlawsthat

encourageentrepreneurshipwhichinturncanleadtothe

countryseconomicascent.

KPMG,oneoftheleadingprovidersofadvisoryservicesin

IndiaandTiE,theworldslargestorganizationof

entrepreneursaspartoftheircommitmenttofoster

entrepreneurshipinIndiaarebringingoutthethirdeditionof

EntrepreneurialIndia2009.Thewhitepaperendeavorsto

assesstheinitiativesofselectIndianstatestoencourage

entrepreneurialgrowthandputforthbestpractices,raise

theprofileofdiscussionsonentrepreneurshipdevelopment

andcontributetoshapingpolicy.

KPMGandTiEembarkedonthisuniquestudy,which

profilestheentrepreneuriallandscapeofIndiaandaimsto

uncoverfactorsleadingtoappropriatelevelsofentrepreneurship.Thestudyevaluatestheperspectiveof

Indianstatesandtheirinitiativestowardsentrepreneurial

developmentononehandwhileevaluatingtheperception

ofentrepreneursontheseinitiativesthroughtheirviewson

nationalstrengthsandweaknessesasacontextfor

entrepreneurshipontheother.Theentrepreneursindicate

whatpolicyorprogramchangestheybelievewouldenhance

thecountrysenvironmentforentrepreneurship.Italso

attemptstoestablishthebestpracticesacrossIndiato

fosterentrepreneurshipwhilealsobenchmarkingwithsome

oftheglobalbestpracticesinentrepreneurialeconomies

suchasSingapore,PhilippinesandIsrael.

UnlikepasteditionsofthisstudyonIndianentrepreneurship

whichsurveyedentrepreneursacrossthecountry,this

whitepaperstudiesselectIndianstatesindetailandbring

forththestatesperspective.Thestudyhasrevealedthat

Indiansareclearlybullishandforwardthinkingabout

entrepreneurshipandthattheyrecognizetheimportanceof

entrepreneurship.Butthereisstillalotofroomfor

improvement.Wehavealongwaytogotodevelopabroad

basedandorganizedentrepreneurialcommunity.Thispapershouldallowustoreassessandrenewoureffortsin

addressingthesituation.Thestudyalsobringstogetherthe

datathatcanbefurtherstudiedforpursuingaspecialpolicy

focus.

AsacountryIndiashouldsustainapositivemomentumin

harnessingthebusinesseswehave,identifyingthegrowth

areasoftomorrowandsupportingmorepeopletobecome

entrepreneurs.Throughthisstudy,TiEandKPMGhopeto

contributetocraftingmoremeaningfulpoliciesand

programsthatwillcontinuetoinspiremoreandmore

Indianstohaveanentrepreneurialmindsetanddevelopa

strongercapacitytograbtheopportunitieswehavenow.

VikramUtamsingh

Head-Markets

KPMGinIndia

JehilThakkar

ExecutiveDirector,Markets

KPMGinIndia

SridharIyengar

President

TiEMumbai



ExecutiveSummary

HowsupportiveistheecosysteminIndiadoinvestors,

thegovernment,andsocietyprovideafoundationonwhich

entrepreneurscangrowandflourish?Itisaquestionworth

exploringindept.

Theemergenceofopportunitiesinmanysectorsandthe

lackofopportunityinothershasdrivenmanyyoungpeople

tostrikeoutontheirown.Manyareleavingtheirwell

payingjobstoestablishtheirownsmallventures.Entrepreneurshipishotandrisktakingabounds.The

promiseofwealthinthelongrunandthefreedomto

choosetheirownpathare,majorfactorsbutdoingthings

forapassionandfindingfulfillmentarekeydriversaswell.

Today,thescopeandvarietyofself-generatedworkis

unlimited.

However,despitethegreatinitiativesundertakenbymany

Indianentrepreneurs,Indiaremainsatoughplacetobean

entrepreneur.Governmentregulations,cumbersome

proceduresandrestrictedaccesstocapitalmakestarting

andrunninganewbusinessachallengingproposition.

Inmanycases,governmentsaremovingtowardsfriendlier

policiesbutmorerapidchangeisnecessary.

TiEandKPMGasapartoftheiraspartoftheircommitment

tofosterentrepreneurshipinIndiabringoutthisthirdedition

ofEntrepreneurialIndia2009.Thewhitepaperendeavorsto

assesstheinitiativesofselectIndianstatestoencourage

entrepreneurialgrowthandputforthbestpractices,raisetheprofileofdiscussionsonentrepreneurshipdevelopment

andcontributetoshapingpolicy.

ThestudyevaluatestheperspectiveofIndianstatesand

theirinitiativestowardsentrepreneurialdevelopmentaswell

asevaluatingtheperceptionofentrepreneurs.The

entrepreneursindicatewhatpolicyorprogramchangesthey

believewouldenhancethecountrysenvironmentfor

entrepreneurship.

TheEntrepreneursViewpoint

Availability of Finance

Financialsupportwascitedasthemostlimitingfactorfor

entrepreneurship.Mostentrepreneurscitedthelackof

appropriatefinancialhelp,resourcesandtheinaccessibility

ofavailablefinancing.Thereisadeficiencyofsufficientdebt,

equityandventurecapitalfunding,governmentsubsidies

andfundingavailablethroughgovernementagaencies.

Mostentrepreneursexpressedtheneedforsufficient

funding,bothdebtandequityaimedathelpingnewand

strugglingbusinesses.Theyalsostressedthattheevaluation

forloansshouldbefocusedontheviabilityofthebusiness

proposalandnotjustthequantumofcollateralorassetsize.

The Policy Framework

Entrepreneursacrossthesixstatesprofiledmentionedthe

lackofstronggovernmentpolicysupportfor

entrepreneurship.Theycitedbureaucracyandcorruption,

poorimplementationofexistingpoliciesandinadequate

supportmechanismsaspartofthelimitingfactorsto

entrepreneurship.

Ontheotherhand,theygenerallyagreedthatthesupport

fornewandgrowingbusinessesisahighpriorityforstate

governmentsandacknowledgeditasathrustareafor

policy.Buttheycompletelydisagreedthatresultingpolicies

werebeingimplementedinamannerthatbenefitednewandentrepreneurialbusinesses.

Theratherambivalentviewofprofessionalsand

entrepreneursonwhethergovernmentpolicyis

categoricallylimitingorcontributingtoentrepreneurship

suggeststhattheyviewthegovernmentpolicyhavinga

limitedeffect.Whilethegovernmentisperceivedtobe

focusingonentrepreneurship,muchneedstobedoneat

thegroundlevelinorderforgovernmentpolicytobecomea

truecatalystforentrepreneurship.



Entrepreneursstressedthatimplementinggovernment

policiesshouldbemoreefficient.Theyrecommendedlocal

policiesshouldalsobecraftedtohelpthebusinessesin

ruralareasandthatbothnationalandstategovernment

agenciesshouldproactivelyengageinseamless

partnershipsandassistanceineffectingpoliciesfor

entrepreneurship.

Access to Markets

Formidablebarrierstohighgrowthentrepreneurship

continuetoexistinIndia.Ourresearchintothebarriersand

facilitatorsofentrepreneurshipinthepreviouseditionsof

EntrepreneurialIndiahasrevealedmanyfacetsofthis

problem.

StatesViewpoint

Thesixstatesprofiledforthepurposeofthisstudyhave

beenmovingintherightdirectiontopromotebusiness

growth.Thegovernmentisincreasinglybecomingreceptive

toentrepreneurialdemandsandexpectationsandrollingout

programstoprovidesupporttonewaswellasexisting

enterprises.However,implementationofsomeofthe

programsiseitherlimitedorfocusedatlargerenterprises.

Insomecases,thegovernmentsacrossthesestatesare

increasinglyadoptingnewerapproaches.Whilethestates

aremovingintherightdirection,albeitatacautiouspace,

theytoohavetheirsetofchallenges.

Partnership Approach

Entrepreneurshipaccordingtogovernmentsisnotpurelya

functionofindividualorstatespolicyregime.Itisrathera

collaborationofentrepreneurs,educationalinstitutes,

independentagencies,themediaandthegovernment,

wheregovernmentisafacilitatorandanenabler.The

governmentwouldliketoseemoreproactivepartnership

fromentrepreneursandbusinessinaddressingtheoveralldevelopmentalchallengesthatfaceIndia.

Cost Benefit Matrix

Whilegovernmentisoftencriticizedfornotproviding

enoughsupport.Withlimitedresources,eachstatealso

needstobeconvincedofthecostbenefitbeforeinvesting

inapolicyoraspecificdevelopmentprogram.The

governmentsneedtoevaluatecarefullyeveryrequestfor

assistanceorpolicyenactmenttotakeintoaccountthe

overallresourcepictureandgoalsfortheregion.

Prioritization

Eachstateinthecountryhasasetofdevelopmental

challengesandprioritiestoraisetheoverallprofileofits

citizens.Withmorethan30percentofcountryspopulation

belowpovertyline,thestatesprioritiesareoftenclearand

maynotfitwiththeprioritiesofsomeentrepreneursand

thatsometimeslimitsopportunities.Althoughthe

governmentsacknowledgethatopportunitycreationwillhaveadominoeffectandcouldleadtolongtermeconomic

upliftment,manyshorttermprioritiesandneedsoftentake

precedenceoverlongtermgoals.



Contents

Introduction 01

The Assessment 04

Punjab 05

Gujarat 12

Delhi 19

TamilNadu 25

Karnataka 32

Maharashtra 38

Creating an Entrepreneurship Culture 44

Conclusion and Policy Recommendations 48

About the study 50



Introduction

Thecentralroleofentrepreneurshipintheeconomicgrowth

ofnationsisincreasinglycomingintofocus,especiallyinthe

recenttroubledtimes.Aspointedoutinarecentarticlein

The Economist,evenasgovernmentsarebusytryingto

savetheireconomies,policymakersaredemonstratinga

renewedinterestinentrepreneurshipandinnovation.

Inmodernopeneconomies,entrepreneurshipisarguedto

befarmoreimportantthanitverwas.Itisevidentthatentrepreneurialventuresaredrivingthegrowthof

economiesdevelopedandemerging.However,amongst

thetypesofentrepreneurshipthereisnecessitybased

entrepreneurshipatoneendofthespectrumtoopportunity

basedentrepreneurshipattheother,thatseeksto

revolutionizetheworldbyleveragingnewtechnologyand

creatingnewmarkets.

WhileIndiahasalonghistoryofentrepreneurship,as

evidencedbycenturiesofbusinessandcommercialactivity

andtheexistenceofgenerationsoldbusinessgroupsand

families,recentGlobalEntrepreneurshipMonitorstudies

foundthatentrepreneurshipinIndiahaspredominantlybeen

necessitybasedratherthanopportunitybased.

