enterpreneurship in india
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8/7/2019 Enterpreneurship in India
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EntrepreneurialIndia
SculptingtheLandscape
21-23December,2009-Mumbai
KPMG IN INDIA
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8/7/2019 Enterpreneurship 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
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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.
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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.
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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
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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.
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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.
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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.
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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
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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.
2 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
3 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
4 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
The Assessment | Punjab
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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
5 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
6 PublicPrivatePartnershipinIndia,Punjab,StatePolicy
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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
7 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
8 IBEF
The Assessment | Punjab
Source:GovernmentofPunjabandCII,2007-08
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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:
The Assessment | Punjab
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
9 ConfederationofIndianIndustry,NorthernRegion,Punjab,June2009
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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.
The Assessment | Punjab
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
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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.
The Assessment | Punjab
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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
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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
Industry specific Policies
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)
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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
The Assessment | Gujarat
5 GovernmentofGujaratScienceandTechnologyDepartment,BTPolicy20072012
6 GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009
7 GovernmentofGujarat,IndustriesandMinesDepartment,GemsandJewellerySector,2009
8 GovernmentofGujarat,IndustriesandMinesDepartment,TextileandApparelSector,2009
9 IndustriesandMinesDepartmentofGujarat,InvestmentOpportunities(Vision2010forProposedInvestmentProgram)
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The Assessment | Gujarat
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
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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
The Assessment | Gujarat
12 VibrantGujarat,BiotechnologySector,2009;GujaratTheGrowthEngineofIndia,SectorProfile,Biotechnology,January2009
13 SocioEconomicReview,GujaratState,20082009
14 SocioEconomicReview,GujaratState,20082009
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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
The Entrepreneurs Viewpoint
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)
The Assessment | Gujarat
15 INDEXTb
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The Governments Viewpoint
ThestateofGujarathasbeenattheforefrontofindustrialandentrepreneurialdevelopment.Thestatehassetmany
policiesandinitiativeswhicharenowbeingreplicatedbyotherstatestocreatesimilareffect.However,thegovernment
alsocreditsthestatesentrepreneurialcultureforitssuccess
Thegovernmentacknowledgesitsroleasanenablerandfacilitatorforgrowthandendeavourstodeliverbycreatingthe
rightframework.Thegovernmentalsoencouragesadialoguebetweenallstakeholderstocreategrowthinitiativeswhile
focussingontheoveralldevelopmentofthestate.Thegovernmenthasbeenreceptiveofthefeedbackprovidedbythe
industryatvariousforumsandhasbeencontinuouslydevisingwaystoaddresstheconcernsofitsentrepreneurs.
Theclarityofvisionandobjectivesatthestatelevelhasenabledthestatetobecomeoneofthemostindustrialised
economiesinthecountrytoday.TheGovernmenthasacknowledgedaneedforongoingdialogueandinteractionbetween
thestateandentrepreneurstocontinuallytakeintoaccounttheentrepreneursneedswhileframingandimplementing
policies.
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D e l h i
Population
13.85 million (as per 2001 census)
Per Capita Net State Domestic Product Job creation Trend
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
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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
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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
The Assessment | Delhi
4 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,SEZPolicy
5 GovernmentOfNationalCapitalTerritoryofDelhi,IndustriesDepartment,TransportPolicy
6 MinistryofExternalAffairs,GovernmentofIndia,ITPDivision,ProfileofDelhi
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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.
The Assessment | Delhi
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
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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
Source:EconomicSurveyofDelhi,20082009
Source:EconomicSurveyofDelhi,20082009
8 StateBudget20092010
9 EconomicSurveyofDelhi,20082009
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24
The Entrepreneurs Viewpoint
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.
The Governments Viewpoint
WiththeCWG2010preperationsinfullswing,thestategovernmentemphasisestheopportunitiesithascreatedacross
theNCRregioninsectorssuchasinfrastructure,hospitality,construction,transportetc.Whilethestaterecognisesthatthe
focusonindustryintermsofpolicyinitiativeshaslaggedbehindschedule,thenewdraftindustrialpolicy2009-21islikelyto
befinalisedbytheendof2009.Thepolicyisfocusedatcreatingopportunitiesinnewcleanersectorswhilesimplifying
proceduresthroughamorerobustandefficiente-governanceframework.
Further,thestategovernmentintendstoachieveconsistentandrapidgrowthandhasformulatedindustrialpolicytoattract
investmentinthestatebypromotinghightechnologyandskilledindustries.Thefocusistoattractknowledge-based
industriesandredevelopmentofindustrialareas.