Formidablebarriersexisttoentrepreneurshipcontinueto

existinIndiaforhighgrowthentrepreneurship.Ourresearch

intothebarriersandfacilitatorsofentrepreneurshipinthe

previouseditionsofEntrepreneurial Indiahasrevealedmany

facetsofthisproblem.

Severalexamplescitedininterviewsinclude,several

constraintstoquicktechnologyadoptionbyIndian

companies,.InconsistentIndirecttaxrulesand

enforcementissuesthatlimittheabilitytoscalequickly,

Laborlawsthatlimitthemobilityoflaborforced

entrepreneurstofeargrowthinemployeestrength.Poor

infrastructurehasledentrepreneurstocreatetheirownand

intheprocess,lockuppreciouscapitalwhichshouldhave

beendeployedtogrowthebusiness.Inadequateavailability

oflandwithcleartitles,andowner-occupantfriendlypolicies

hasledtothediversionofscarcecapitaltowards

unproductiveinvestmentsinlandandbuildings.Lengthy

courtproceedingsandslowjudicialenforcementofproperty

rightsandprivatecontractshaveledtosub-optimal

businesspractices.

Despiteallodds,theaccentonliberalizationand

globalizationinthelasttwodecadeshasbroughtabout

mitigatingeffectsinmanyoftheareascitedabove.A

discussionwithsomeoftheestablishedentrepreneurs

pointstoapositiveroleplayedbytheneweconomic

policiesinopeningupareas.

GiventheambitiouseconomicgrowthtargetsthatIndiahas

setforitself,highgrowthbusinesseshaveacrucialroleto

play.Whilehighgrowthbusinesseshavetousetheir

entrepreneurialingenuitytoovercometheenvironmental

constraintsorrenderthemirrelevant,publicpolicyhasa

significantanddecisiveroletoplayinminimizing,and

preferably,completelyremovingtheconstraintsthathobble

highgrowthentrepreneurship.

01



ThechallengeforpolicymakersinIndiacanthusbe

articulatedasoneofcreatingtherightframeworkof

conditionstoenabletheestablishmentoffastgrowing,

innovativenewbusinesses.Therearemanyavenuesopen

topolicymakerstoaddresstheissue,butthechallenge

wouldbeinprioritization-pickingtherightsetofissuesand

sequencingthemtoachievesignificantandquickpay-off.

Againstthisbackdrop,theEntrepreneurial India 2009

focusesonhowtoredesignIndia'sentrepreneurial

ecosystemsoIndiacanfinallyunleashwhatPrimeMinister

Singhcalled"theanimalspirit"ofIndianentrepreneurs.TiE

andKPMGhavestudiedselectIndianstatestounderstand

theirregulatoryandpolicyframeworkandsuggestbest

practicesthatcouldhelpthecountrytocreateatruly

conduciveentrepreneurialecosystemfocusedatfostering

highgrowthentrepreneurialactivitynotlimitedtonecessity

butoneemergingfromaplethoraofopportunities.

02


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TheAssessment

TodayinIndia,opportunityabounds.Thescopefor

entrepreneurialdevelopmentinthecountryistremendous.

WhileGDPgrowthseemstobebackontrack,thecountry

isfacedwithtremendouschallengesincludingcreationof

widespreademploymentandreducingpoverty.Creatingan

environmentandanecosystemthatencouragesand

facilitatestheentrepreneurshiptakesadvantageof

opportunitycanbecriticalinthenationmeetingitsoverall

developmentgoals.

InIndia,wehavedeeptechnicalandknowledgebased

resourcestotakeuptheentrepreneurialchallenge.The

successofIndianentrepreneursaroundtheworld,and

increasinglyinIndia,istestimonytothedriveourpotential

asanentrepreneurialnation.Atpresent,therearevarious

organizationsatthecountrylevelandstateleveloffering

supporttoentrepreneursinvariousways.TheGovernment

ofIndiaandvariousStateGovernmentshavebeen

implementingvariousschemesandprogrammesaimedat

nurturingentrepreneurshipoverthelastfewdecades.

VariousChambersofCommerce&apexinstitutionshave

startedorganizingseminars&workshopstopromote

entrepreneurship.Incidentally,variousmanagementcolleges

haveincorporatedentrepreneurshipaspartoftheir

curriculum.Thisisindeedagooddevelopment.Thisshows

thecommitmentoftheGovernmentandthevarious

organizationstowardsdevelopingentrepreneurialqualitiesin

theindividuals.

However,inacountry,whereover300millionpeopleare

livingbelowthepovertyline,itissimplyimpossibleforany

governmentalonetodriveentrepreneurialandbusiness

growthaproductivepartnershipwithallstakeholdersis

criticalandnecessary.

ThefollowingpageswillprofiletheinitiativesbysixIndian

statestofosterentrepreneurialandbusinessgrowth.

Ourresearchfocusesonunderstandingthekeypolicy

initiativesofthesestatestopromotebusinessandindustry.

Itfurtheranalysestheentrepreneursperceptionofthese

initiativesandtheStateschallengesinpromoting

entrepreneurialgrowth.Astheseperceptionsand

challengesevolve,KPMGandTiEplantoactasacatalystforgovernmentsandentrepreneurstocometogetherto

refineideas,enablebetterpolicyimplementationandfoster

growth.

04



ThePolicyFramework

New industrial policy to push the states economy

PunjabisoneofthelargestproducersoffoodgrainsinIndiawithfoodgrainscontributing68percenttotheannualfood

productionofIndia.In2006-07itcontributed75.3percentWheatand31.2percentRice.ItwasthefirstIndianstatetouseagriculturaltechnology toengineeraGreenRevolution.1

Theeasyavailabilityofrawmaterialhasattractedagro-basedindustrieslikefood&foodproducts,textilesandapparel.

Otherindustrialsectorsinthestateincludechemicalsandchemicalproductsandtransportequipment.

Punjabseconomyisprimarilyanagro-basedeconomyanditsindustrialbaseisdominatedbysmallandmedium

enterprises.However,withthefastchangingglobaleconomicscenario,thestategovernmenthasframedanewIndustrial

Policydirectedatattractingindustrialinvestmentinthestate.

P u n j a b

Population

24 million (as per 2001 census)

The state had about 0.520 million (67.26 percent)

employees in public sector and rest of the 0.253

million employees was in private sector in 2005

(Source: Government of Punjab)

Per Capita Net State Domestic Product

Source:Directorateofeconomicsandstatisticsandstategovernment,2008-09

1 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009



Highlights of the Industrial Policy2

Theprimaryobjectiveofthenewindustrialpolicyistobringsynergybetweentheagricultureandindustrialsectorto

growthestateseconomy

NoCLUchargesandLicensefeeforchangeoflandusefromagriculturetoindustryanywhereinthestate

DedicatedannualizedfundofINR1500millionwillbecreatedforthepurposesofcreationofclusters&upgradationof

IndustrialInfrastructure

StateGovernmentwillcreatelandbankstodevelopIndustrialAreasfortherelocationofexistingindustriesfrom

residentialareasandforlocationofnewindustries

Extendedseveralpolicyincentivesandconcessionstoareaslikehotelandresortprojects,healthtourism,farmtourism,

multiplexesandtextileindustry

Industry specific Policies

IT Policy

ITPolicyintendstocreateanenablingenvironmentinthestateforIT/KnowledgeIndustrytoattractinvestmentfromthe

privatesector.ItalsotargetstheexportsofIT/KnowledgeindustryworthINR214.6billion(USD4.6billion)and0.6million

directandindirectjobsby2018.3

TheincentivesgiventoIT/TIESIndustryinclude:4

Exemptionsfromstampdutyandregistrationfeeforlandtransfer/allottedbyPICTCL(PunjabInformation&

CommunicationTechnologyCorporationLtd.)

StampdutyreimbursementonlandacquiredbydeveloperforbuildingITparkorITunitsdevelopingtheirowncampuses

VATonallITproductsrationalizedtobeatparwiththeminimumfloorrateof4percent

ITunitscanbesetupinresidential,commercial,institutional,industrialoragricultureusezonenotifiedunderthemaster

plan

Capitalsubsidyat20percentoffixedcapitalinvestmentintheproject,subjecttoceilingofINR2milliontobegivento

first10SMEunitsinITParknotifiedbyPICTCL

PunjabVentureCapitalFundhasbeencreatedbyGovernmentofPunjab,SIDBIandvariousstatecorporationsforIT/

KnowledgeIndustry

ITParksnotifiedbyPICTCLwillbeexemptedfromstatutorypowercuts,restrictionsonpeakloadhoursandweekly

loadshedding.ITunitsandparkswillbechargedfortheactualunitsconsumed.




The Assessment | Punjab

06



Agro- Policy5

Inordertodeveloptheagrosector,thepolicyhasmadeprovisionof:

Interestsubsidywouldbegrantedtounitsavailingtermloanfromscheduled/nationalizedBanks/FIs,whichfallunderthe

purviewoftheReserveBankofIndia

5percentbackendedsubsidyfor5yearsontheinterestontermloansubjecttoaceilingofINR2millionperyearper

unitwillbeprovidedsubjecttotheconditionsspecified

InterestsubsidywillbeavailabletoagroindustrialunitsmakingfixedcapitalinvestmentrangingfromINR100millionto

lessthanINR250millionandavailingtermloanuptoINR150million.Thecostoflandforthecomputationoffixed

capitalinvestmentwillnotbemorethan20percentoffixedcapitalinvestment

Assistanceforpreparationofdetailedprojectreportandforpatentregistrationinagro-industriesupto50percent

CLUchargeswouldbewaivedoffwhileEDCchargesaretobereviewed

VATandothertaxes/levieswouldberationalized

Notification Textile Policy 20066

TextilesareafocusareaofIndustrypolicyinPunjab.KeyHighlightsoftheTextilePolicyare:

ApparelTrainingandDesignCentreinLudhianaandparticipationoftheprivatesectorisbeingencouragedtostrengthen

apparel-relatedcoursesofIndustrialTrainingInstitutesandPolytechnicsinthestate

Assistanceinlandacquisitionbythestategovernmentforsettingupofmegatextileunits

Creationofinfrastructureintheformoftextileclusters,apparelparksandintegratedtextileparks,havingallnecessary

facilitiesatoneplace,developedmainlythroughprivatesectorparticipation

Reductioninelectricitydutytohalftheexistingrateformegatextileprojectsforaperiodoffiveyearsandfullwaiverof

electricitydutyforaperiodofsevenyearsformegatextileprojectsinthedistrictsofPatiala,Sangrur,Mansa,Bathinda,

Faridkot,Moga,MuktsarandFerozepur

Settingupofneweducationalandtraininginstitutesformakingskilledtechnicalworkforceavailabletotheindustry,with

assistancefromtheGovernmentofIndiaaswellasprivatesectorparticipation.

Creationofinfrastructurethroughclusters,educationalandtraininginstitutions

Reductionofelectricitydutyforprojects

Assistanceinlandacquisition

Biotech Policy 20066

Thepolicyintendstofacilitatethegrowthofbiotechindustriesanddevelopmentofcleanbiotechtechnologiesinthestate.

Keyinitiativesunderthispolicyinclude:

Conductingworkshopsandtrainingsessionsonapplicationofcleanbiotechtechnologiestocreatepublicawareness

aboutbiotechnology

SetupthePunjabBiotechPromotionBoardtoattractinvestmentinthesector


6 PublicPrivatePartnershipinIndia,Punjab,StatePolicy


07



Promotionofpublic-privatepartnershipsinagricultureextension,cropdiversificationandorganicfarminginthestate

Establishinganewbiotechnologyinstitute,whichwillactasabiotechnologydevelopmentcentretomeetR&D,pilot

scaletestingandvalidationrequirementsofthebiotechnologyindustry

Creatingagri-clinicsandagri-businesscentresthroughoutthestatetoserveasnodalcentresforinformation

disseminationandkisancallcentrestoprovideimmediateandfirst-handinformationtofarmers

Micro, Small and Medium Enterprise Policy highlights7

Interestsubsidywillbeavailabletoexistingsmall/mediumagroindustrialunitsundertakingmodernizationand/or

technologyup-gradationforinstallingnewequipmentsandavailingtermloanuptoINR50millionforthepurpose

Interestsubsidyat5percentfor5yearsontheinterestontermloansubjecttoceilingofINR2millionperyearperunit

toagro-industrialunits,agri-infrastructureprojectsandalsotoexistingsmall/mediumagro-industrialunitsfor

modernization

Capitalsubsidyat20percentoffixedcapitalinvestmentinaproject,subjecttoceilingofINR2million,tobeavailableto

first10approvedSMEunitsintheITParksnotifiedbyPICTCL

TheStateGovernmentwouldencourageexistingsmall/mediumagroindustrialunitstoundertakemodernizationand/or

technologyupgradationtomeetthechallengesofmarketing

ThePolicyImpact

Strong agricultural and well developed small/medium scale industrial base

Thesmallscaleindustriesleadtheindustrialperformanceofthestatewith47percentofproduction,60percentofexports

and21percentoftheinvestmentfortheindustrialsectorin2008. 8

Small Scale Industries in Punjab

Units(inmillion)FixedInvestment

(INRMillion)

Employment

(InMillion)

ProductionValue

(INRMillion)

2004-05 0.204 48350 0.934 250950

2005-06 0.205 48550 0.938 252000

2006-07 0.205 55000 NA NA


8 IBEF


Source:GovernmentofPunjabandCII,2007-08

08



Focus on increasing the existing industrial base

Thenewindustrialpolicyhasunveiledreformssuchascluster

approachwhichincludesdevelopmentandupgradationof

infrastructure.

Thenewpolicyislikelytostrengthentheexistingsmallscale

sectorsuchashandtools,steel,forging,castingandtextile

locatedinseveralpartsoftheState.Smallscaleindustrialhubs

includingLudhiana,Batala,Jalandhar,Amritsar,Mohali,

Kapurthala,MandiGobindgarharelikelytobebenefitfromthe

policy.

NotonlythesmallscalesectorbutalsotheITIndustryandagro-sectorareexpectedtoattractinvestmenttothestate.The

policyreformstocreatelandbankstoprovidelandataffordablepricestonewindustriesarealsolikelytoincreasethefresh

investmentinthestate.

GrowthImpetus

Proposed Industrial infrastructure

ConsideringthattheIndustrialparksfortheIT,BiotechandTextileindustriesaretheprimarycatalystforthegrowthofthe

industry,thestategovernmentisencouragingthedevelopmentofParks.About273MegaIndustrialManufacturing,

IndustrialPark,MultiplexandHotelProjectswithproposedinvestmentofINR614.66billionhavebeenapprovedbyState

Governmentforimplementationduring2007-08.9

Someoftheindustrialparkscomingupinnearfutureinthestateareasfollows:


Investment intentions in terms of IEMs filed,

LOIs/DILs issued in Punjab

NumbersProposedInvestment(INRBillion)

2005 203 58.46

2006 214 114.09

2007 105 51.72

2008 102 94.82

2009

(tillAug)42 86.08

Source:DepartmentofIndustrialPolicyandPromotion,Monthly

Magazine,September2009

Industries Infrastructure

Textiles

ApparelExportersAssociationofLudhianaandthePunjabSmallIndustriesCorporationjointlydevelopingan

apparelparkin85acreswith102plots

LudhianaIntegratedTextilePark(forknittingandgarmenting)inLudhiana, andLotusIntegratedTexpark,in

Dhaula,DistrictBarnalahavebeenapprovedforPunjabundertheSITPSchemein2007

FoodParks SirhindinFatehgarhSahibdistrict

IndustrialClusters

Textile(Ludhiana),Leatherindustry(Jalandhar),SewingMachine&parts(Ludhiana),Agriculturalimplements

(Moga),MachineToolsatBatala,BicyclesandBicyclePartsatLudhiana,RerollingSteelMillsatMandi

Gobindgarh,GemsandJewelleryatAmritsar,DieselEnginesatPhagwara,HandicraftsatHoshiarpur

AutomobilesandAutoPartsinLudhianaandWoodenFurnitureatKartarpur

InformationTechnology

Parks

ElectronicsTownship(ELTOP),spanning365acresinMohaliformsthehuboftheITindustryinPunjab

ITparksarealsoplannedforPatiala,Amritsar,JalandharandLudhiana

SEZ

QuarkcityIndiaPvt.Ltd.-ITspecificSEZinMohali.ThisSEZcoversanareaof20hectares

RanbaxyLaboratoriesLtd.,MohaliThepharmaSEZcoversanareaof32hectares

Source:UnitedNationsIndustrialDevelopmentOrganization,PunjabIndustrialreview,2008


09



Venture Capital fund for IT industry

ThestatehaslaunchedaVentureCapitalFunddedicatedtoITIndustrywithacorpusofINR200million.Thishasbeen

fundedjointlybyPSIDC,PunjabInfotech,PFCandSIDBI.10

States emphasis on the development of skilled work

force

Thestatehasastrongeducationalinfrastructure,with

literacyrateof69.7percent,whichisabovethenational

averageof64.8percent(2001census).11

The Entrepreneurs Viewpoint

TheentrepreneursinPunjabareawareofthenewindustrialpolicyandadmitthatthestatehastakensomeinitiativesand

ismovingintherightdirection.TheyacknowledgetheinitiativestowardspromotingITindustryinthestate,however,the

entrepreneursarekeenlyawaitinganeffectivesinglewindowclearance.Theyalsoexpresstheneedtomigratemost

processesonlinetoensurefasterturnaroundsandpromotestandardization.Whiletheentrepreneursacknowledgethe

initiativesofthegovernment,thereisageneralperceptionthatthestatelacksthepoliticalwilltofocusonentrepreneurial

development.

Withregardstoeducationaldevelopment,entrepreneursfindagapbetweenacademiaandindustryandaneedforindustry

readyprofessionals.Thereseemstobeaneedforincreasedfocusonvocationaltrainingandskillsbasededucation.

WhiletheentrepreneursappreciatetheagroinitiativesandtheITindustrydevelopment,theyexpressaneedtoconsciously

boostthemanufacturingsector.Itisfeltthataconsiderablenumberofmanufacturingunitshavemovedtonearbystates

likeHimachalthatmayofferamorewelcomingenvironment.

Theentrepreneursalsoacknowledgethatthereisaneedforproactiveandusefulinteractionbetweengovernmentand

industryassociationstoarriveatamutuallyagreeablepolicyframeworkwhichislong-termandpractical.Theentrepreneurs

canbepartoftheoveralldevelopmentstrategyiftheyareconsideredatthetimeofformulatingthestrategy.Ageneral

perceptionisthatstrategiesareusuallymadekeepingthelargerentrepreneursinmindthusnotbenefitingsmaller

enterprises.However,notunderminingtheneedtoattractlargeenterprises,entrepreneursadmitlargerenterprisesarecriticaltotheecosystemtoactasacustomerbaseforMSMEs

Further,whenprobedonawishlist,theentrepreneursexpressedaneedforaregionwisepolicyandaclusterbased

approachratherthanonesinglepolicyfortheentireState.

ASeedandVenturefundcocreatedbythegovernmentandestablishedentrepreneursisalsoexpectedtoprovide

opportunitiestothestatesaspiringentrepreneurialpopulation.


Faculty Institutions Students

Engineering 38 9455

Management 57 2,000

HotelManagement&

CateringTechnology2 120

MCA 25 1,180

Source:GovernmentofPunjab,Education

10 GovernmentofPunjab,IndustrialPolicy,2009

11 MaharashtraGovernment,EconomicSurvey,2008-09

10



The Governments Viewpoint

ThestategovernmentpraisesthepeopleofPunjabfortheirentrepreneurialqualities.However,itisfeltthatinmanycases,

theentrepreneurslimitthemselvesanddonotpushforscaleafterreachingacertainlevel.Thestatebelievesthatthereis

anenormouslevelofinnovationatthegrassrootlevelbutthisinnovationisnotcommerciallyexploitedinanefficientmanner.Rapidtechnologyadoptionisalsoachallengeasvoicedbythegovernment.

Thegovernmenthoweveradmitsthatthesupportsystemmaynotbesufficientlyrobusttogiveentrepreneurstheleverage

theyneedtogetthemtothenextlevel.Thegovernmentalsofeelsthementoringinthestateisminimalorabsentwhich

furtherleadstoopportunitylossorstagnation.

Onfinancialincentivestopromoteindustry,thestategovernmentstatedthatlimitedfundsconstrainitfromgivingmany

exemptionsandsubsidies.Thereisnoplannedexpenditureonindustries.However,shouldsurplusfundsbemadeavailable,

thestatewillfocusoninfrastructuredevelopment,VCfund,developmentoflaborskillsandlanddevelopment.

JustifyingthestatesfocusonAgricultureandAgrobasedindustries,thestatefeelsthatitsfocusiscommensuratewith

thesectorscontributiontoGSDP.TakingtheexampleofpowerApprox32percentofpowerisconsumedbyAgriculture,

35percentbyindustry,19-20percentislostandbalanceusedfordomesticpurpose.However,industrycontributesonly15

percentoftheGSDP.