ThegovernmentislookingforwardtoshowcasingDelhitotheworldduringtheCWG2010andthegameshavebecomeacatalystforinvestmentandgrowthorientedactivityinthestate.
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T a m i l N a d u
Population
62.4 million (as per 2001 census)
Per Capita Net State Domestic Product Job creation Trend
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
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UpgradationofeducationalinstitutionsbyinitiatinganIndustrialTrainingQualityImprovementProjecttoinvest
substantiallyintheITI/ITCinfrastructuredevelopmentandcapabilities
FinancialassistancetoindustrialparksuptothemaximumofINR20millionor25percentoftheinvestmentineligible
fixedassets,whicheverisless
FinancialassistancetotechnologyinnovatorsorstandaloneR&Dunitsorindividualsforinnovationscapableofindustrial
application,upto50percentofthecostoffilingapatentorINR0.2million,whicheverisless
Encouragementofinvestmentsinresearchanddevelopmentbymanufacturingcompanies
EnactmentofaBusinessFacilitationActforgivingSingleWindowCommittees,atStateandDistrictlevel,formal
authorityandcleartimelinesforeachapproval
ImplementingaBusinessFacilitatione-GovernanceSystemforenablinginvestorstoapplyforSingleWindow
Clearanceon-lineandtomonitorclearances
Promotingclusterdevelopmentactionplanforupgradingthequalityofinfrastructureinindustrialclusters
Industry specific Policies
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
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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
The Assessment | Tamil Nadu
4 BiotechnologyPolicyOfGovernmentOfTamilNadu
5 GovernmentofTamilNadu,Micro,SmallandMediumIndustriesPolicy2008
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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
The Assessment | Tamil Nadu
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
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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
The Assessment | Tamil Nadu
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
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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.
The Governments Viewpoint
ThegovernmentofTNisfocusedoncreating andattractingindustrialprojectsandpromoteinvestmentsinTamilNadu.The
stateacknowledgestheneedforinformationdisseminationandiscommittedtoprovidingcomprehensiveinformationon
supporttoinvestorsaboutfederalandStateGovernmentpolicies,infrastructuresupport,taxation,investmentopportunities
etcthroughtheirportals.
ThegovernmentisalsoproactivelyplanningtheSingleWindowDocumentationCentreformajorinvestmentproposalsand
assistinvestorsingettingallpre-projectclearances,infrastructuresupportlikelandinindustrialparks,power,water,etc.
Howeverfromasmallerinvestorperspective,thegovernmentacknowledgestheneedtoprovidebetterinformation
disseminationonschemesandincentivesandamoreproactiveapproachtotheSMEsegment
Thegovernmentalsoclaimssignificantprogressinenablinginformationandleadsharingonexportenquiriesandother
measurestopromoteexports.
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Thestategovernmenthastakenanumberofpolicyinitiativestopropelgrowthinthemanufacturingandservicessectors.
TamilNaduhasbeenconstantlyupgradingitsinfrastructuretomeettheindustrialneed.Policymeasuressuchassingle
windowclearancesystemhavepavedwayfortheforeignerstoinvestinthestate.TamilNaduwasoneofthefirstto
formulatepoliciesfortheITESandbiotechindustries.Ithasoneofthelowestpowertariffsinthecountryandisoneofthe
fewstatestosellelectricitytoneighbours.
Althoughthegovernmenttakesprideinthevariousinitiativestheyhavebeenrollingouttosupportindustryand
entrepreneurs,theyalsoacknowledgetheneedforimprovedcommunicationbetweenentrepreneursandthegovernment.
Thestatehasidentified5criticalactionareasi.e.,industrialpolicy,infrastructuredevelopment,proceduralsimplification,
industrialpromotionandinvestmentpackagestowardssignificantdevelopmentsintheindustrialsceneandhopesto
engagewiththeentrepreneurialcommunitymoreontheseareas.
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K a r n a t a k a
Population
52.9 million ( as per 2001 census)
Per Capita Net State Domestic Product Job creation Trend
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
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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
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8/7/2019 Enterpreneurship in India
39/592009KPMG,anIndianPartnershipandamemberfirmoftheKPMGnetworkofindependentmemberfirmsaffiliatedwithKPMGInternational,aSwisscooperative.Allrightsreserved.
Special Economic Zone Policy Highlights5
TheKarnatakagovernmentannouncedastatepolicyforexpeditingthegrowthofSpecialEconomicZones(SEZ)andasa
partofthis,keybenefi