Acknowledgingthedemandsofentrepreneurs,thestategovernmentrealizesandrecognizestheneedfordevelopmenton

otherfactorslikelanddevelopment;industryspecificinfrastructurelikecoldstorage,goodroads,properwatermanagement

andindustryclusterscomprisingsimilarconcernsandexpertisetobesetup.Fromthestatesperspective,ifgivenachoice

theywouldenhancetheirfocusonSMEsectorasthelargerenterprisescanavailofexternalhelp.

Withregardstospecificentrepreneurialeducationanddevelopment,thestatehascoursesonentrepreneurshipwherethe

objectiveistoprovidetheknowledgeforjobcreationaswellasselfemployment.Thereisalsocontinuousefforttoenable

andincreaseinteractionwiththeindustryandbridgethegapbetweenwhatistaughtintheseinstitutesandwhatthe

industryrequires.PeoplefromIndustryarecalledforinteractions,workshopsandtalks.Theyarealsoinvolvedwhile

developingthecurricula.Initiativeshavealsobeenstartedforcollaborationbetweenthegovernmentandindustryplayers

withbiggerorganizationslikeTATAandL&Ttakingthelead.

TheStateismovingintherightdirectionbutpolicyimplementationneedstoincreasethemomentumofentrepreneurial

growth.TheStatedoescitetheneedforadditionalfinancialresourcestoimplementthesepoliciesthough.TheGovernment

alsolooksforwardtoacommunicationandfeedbackmechanismwithitsentrepreneursandisopentoinitiativesthatwill

increasecommunicationandpartnershippotentialwithprivateindustry.


11



ThePolicyFramework

Highlights of the Industrial Policy 2009

GujaratisconsideredoneoftheleadingindustrialstatesinIndiaandisoftenprojectedasanexampleofabusiness-friendly

state.Itaccountsfor22percentofthecountrystotalinvestmentandcontributesabout16percenttothetotalvalueof

outputaddedbythemanufacturingsectorinthecountry 1.Thestatehasachievedgrowthintheindustrialsectorand

contributesnearly16.1percenttothecountrysindustrialoutput1.

ToprovideimpetustothegrowthoftheindustrialunitsinGujarat,thestategovernmenthasreviewedandupdatedthe

IndustrialPolicyandannouncedtheGujaratIndustrialPolicy2009.Themainobjectiveofthepolicyistofacilitateinvestment

inthestate,createlargescaleemploymentopportunitiesandachieveglobalcompetitivenessbyimprovingproductivity

amongindustrialunits.Asperthenormsofthepolicy,thestatehopestodothefollowing 2:

G u j a r a t

Population

50.6 million (as per 2001 census)

Per Capita Net State Domestic Product Job creation Trend

Source:SocioEconomicReview,GujaratState,20082009 Source:SocioEconomicReview,GujaratState,20082009

1 SocioEconomicReview,GujaratState,20082009

2 IndustriesandMinesDepartmentofGujarat,IndustrialPolicy,2009



FocusonSpecialInvestmentRegions(SIR)andInvestmentRegions(IR)withconvergenceofindustrial,socialandurban

infrastructure.ThestatehaslegislatedtheSpecialInvestmentRegionAct,2009(SIRAct)forfacilitatingdevelopmentof

SIRinDedicatedFreightCorridor(DFC)andDelhiMumbaiIndustrialCorridor(DMIC)

Encouragesettingupofmegaprojectstofacilitatelargescaleeconomicactivityinthestate.Projectswithinvestment

ofmorethanINR10billionandcapacitytoprovideemploymentto2,000peopleareencouraged

Promotionofclusterdevelopmentapproachbyprovidingfinancialassistancetotheclusters

Specialthrusttosectorssuchastextilesandapparels;gemsandjewellery,agri-business,fisheries,IT/Knowledge-

basedindustries,nanotechnology,biotechnology,non-conventionalenergyresourcesportandrelatedindustriesand

powersector

Providingfinancialassistancefortheupgradationandimprovementuponthestatusofinfrastructureinthestate

Developmentofnewindustrialestatesinfocussectorstopromotesectorspecificeconomicactivityandgenerate

employment.Thestategovernmentplanstoprovidefinancialassistanceandincentivessuchasreimbursementof

stampdutyonthecostofland

DevelopmentofnewindustrialestatesthroughthePublicPrivatePartnershipmodel(PPP)framework

Emphasisonencouragingexpansionoftheskilledandeducatedmanpowerbase

TheGovernmentofGujarat(GoG)hasincorporatedGujaratKnowledgeSocietyandplanstosetupknowledge

corridorsforhighereducation

Ithasproposedtosetuptrainingextensioncentersinindustrialparks/clusters/SEZsonaPPPbasis,anchor

institutes,incubationcenters


Thestateisprovidingsupporttothekeythrustsectorsthroughspecificpolicyinitiatives:

IT/ITES Policy3

TheGovernmentofGujarathasundertakeninitiativestopromotethe

IT/ITESindustryinthestate.ThestategovernmenthasnotifiedIT

Policy20062011inNovember2006.Asperthepolicy,thefollowing

incentiveswillbeprovidedtoaugmentthegrowthofthesector:

Exemptionfrompaymentofelectricitydutyforaperiodoffive

yearsandpowercutsforallnewITunits

ExemptionofstampdutyforunitsintheITParksandITSEZ

FinancialassistancetoITparkdeveloperandallowingadditional

floorspaceindex(FSI)forIT/ITESparksinurbancenters

ProposedinvestmentofaboutINR114millionin2009-20104

GrantingofSEZstatustotheITindustrysubjecttotheprovisionof

SEZAct/rules

The Assessment | Gujarat

3 IndustriesandMinesDepartmentofGujarat,IndustrialPolicy,2009

4 IndustriesandMinesDepartmentofGujarat,InvestmentOpportunities(Vision2010forProposedInvestmentProgram)

13



Biotechnology Policy5

ThestateofGujaratconsistofmorethan50biotechnologycompaniesand66supportorganizations 6.Toencouragenew

entrepreneursandattractinvestmentsinbiotechnologysector,theGoGhasformulatedtheStateBiotechnologyPolicy

20072012.Thekeyhighlightsofthepolicyare:

Focusonthrustareassuchasanimalhusbandry;agriculture;pharmaandhealthcare;andmarineforthedevelopmentin

biotechnology

Facilitateprivatepartnershipsfordevelopingbiotechnologyparks,zonesandothersupportinginfrastructureforresearch,

training,testing,andaccreditation

Financialassistanceforthebiotechnologyparksat50percentoffixedcapitalinvestmentsinland,buildingsand

infrastructurefacilitiesuptoamaximumofINR25million

Promotingsinglewindowclearancebyfacilitatingeasyapprovalsbyinstitutingacoordinatingorliaisonofficer

Gems and Jewellery Policy7

TheGoGhasidentifiedthegemsandjewellerysectorasoneofthethrust

areasfordevelopment.Thestateaccountsfor80percentofthediamonds

processedinIndiaandhasemergedasthemajorsourceofemployment

generation.Tofurtherenhanceitsdominanceinthesector,thestate

governmenthasformulatedvariousschemestomakethestateasthe

favorabledestinationofinvestment.

FinancialassistancebywayofinterestsubsidytoModernJewellery

unitsattherateof3percentperannumuptoamaximumofINR1.5

million

EstablishmentofjewelleryparksbyencouragingPPPinthesector

FinancialassistancefortheestablishmentofHallmarkCertification

CentresandGemsTestingCentres

Textile and Apparel8

Thestatecontributesabout33percentofmill-madefabricand25percentofpower-loomfabricofthecountry.Tofurther

augmentthegrowthofthesector,thestategovernmenthasintroducedvariousschemes:

Financialassistancebywayofinterestsubsidyintechnicaltextiles,spinning,weaving,knitting,apparelandmachine

carpeting

Financialassistancefortechnologyacquisitionandupgradation.

ProposedinvestmentofaboutINR4billiontothesector9

AssistanceforestablishingApparelTrainingInstitutions

Supportforsettingupapparel/sewingparks,weavingparkforcotton/synthetictextiles,exclusivetechnicaltextileparks,

etc,onPPPbasis


5 GovernmentofGujaratScienceandTechnologyDepartment,BTPolicy20072012

6 GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009

7 GovernmentofGujarat,IndustriesandMinesDepartment,GemsandJewellerySector,2009

8 GovernmentofGujarat,IndustriesandMinesDepartment,TextileandApparelSector,2009

9 IndustriesandMinesDepartmentofGujarat,InvestmentOpportunities(Vision2010forProposedInvestmentProgram)

14




Micro, Small and Medium Enterprise Policy highlights10

ThestategovernmenthasidentifiedvariousincentivesfortheMSMEs.

Interestsubsidyattherateof7percentand5percentformicroenterprisesandsmallandmediumenterprises,

respectively

InterestsubsidyislikelytobegrantedforamaximumamountofINR2.5millionperannum,foraperiodoffiveyears

VenturecapitalfundingfortheMSMEsuptoINR100millionduringtheoperativeperiodofthescheme

Allotmentof50percentgrantsubjecttomaximumofINR10milliontotheMSMEsfortheacquisitionoftechnologyin

anyform

AssistancetoR&Dinstitutionsupto60percentoftheprojectcostexcludinglandcostandbuildingcost

Patentassistanceupto50percentsubjecttomaximumofINR1millionforexpenditureforobtainingdomesticpatent

anduptoINR2.5millionforobtaininginternationalpatents

ThePolicyImpact

TheintroductionoftheIndustrialpolicy2009isseentohavehelpedindustrialdevelopmentinthestate.

TheimplementationofpolicieshasleadtoanemergenceofnumberofIndustrialEntrepreneursMemorandum(IEMs)in

thestate.Inthefirsteightmonthsof2009,about61IEMswereimplementedwithaninvestmentofINR13.4billion.

Further,sinceAugust1991tillAugust2009,1,485IEMswhereimplementedbytheentrepreneurswithatotalinvestment

ofINR807.4billionandgeneratingemploymentfor209,100people.11

Further,theMicro,SmallandMedium

Enterprise(MSMED)Act-2006,hasalso

triggeredthedevelopmentofthemicro,small

andmediumenterprisesandabout37,312units

havebeenregisteredwithaninvestmentofINR

201billionandemploymentgenerationof

approx600billionduringOctober2006June

2009.Also,about4,359unitswereregistered

duringJanuary2009June2009.

2007 2008 2009(UptoAugust)

Number Investment(INRbillion) Number Investment(INRbillion) Number Investment(INRbillion)

IEMs

Implemented223 74.7 76 13.3 61 13.4

Source:IndiaStatandMinistryofCommerceandIndustry,GovernmentofIndia

Source:OfficeofTheIndustriesCommissionerate,Gujarat

UnitsRegisteredundertheMSMEDActfromOctober2006toJune2009

Micro Small Medium

NumberofUnitsRegistered 29085 7911 316

Investment(INRBillion) 58.4 114.2 28.5

Employment(milion) 0.27 0.24 0.04

10 GovernmentofGujarat,IndustriesandMinesDepartment,Micro,SmallandMediumEnterprises,2009

11 MinistryofCommerceandIndustry,SIAStatistics,September2009

15



16

GrowthImpetus

Infrastructural development initiatives Thestatehastakenanumberofinfrastructuraldevelopmentinitiativessuchas

developmentofbiotechnologyparks,industrialparksandestates.

ThestateissettingupBiotechSEZatSavil,Vadodarawithatotalareaof1,700acres,thelargestinthecountry.Thestate

governmenthasalsoproposedtosetupbiotechzonesandparksatfivelocationsinGujarat 12.

Further,theGujaratIndustrialDevelopmentCorporation(GIDC)hasapproved6newproposalsforindustrialestatesatthe

endofyear2008-09.12

Investment Promotion Measures TheGovernmentofGujarathastakenanumberofinvestmentpromotionmeasuresfor

theoveralldevelopmentofthestate.InJanuary2009,ithasorganizedVibrantGujaratGlobalInvestorsSummit-2009to

attractinvestorstoestablishprojectsinthestate.About8690MoUsweresigned/announcedin28differentmajorsectors

withtotalinvestmentofINR12215billionand2.7millionemploymentopportunitiesinthestate. 13

States emphasis on the development of skilled work force Thestategovernmenthascreatedincubationcentersin

partnershipwithprivateandcorporatesectortosupportthepotentialoftheyouthinthestate.Thestateisalso

encouragingspecializedskilldevelopmentinstitutionsthatcanimpartvocationalskillsinareassuchasmarineengineering,

mining,specializedpipelaying,logistic,etc. 14

Sectors MoUs(Number)ProposedInvestment

(INRBillion)

ProposedEmployment

(Million)

Manufacturing 576 2,405 0.98

Infrastructure 194 4,859 0.17

InvestmentRegions 101 1,967 0.85

UrbanDevelopment 261 1,012 0.17

SocialServices 145 301 0.02

Tourism 99 440 0.13

SpecialSectors 1423 721 0.05

MSME 7252 68 0.30

Announcements 15 444 0.00

Source:SocioEconomicReview,GujaratState,20082009


12 VibrantGujarat,BiotechnologySector,2009;GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009





Major hub for SEZs units Gujaratwasthe

firststatetoimplementtheSpecialEconomic

Zone(SEZ)Act,2004.Thestateisranked

numberoneintermsofareacoveredunder

SEZsinIndiawith60approvedSEZs(asonMay2009).

Single window clearance facility ThestategovernmenthassetupasinglewindowclearancefacilitythroughINDEXTb

(IndustrialExtensionBureau),anorganizationofGujaratGovernment.ItactsasaninvestmentpromotionagencyofGujarat

stateandprovidessinglepointofcontactforallinvestmentrelatedactivitiesinGujarat. 15


Laudingtheeffortsofthestategovernment,theentrepreneursinGujarattrulybelieveintheirstatesgoverningmachinery.

Accordingtoentrepreneurs,thestatehassetoneofthebestplatformsforanentrepreneur.Ithastakennumeroussteps

toensureentrepreneurialdevelopment.Thereiseaseinsettingupanindustrialunitthroughquickdecisionsand

streamlinedprocedures.Thestategivesopportunitytotransformideasintoactivities.

Togetherwiththeresources,Gujaratisseenashavingaveryprogressiveoutlooktowardstheindustryandentrepreneurial

development.Thestatehasarobustpolicyframework,whichiscreatedwithparticipationfromallstakeholders.However,

theentrepreneursfeelthatwhilethestateisproactiveinannouncingpolicies,theimplementationofsomeofthesepolicies

hasbeenfallingbehindschedule.

Further,thestatesfocusonSMEsectortogetherwithlargerenterprisesandforeigninvestmentismuchappreciatedbyits

entrepreneurs.Fromanentrepreneursperspective,landbankforsmallplayersandeasylandtransformationsfrom

AgriculturetoIndustry,availabilityoffinancialinstitutionsanddevelopmentbanks,easycommunicationwiththe

governmentarecitedassomeofthemotivatingfactors.Thestatesstrategicvisioncombinedwithefficientutilisationofits

resourceshasledtovariousnewgrowthopportunitiesinthestatewhichthestatesentrepreneurshavetriedtoharness.

AsoneoftheentrepreneurinGujaratcommentedGujarathasentrepreneurshipinitsDNA,thegovernmentonlyneedsto

provideopportunities

Asentrepreneursinthestaterecognisethestateseffortsandwillingnesstopromoteentrepreneurialdevelopment,they

alsoexpressedsomeoftheirconcernsandexpectations.Thereisaneedtocreatemodernworld-classsocialinfrastructure

intermsofeducation,healthcareandtourismtopromoteinboundtourismaswellasmanpowermigrationfromother

states.Further,whiletheavailabilityofmanpowerisnotanissue,athoroughskillgapanalysisisrequiredfromgroundtotopleveltoaddresstheneedsofspecialisedindustries.Thestatesentrepreneurstakeprideinthestatesproactive

investmentpromotionprogrammes,theyalsofeeltheneedtocreatesustainabletradeandbusinesscoordinationagency

acrossvariousIndianstatesandcountriestofosterbusinesstie-ups.Further,whilethestatehasanefficientsinglewindow

mechanismsitsentrepreneursfeelthatthattoalargeextentthisisonlyforselectmarqueeprojectsandnotallprojects

receivethesametreatmentandsomestillfacedelays.Inaddition,whilethestatesauthoritiesareperceivedtobe

supportiveinmanyareas,entrepreneurshavefacedhindranceswhiledealingwiththecentralauthorities(Customs&excise

andIncomeTax)operatinginthestate.

ProposedInvestmentandEmploymentinthe60SEZs (May30,2009)

ProposedInvestmentbytheDeveloper

aswellasUnitsinSEZsINR2,674billion

ProposedEmployment 1.9mill ionpersons

Proposed area ofSEZs 29423.83 hect ares

Source:OfficeofTheIndustriesCommissionerate,Gujarat(SEZs)


15 INDEXTb

17



18


ThestateofGujarathasbeenattheforefrontofindustrialandentrepreneurialdevelopment.Thestatehassetmany

policiesandinitiativeswhicharenowbeingreplicatedbyotherstatestocreatesimilareffect.However,thegovernment

alsocreditsthestatesentrepreneurialcultureforitssuccess

Thegovernmentacknowledgesitsroleasanenablerandfacilitatorforgrowthandendeavourstodeliverbycreatingthe

rightframework.Thegovernmentalsoencouragesadialoguebetweenallstakeholderstocreategrowthinitiativeswhile

focussingontheoveralldevelopmentofthestate.Thegovernmenthasbeenreceptiveofthefeedbackprovidedbythe

industryatvariousforumsandhasbeencontinuouslydevisingwaystoaddresstheconcernsofitsentrepreneurs.

Theclarityofvisionandobjectivesatthestatelevelhasenabledthestatetobecomeoneofthemostindustrialised

economiesinthecountrytoday.TheGovernmenthasacknowledgedaneedforongoingdialogueandinteractionbetween

thestateandentrepreneurstocontinuallytakeintoaccounttheentrepreneursneedswhileframingandimplementing

policies.




D e l h i

Population



Source:EconomicSurveyofDelhi,20082009 Source:EconomicSurveyofDelhi,20082009

ThePolicyFramework

Highlights of the Industrial Policy

Delhihasalargepresenceofmanufacturingunitsemployingabout0.6millionpeople,withmajorityofunitsoperatinginthe

unorganizedsector.Asperthe5thEconomicCensusheldinDelhiduring2005,thestatewasranked16thintheAllIndiaranking,withnumberofestablishmentscontributingabout1.80percentofthetotalestablishmentsinIndia. 1 Thestatehas

about28plannedindustrialestatesspreadoveranareaof4,647acres,ofwhich21areunderDelhiDevelopmentAuthority

(DDA)andtheremainingaremaintainedbyDelhiStateIndustrial&InfrastructureDevelopmentCorporation(DSIIDC). 2

Thestategovernmentintendstoachieveconsistentgrowthandhasformulatedindustrialpolicytoattractinvestmentinthe

state.ThefirstindustrialpolicyfortheNationalCapitalTerritory(NCT)wasframedin1982withanobjectiveofcreatinga

manufacturingsectorandemploymentopportunitiesinthestate.However,withglobalizationofeconomiesandtechnology

andadvancementbecomingthekeystoneofaneconomydevelopment,thestategovernmenthasformulatedanew

industrialpolicy2009-2021after27yearsofthelastpolicy.

1 EconomicSurveyofDelhi,20082009

2 GovernmentOfNationalCapitalTerritoryofDelhi,DepartmentofIndustries,DraftIndustrialPolicy,2009-2021



20

ThenewindustrialpolicyisstillunderconsiderationbyGovernmentofNationalCapitalTerritoryofDelhi(GNCTD)giving

thrustonthefollowing:2

Focusonrelocatingandphasingoutpollutingunits

Promotinghightechnologyandskilledindustries.Thefocusistoattractknowledge-basedindustries

Redevelopmentofindustrialareas

Encouragementofclusterapproachinnewindustrialareas

PromotingPublicPrivatePartnership(PPP)fordevelopingspecializedindustrialparks(suchasHi-TechParkforIT/ITES)or

SpecialEconomicZones(SEZ)withgovernmentasco-partner

CreationofR&Dandeducationhubsinconjunctionwitheducationaluniversities,researchinstitutesandR&Dunitsin

engineering,pharmaceuticalsandelectronics

PromotingsinglewindowclearancethroughtheBusinessFacilitationMission(BFM)program.Theobjectiveistoattract

investmentsinthestatethroughproceduralsimplificationsandremovingtheneedforapproachingvariousdepartments

forclearancesandpayments.

Industry Specific Policies

Thestateisprovidingsupporttothekeythrustsectorsthroughspecificpolicyinitiatives:

IT/ITES Policy3

TheGovernmentofNCTofDelhihasundertakeninitiativestopromotetheinformationtechnologysectorinthestate.The

stategovernmenthasputforththeITpolicyin2000,whichaimstoexplorenewopportunitiesforemployment,efficiency

andenhancefactorsforeconomicgrowth.Thekeyhighlightsofthepolicyare:

Generateadditionalemploymentinthedigitaleconomy

Promotetheusageofe-governancetosupportthegovernmenttodeliverefficientservicestoitscitizens

EncouragetheuseofITinschools,collegesandeducationalinstitutionsinthestateofDelhi

PromoteentrepreneurshipandincreaseIT'scontributiontotheeconomicgrowthofthestate

Usethemediumofinformationtechnologytopromoteequalitybyremovingpoverty,improvinghealthcare,empowering

women,etc.

EncourageinvestmentandaccelerategrowthintheIThardware,software,Internet,training,ITenabledservices,

telecomande-commercesectors

The Assessment | Delhi

3 GovernmentOfNationalCapitalTerritoryofDelhi,DepartmentofIndustries,ITPolicy,2000



SEZ Policy4

TheGovernmentofNCTofDelhihasformulatedapolicytoprovidevariousincentivesandconcessionsforthepromotionof

SEZunitsinthestate.TofosterthegrowthoftheSEZunitsinthestate,thegovernmentisprovidingthefollowing

incentives:

SpecificsectorssuchaselectronichardwareandsoftwareincludingITES,nano-technology,bio-technology,gemsand

jewelleryandnon-conventionalenergyareallowedtocarryoutactivitiesintheSEZunits

IT/ITESSEZunitsarelikelytobeexemptedfromenvironmentclearance

ExemptionfromstateandlocaltaxesfortransactionswithintheSEZunits

100percentexemptionfrompaymentofstampdutyonthelease/licensedeedregardingthelandorbuiltupspace,

howevernoexemptionfrompaymentofregistrationcharges

Exemptionfromelectricitydutyortax

AllunitsestablishedundertheSEZwillbedeclaredpublicutilityservices''underthejurisdictionoftheIndustrial

DisputeAct1947

Transport Policy5

Thestategovernmentformulatedthetransportpolicytoprovidecost-effectiveand

efficientmodesoftransportationtothecitizens.Thekeyhighlightsofthepolicyare:

Provisionofaffordablemodesoftransportsuchasbuses,mini-buses,electric

trolleybuses,metros,etc.

ControllingpollutionbyprovidingCNGbuses,strengtheningthepollutionnorms,

introductionofstrictinspectionandcertificationsystems

Strengtheningthetransportinfrastructurebyconstructingflyovers,subwaysand

expressways

Small Scale Industries6

ThestategovernmenthasidentifiedvariousincentivesfortheSmallScaleIndustries(SSI)inDelhi:

ProvisionofcapitalsubsidyschemefortechnologyupgradationtothenewandexistingSSIs.Thecapitalsubsidyis

limitedto12percentofmaximumloanofUSD86,703underthescheme.

Promotingsinglewindowclearanceservices

Simplifyingproceduresandintroducingredressalofgrievancesandassistancemechanism

Establishingexportpromotionandqualitycontrolcell

Provisionoffinancialassistanceatlowerinterestrates

Focusoninfrastructurefacilitiesbyprovidingdevelopedplotsandfactories


4 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,SEZPolicy

5 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,TransportPolicy

6 MinistryofExternalAffairs,GovernmentofIndia,ITPDivision,ProfileofDelhi

21



22

ThePolicyImpact

TheintroductionoftheIndustrialpolicyhelpedindustrialdevelopmentinthestatewithincreaseinnumberofpublicprivate

partnershipprojectsandforeigndirectinvestment(FDI)inflowsinthestate.

Theimplementationofpolicieshasfosteredthegrowthofforeigndirectinvestmentinthestate.Inthefirstfivemonthsof

2009,theDelhiregion(includingpartsofUPandHaryana)wasthesecondmostfavoredforeigndirectinvestment

destinationafterMumbai.Duringtheperiodthelargestinvestmentattractingsectorshavebeenelectricalequipment,the

servicessector,telecommunications,andtransportationindustryfollowedbychemicals,foodprocessingindustries,drugs

&pharmaceuticals.

Theinvestmentinflowislikelytobringinnewtechnology,enhancethequalityofhumancapitalandcreateastrong

competitivebaseforitsoveralldevelopment.

Further,duringAugust1991toAugust2009,thestatehas

implementedonly50IndustrialEntrepreneurMemorandums

(IEMs)withaninvestmenttoINR6.5billionandgenerating

employmentfor4,880people.7

Theimplementationofindustrialpolicyhasalsotriggeredthe

emergenceofpublicprivatepartnershipsprojectsinthestate.The

2010CommonWealthGamesinNewDelhihasprovidedan

opportunitytotheprivatesectortobeinvolvedonalargescale

fortheoveralldevelopmentofthestate.

GrowthImpetus

Thestateprovidesanenvironmentconducivetobusinesswithqualityinfrastructure,favourablegovernmentpoliciesand

highly-skilledandtrainedworkforce.

Infrastructural development initiatives Thestategovernmentistakinganumberofinfrastructuraldevelopment

initiativessuchasdevelopmentofindustrialparksandestates.Ithasacquired1,300acresoflandofwhichpossessionof

1,065acreshasbeentakenfordevelopingnewindustrialestates.Ithasalsoacquired800acresoflandforthe

developmentofindustrialareas.DevelopmentofurbantransportinfrastructuresuchastheDelhiMetro,freewaysand

betterroadshavealsohelpedmakeDelhiamoreattractivecityforbusinessingeneral.

ThestategovernmenthasmadeDelhiFinancialCorporationresponsibleforfacilitatingvariousclearancesandloans

requiredforsettingupanindustry.


ForeignDirectInvestmentInflowinDelhi(INRbillion)

20002005 220.8

2006 97.8

2007 138.6

2008 93.5

2009(JanuarytoMay) 101.1

Note:ThedataforDelhiincludesUttarPradesh(UP)andHaryana

Source:IndiaStatandMinistryofCommerceandIndustry,

GovernmentofIndia

TotalNumberofIndustrialEstateinDelhi(asonMarch31oftherespectiveyears)

2002 2003 2004 2005 2006 2007 2008 2009

29 29 29 31 31 31 28 28

Source:EconomicSurveyofDelhi,20082009

7 MinistryofCommerceandIndustry,SIAStatistics,September2009



Thestateishostingthe2010CommonwealthGames,whichislikelytoprovideitanopportunitytoaugmentits

infrastructureandfacilities.ThestategovernmenthasproposedanoutlayofINR21.05billionfortheCommonwealth

Gamesprojects.ThegovernmenthasalsotargetedutilizingmorethanINR450billion(during2007-2012)forimprovingcivic

infrastructureandservicesinthestate. 8

Strong focus on the development of skilled work force9 Thestatehasastrongeducationalinfrastructure,withliteracy

rateof81.67percent,whichisabovethenationalaverageof64.8percent.Thestateisthehubforleadingtechnical(IIT),

medical,management,andlegalinstitutions.TheGovernmentofDelhiisfocusingontheeducationsectorandhas

increasedtheexpenditureonthesectorfrom8.5percentin2007-08to10.3percentin2008-09ofthetotalplan

expenditure.Further,in2008-09,Delhiper-capitaexpenditure(INR1,753)oneducationsectorwashigherthanallstates

(INR1,098).

Strong financial infrastructure for collection of

savings and disbursal of credit Thestatehas

asoundfinancialinfrastructurewith2,076

branches(September2008)ofScheduled

CommercialBanks,anincreaseof14.32percent

ascomparedtothepreviousyear.Thecreditto

depositratioofallscheduledcommercialbanks

was70.49percent,veryclosetotheallIndia

ratioof74.93percent.

StatusofEducationalInstitutes

Schools 5022

Colleges 175-degreecolleges

TechnicalInstitutes 46AICTEapprovedtechnicaleducationinstitutions

FinancialInstitutionsinDelhi(asonSeptember2008)

StateBankofIndiaanditsAssociates 360

NationalizedBanks 1247

ForeignBanks 40

OtherScheduledCommercialBanks 429



8 StateBudget20092010

9 EconomicSurveyofDelhi,20082009


23



24


WithCommonwealthGames2010aroundthecorner,thestateofDelhiisworkingtomakemanyimprovementsand

creatingaplethoraofopportunitiesinmultiplesectorsacrossthespectrum.However,whilenewopportunitiesarebeing

createdinlightoftheCWG2010,thebasicpolicyframeworkofthestatehasnotbeenrevisedforthelast27years.Hence,manyentrepreneursinthestatearenotawareofthepoliciesandperhapswerenotabletoharnessthebenefitswhile

startingtheirentrepreneurialjourney.

However,thestateofDelhiisperceivedasnotproactiveinpromotingbusinessorindustrialgrowth.NeighbouringHaryana

andUPareactivelycreatinginfrastructuretopromoteindustrywhichhascompelledthebusinesstomigratefromDelhito

thesestates.Partly,thereluctancemaystemfromthedesiretomoveheavyindustryoutofDelhiandpartlyfromthefact

thatDelhi,beingthecapitalandtheeconomiccentreoftheNorth,seesvibranteconomicactivitywithoutactivepromotion.

However,entrepreneursdidcitetheneedforactivegovernmentsupportandthereseemedtobeanoveralllackof

awarenessoftheStatessectorspecificpoliciesandincentivestructures.

Whilediscussingtheirwishlistandconcerns,therewasconsensusamongstentrepreneursforcreatinganenablingpolicy

frameworkfocusedatinclusivegrowthandservicesectordevelopment.Accordingtoentrepreneursinthestate,

entrepreneurshipisnotarticulatedinthecurrentpolicy.TheentrepreneursalsofeeltheneedforastatesupportedVenture

/SeedFund.Thereisalsoadireneedtocreateinfrastructureintermsofofficespaceanddevelopexistingpowerand

telecominfrastructuretofosterbusinessgrowthinthestate.Further,theexistingindustrialinfrastructureneedsafaceliftto

enableinvestmentsinthestatewhilecreatingamorefocusedregulatoryframeworktominimiseprocesstimeand

enhanceclarity.


WiththeCWG2010preperationsinfullswing,thestategovernmentemphasisestheopportunitiesithascreatedacross

theNCRregioninsectorssuchasinfrastructure,hospitality,construction,transportetc.Whilethestaterecognisesthatthe

focusonindustryintermsofpolicyinitiativeshaslaggedbehindschedule,thenewdraftindustrialpolicy2009-21islikelyto

befinalisedbytheendof2009.Thepolicyisfocusedatcreatingopportunitiesinnewcleanersectorswhilesimplifying

proceduresthroughamorerobustandefficiente-governanceframework.

Further,thestategovernmentintendstoachieveconsistentandrapidgrowthandhasformulatedindustrialpolicytoattract

investmentinthestatebypromotinghightechnologyandskilledindustries.Thefocusistoattractknowledge-based

industriesandredevelopmentofindustrialareas.

ThegovernmentislookingforwardtoshowcasingDelhitotheworldduringtheCWG2010andthegameshavebecomeacatalystforinvestmentandgrowthorientedactivityinthestate.




T a m i l N a d u

Population



Source:EconomicSurveyofDelhi,20082009 Source:EconomicSurveyofDelhi,20082009

ThePolicyFramework

Highlights of the Industrial Policy 20071

TamilNaduisconsideredaleadingindustrialstateinIndia,andamajormanufacturingcentre.Itisoneofthemostfavored

destinationsbyboththedomesticandforeigninvestors,especiallyinareasofInformationTechnologyandrelatedindustries,automobiles,electronics,consumerdurables,garmentsandrealestate.

Tofurtherstimulatethegrowthofindustrial developmentinthestate,thegovernmentintroducedtheIndustrialPolicy2007.

Thekeyobjectivesofthepolicyaretoattractinvestment,facilitatenewmanufacturingcapacityandraisethe

competitivenessandefficiencyoflocalindustry.Otherstatedhighlightsofthepolicyare:

IncreasemanufacturingsectorcontributioninGSDPfrom21percentto27percentby2011

Developanefficientanddependableindustrialinfrastructure

Upgradeinfrastructurefacilitiesbyencouragingpublicprivatepartnershipsinallindustrialclusters,includingwater

supply,power,communicationfacilities,roads,railways,etctoincreasecompetitivenessintheindustry

1 TamilNaduindustrialDevelopmentCorporationLimited,IndustrialPolicy,2007



26

UpgradationofeducationalinstitutionsbyinitiatinganIndustrialTrainingQualityImprovementProjecttoinvest

substantiallyintheITI/ITCinfrastructuredevelopmentandcapabilities

FinancialassistancetoindustrialparksuptothemaximumofINR20millionor25percentoftheinvestmentineligible

fixedassets,whicheverisless

FinancialassistancetotechnologyinnovatorsorstandaloneR&Dunitsorindividualsforinnovationscapableofindustrial

application,upto50percentofthecostoffilingapatentorINR0.2million,whicheverisless

Encouragementofinvestmentsinresearchanddevelopmentbymanufacturingcompanies

EnactmentofaBusinessFacilitationActforgivingSingleWindowCommittees,atStateandDistrictlevel,formal

authorityandcleartimelinesforeachapproval

ImplementingaBusinessFacilitatione-GovernanceSystemforenablinginvestorstoapplyforSingleWindow

Clearanceon-lineandtomonitorclearances

Promotingclusterdevelopmentactionplanforupgradingthequalityofinfrastructureinindustrialclusters


Thestateendeavorstosupportkeythrustsectorsthroughspecificpolicyinitiatives:

ITES Policy2

Topromotethesector,in2005,theGovernmentofTamilNadureleasedanITESpolicy.Thepolicyoutlinescertain

concessionsandincentivestoencouragethegrowthofthesector.

Granted50percentexemptionofstampdutyforITcompaniestowardslandregistrationandofficeconstruction

Promotingunrestrictedmovementofcapitalequipmentincludinghardware,peripherals,captivepowergenerationsets,

etc.

RelaxationofFSI(FloorSpaceIndex)upto100percentwillbegivenindesignatedITParks

AllotmentofIndustryStatustoallsoftwareindustriesincludingservicesandtraininginstitutionsinITES

CreationofITESParksinChennaiandotherTierII/TierIIIcities

Handloom and Textile Policy3

Tostimulatethegrowthofthetextileindustry,thestategovernmenthasformulatedthehandloomandTextilePolicy2006

2007.Thepolicyaimsatachievingglobalstandardsinproductquality,contributemoretoexportsand toencouragetextile

clusters.Thekeyhighlightsofthepolicyare:

Focusonhandloomexportsbyencouragingtheweaverstobringoutexport-orientedproducts

RegisteringhandloomproductssuchasKancheepuramSilkSareesand"BhavaniJamakkalamunderunderthe

GeographicalIndicationsAct

SettingupofApparelandHi-techWeavingParks

The Assessment | Tamil Nadu

2 GovernmentofTamilNadu,ITPolicy

3 GovernmentofTamilNaduHandloomandTextilePolicy



Biotech Policy4

TamilNaduisrichinbioresourceswithoneofthelargestcoastlines

inthecountry,representingopportunitiesformarinebiotechnology.

TofurtheraugmentthegrowthoftheBiotechnologyindustry,thestategovernmenthasformulatedabiotechnologypolicy.Thekey

highlightsofthepolicyare:

FocusonMedical/Human&AnimalHealthcare,Agriculture-

food,Environment,andIndustrialProducts

CreationofBiotechnologicalEnterprisesZones(Bio-Valleys)in

thestate

RegulatoryfacilitationforestablishingaBiotechentityresearch

centres

FacilitatingsinglewindowfacilityforBiotechenterprisesandentitiestoobtainclearancesfromthevariousCentralagencies

Enhancementofhumanresourcepoolforthedevelopmentof

thesector

Facilitatingestablishmentofanemergingtechnologyfundfor

thesector

Allotmentofindustrystatustothebiotechnologyunits

undertakingcommercialproduction

Micro, Small and Medium Enterprise (MSMEs) Policy highlights5

ToenhancethecompetitivenessoftheMicro,SmallandMediumenterprises,thestategovernmentannouncedan

exclusiveMicro,SmallandMediumEnterprisePolicy2008.Thepolicyfocusesonallinitiativestobetakenbythestate

governmentforthedevelopmentofMSMEs

Encourageagro-basedindustriestoprovidebetterincometothefarmers

Promoteentrepreneurdevelopmentandsectorspecificskilldevelopmenttrainingprogrammes

Establishmentofnewindustrialestatesbyallotting20percentlandinallnew/expansionschemesundertakenbyState

IndustriesPromotionCorporationofTamilNaduLtd(SIPCOT)toMSMEs

Rebateof50percentonstampdutyandregistrationatthetimeoforiginalallotment

Encouragementofprivatelydevelopedestatesbyproviding25percentofthetotalprojectcost,subjecttoamaximum

ofINR10millionasassistance

Financialassistancebywayofcapitalsubsidyattherateof15percentoneligibleplantandmachinery,subjecttoa

maximumofINR0.375million

FinancialassistancebywayofcapitalsubsidyforThrustSectormanufacturingenterprisessetupanywhereintheState


4 BiotechnologyPolicyOfGovernmentOfTamilNadu

5 GovernmentofTamilNadu,Micro,SmallandMediumIndustriesPolicy2008

27



ThePolicyImpact

TheintroductionoftheIndustrialpolicy2007hasplayedacriticalroleinenhancingthegrowthofindustrialdevelopmentin

thestate.

Theimplementationofthesepolicieswereanimportantcontributortothestateincreasingtotalinvestment3timesfrom

INR1,737billiontoINR5,792billionduringJune2006toMarch2009. 6 ItalsoleadanumberofIndustrialEntrepreneurs

Memorandum(IEMs)inthestate.FromAugust1991toAugust2009,about521IEMshavebeenimplementedbythe

entrepreneurswithaninvestmentofINR137.7billionandgeneratingemploymentopportunitiesfor79,084people.7

Further,theimplementationofpolicieshastriggeredthegrowthofForeignDirectInvestment(FDI)inthestate.TheFDI

inflowintheChennairegion(includingTamilNaduandPondicherry)increasedfromINR28.9billionin2007toINR29.8

billiontillMay2009.

ThestatehasimplementedtheMicro,SmallandMediumEnterprise(MSMED)Act-2008,whichhasstimulatedthegrowthof

micro,smallandmediumenterprisesinthestate.ThenumberofMSMEhasincreasedby3.5percentfrom0.539millionin

20062007to0.558millionin20072008,whichhasleadtoanincreaseinthenumberofpersonsemployedinthestate.8

Further,thepolicyalsoresultedintheestablishmentofanumberofindustrialestates.During20082009about11new

industrialestateshavebeenestablished.Thegovernmentplanstosetupaboutthreenewindustrialestatesfortheyear

20092010.9


Source:IndiaStatandMinistryofCommerceandIndustry,GovernmentofIndia

19912006 2007 2008 2009(UptoAugust)

NumberInvestment

(INRbillion)Number

Investment

(INRbillion)Number

Investment

(INRbillion)Number

Investment

(INRbillion)

IEMs

Implemented 438 96.4 29 15.6 24 13.7 30 12.1

Source:MinistryofCommerce&Industry,GovernmentofIndia

Source:DepartmentofEconomicsandStatistics,TamilNaduStatisticsataGlance-2008

20002005 2006 2007 2008 2009(TillMay)

ForeignDirect

Investment52.0 51.9 28.9 58.2 29.8

Parameter 20052006 20062007 20072008

NumberofRegisteredMSMEs(Million) 0.511 0.539 0.558

InvestmentinFixedCapital(INRbillion) 161.0 168.2 193.6

ValueofOutput(INRbillion) 1,039.1 1,059.8 1,147.2

Employment(Millionnumber) 3.593 3.703 3.946

6 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote200920107 MinistryofCommerceandIndustry,SIAStatistics,September2009

8 DepartmentofEconomicsandStatistics,TamilNaduStatisticsataGlance-2008

9 GovernmentofTamilNadu,PolicyNotes,Micro,SmallandMediumEnterprisesDepartment,20092010

28



GrowthImpetus

Infrastructural development initiatives Thestatehastakenanumberofinfrastructuraldevelopmentinitiativessuchas

developmentofindustrialparksandSEZunitstodispersetheindustries.Thestateranksthirdinthenumberofapproved

SEZunits11.Thestatehasnotified47SEZunitswithatotalareaof3972hectares.

Investment Promotion Measures10 TheGovernmentofTamilNaduhasputinplacespecificindustrialpromotional

agenciessuchasTIDCO,SIPCOTandTANSIDCOwithanobjectiveofoverallindustrialdevelopmentinthestate.

TheGovernmenthasmadesignificanteffortstoattractnewinvestmentsinthestate.Withinthenewindustrialpolicy,the

governmenthassanctionedstructuredpackagesofassistanceforattractingnewinvestmentsinthestate.During2006

2009,thestatesigned23MemorandumofUnderstanding(MOU)inadditiontosanctioningstructuredpackagesof

assistancefor9projects.Outofthe23MOU,12weresignedinthecalendaryear2008withatotalinvestmentofINR251

billion.Thegovernmentalsoissuedstructuredpackagesofassistancefor7projectsforaninvestmentofINR54.6billion.

Availability of skilled manpower Thestatehasaliteracyrateof73.5percent,whichishigherthanthenationalaverage

of64.8percent.Thestategovernmentistakinganumberofinitiativestoenhancethequalityofmanpower.Ithasinitiated

anIndustrialTrainingQualityImprovementProjectfortheupgradationofeducationalinstitutions.Ithasalsoopeneda

numberofindustrialtrainingcentersandissupportingdevelopmentofCentersofExcellenceandincubationcentersfortheoveralldevelopmentoftheentrepreneurs.

Single window clearance facility Thestategovernmenthasaneffectivesinglewindowclearancemechanismto

facilitatesmoothimplementationofindustrialprojects.Toavoidproceduraldelays,thegovernmenthasintroduceda

CommonApplicationForm(CAF)toreplacemultipleforms.IthasdesignatedanodalagencyTamilNaduIndustrialGuidance

&ExportPromotionBureau(GuidanceBureau)fortheefficientfunctioningofthemechanism.11


Source:DepartmentofCommerce,India,SpecialEconomicZones(SEZs)andExportOrientedUnits(EOUs)

State-wiseDistributionofApprovedSEZs(asonMarch31,2009)

Formalapprovals In-principle approvals NotifiedSEZs

69 17 47

StatusofEducationalInstitutes

Arts,ScienceandOtherColleges 1,145

Engineering educational institutions 355

Polytechnics 317

Governmentitis 60

AffiliatedPrivateIndustrialTrainingCenters 605

IndustrialTrainingCenters 753

Source:GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010

10 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010

11 GovernmentofTamilNadu,IndustriesDepartment,PolicyNote20092010

29



The entrepreneurs Viewpoint

ThestateofTamilNaduisundoubtedlyoneofthemostindustrializedstatesinthecountrywithspecificfocuson

InformationTechnology,automobilesandtextilesectors.Thestategovernmenthasbeenproactiveinidentifyingthekey

focusareasandaccordinglyimplementingthepolicyframeworktoaugmentgrowthinspecificsectors.ThestatehasalsobeenoneofthefirstinthecountrytospecificallyfocusonpromotingindustryandbusinessgrowthinTierIIandTierIII

citiesthusaimingfortheholisticdevelopmentofthestate.

Theentrepreneursinthestateacknowledgethatthestatehasbeenmovingintherightdirectionwiththeindustrialpolicy

beingbusinessfriendlyandmeasuresbeingtakenspecificallyforthemicro,smallandmediumenterprises.Therehavealso

beenspecificmeasurestopromoteITandITESindustriesandthestatesgovernmentmachineryhasbeenextremely

supportiveandhasplayedavitalroleinestablishingtheIT/ITESsectorinthestate.

Accordingtoentrepreneurs,thegovernmentthroughTamilNaduSmallIndustriesDevelopmentCorporationLimited

(TANSIDCO),hasalsoplayedacatalyticroleinthepromotionanddevelopmentofSmallScaleIndustriesandhasteningthe

industrialdispersalthroughoutTamilNadu.Thegovernmenthasbeenproactiveinprovidingsupportthroughdevelopmentof

industrialestates,provisionofworksheds,developedplots,rawmaterialssupply,marketingassistance,exportassistance

andguidancetoentrepreneurs.

Further,thestatehascreatedvariousapexbodiesandsupportedchamberstopromotetheinterestofsmallandtiny

enterprise.Thegovernmentalsobeenorganizingguidanceseminarsforentrepreneursandcreatingtrainingprogrammesto

addresstheirconcerns.However,despitetheseefforts,mostentrepreneursfeelthatthisisanareawherethescopeof

developmentisimmense.Theentrepreneursexpectthegovernmenttoprovidesoftersupportthroughmakingcritical

information(schemes,incentivesetc)availablewhilecreatingmentoringandguidanceplatforms.

Thewishlistalsoincludescreationofstateinitiatedfundingmechanismforentrepreneurialdevelopmentwhileensuring

creationofrightinfrastructureontheotherhand.AspecificexamplecitedwaswithspecificreferencetoSEZswherethe

infrastructureattheSEZisreadybutperhapstheconnectingroadsarestillnotreadythusdelayingthepossibleusageof

thereadyinfrastructure.


ThegovernmentofTNisfocusedoncreating andattractingindustrialprojectsandpromoteinvestmentsinTamilNadu.The

stateacknowledgestheneedforinformationdisseminationandiscommittedtoprovidingcomprehensiveinformationon

supporttoinvestorsaboutfederalandStateGovernmentpolicies,infrastructuresupport,taxation,investmentopportunities

etcthroughtheirportals.

ThegovernmentisalsoproactivelyplanningtheSingleWindowDocumentationCentreformajorinvestmentproposalsand

assistinvestorsingettingallpre-projectclearances,infrastructuresupportlikelandinindustrialparks,power,water,etc.

Howeverfromasmallerinvestorperspective,thegovernmentacknowledgestheneedtoprovidebetterinformation

disseminationonschemesandincentivesandamoreproactiveapproachtotheSMEsegment

Thegovernmentalsoclaimssignificantprogressinenablinginformationandleadsharingonexportenquiriesandother

measurestopromoteexports.


30



Thestategovernmenthastakenanumberofpolicyinitiativestopropelgrowthinthemanufacturingandservicessectors.

TamilNaduhasbeenconstantlyupgradingitsinfrastructuretomeettheindustrialneed.Policymeasuressuchassingle

windowclearancesystemhavepavedwayfortheforeignerstoinvestinthestate.TamilNaduwasoneofthefirstto

formulatepoliciesfortheITESandbiotechindustries.Ithasoneofthelowestpowertariffsinthecountryandisoneofthe

fewstatestosellelectricitytoneighbours.

Althoughthegovernmenttakesprideinthevariousinitiativestheyhavebeenrollingouttosupportindustryand

entrepreneurs,theyalsoacknowledgetheneedforimprovedcommunicationbetweenentrepreneursandthegovernment.

Thestatehasidentified5criticalactionareasi.e.,industrialpolicy,infrastructuredevelopment,proceduralsimplification,

industrialpromotionandinvestmentpackagestowardssignificantdevelopmentsintheindustrialsceneandhopesto

engagewiththeentrepreneurialcommunitymoreontheseareas.


31



K a r n a t a k a

Population

52.9 million ( as per 2001 census)


Source:EconomicSurveyofKarnataka,20082009 Source:EconomicSurveyofKarnataka,20082009

ThePolicyFramework

Highlights of the Industrial Policy 2009 2014

KnownastheSiliconValleyofIndia,KarnatakaisamongstthetopfiveindustriallydevelopedstatesinIndiawiththe

servicesectorlargelyfuellingtheoveralleconomicgrowth.1

Aimedatpropellingtheoverallsocio-economicdevelopmentofKarnataka,thestategovernmentintroducedtheIndustrial

Policy2006-2009.ThispolicywasfurtherrevisitedtoformthelatestIndustrialPolicy2009-2014.Thekeyobjectivesofthe

policyaretoincreasethegrowthofGDPandexports,strengthenmanufacturingindustries,andgenerateadditional

employmentforatleast1millionpersonsinthemanufacturingandservicesectors.Otherstatedobjectivesandhighlights

ofthepolicyinclude2:

IncreasingtheshareofindustrytothestateGDPto20percentbytheyear2014

Developmentofsector-wiseindustrialzonesforoptimalutilizationoflocalnaturalandhumanresources

1IndiaBrandEquityFoundation(IBEF)

2 KarnatakaIndustrialPolicy,2009-2014



Thrustonprovisionofworld-classinfrastructuralfacilitiesforindustrieswithactiveparticipationofprivatesector/industry.

Toupgradeandmaintaininfrastructuralfacilitiesonasustainablebasis,itisproposedtohaveadedicatedInfrastructure

DevelopmentFundofINR5billion

Lucrativeemploymentandperformancelinkedpackageofincentivesandconcessionstoattractinvestmentsto

backwardregionsandtheMicroSmallMediumEnterprises(MSME)sector.ThestatewillallocateINR10billionfor

acquiring1000to2000acresoflandforestablishingsmallandmediumenterprisecolonies

Emphasisonthedevelopmentofskilledmanpowerwithaspecialfocusonupgradingemergingskillsetsand

developingskillsetsinwomen

Promotionofselfemploymentbylocalyouthis likelytobefocusedonthroughproperbackupsupportandfacilitation

Aclusterdevelopmentapproachwillbeencouragedforthestatetoproductivelytargetresourcesanddevelopastate-

of-artindustrialinfrastructure

Enhancetheeffectivenessofthesingle windowclearancemechanismandreducethetransactioncostsofdoing

business

PromotionofPublicPrivatePartnership(PPP)frameworkforthedevelopmentofnewindustrialestates

Industry Specific Policies

Thestateendeavorstopromoteinvestmentsincertainkeyfocussectorsthroughspecificpolicies:

IT/BPO Policy - No longer the de facto choice for the IT/ITES industry

Thestategovernmentispursuingnumerouseffortstoregaingrowthandexpansioninthesector

throughfavorablepolicies3:

ExemptiontoITcompaniesfrompaymentofentrytaxon certaincapitalgoods,concessiononstampdutyand

registrationcharges,andrebatesoncostofland

ContinuousanduninterruptedsupplyofpoweratindustrialratestoITunits

Pollutioncontrolclearances,relaxationinlaborlaws,andeasyfacilitationthroughthesinglewindowagency

Venturecapitalandassistancefromgovernmentforstart-ups

Biotechnology Policy

Themainobjectivesofthebiotechnologypolicyaretospreadawarenessabouttheinvestmentopportunitiesin

biotechnologyandrelatedsectors.Furthermore,thepolicyoutlinesasetofincentivesandconcessionsforattractinginvestments4:

Exemptionfromthepaymentofentrytaxonall inputsaswellascapitalgoods,including captivegenerationsets,during

theimplementationstage(upto5years)

Megaprojectswillbeofferedauniquepackageofconcessions foramaximumperiodof8 years.Theywillalsobe

offeredupto50percentconcessiononstampdutyandregistrationchargesforfirstsaleandfirstlease

Totalexemptionfromelectricitytaxforaperiodoffiveyears

Upto50percentexemptionfromthepaymentofstampdutyandregistrationchargesforbiotechparks

The Assessment | Karnataka

3IndustryOverview,EconomicSurveyofKarnataka2008-2009

4 TheMillenniumBiotechPolicy

33



Special Economic Zone Policy Highlights5

TheKarnatakagovernmentannouncedastatepolicyforexpeditingthegrowthofSpecialEconomicZones(SEZ)andasa

partofthis,keybenefi

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