Vibrant Gujarat: A summit subdued

With the 10th edition of the Vibrant Gujarat Global Summit stands postponed, an analysis of data shows that the state has taken a beating in terms of projects taking off and jobs being generated. Avinash Nair reports

At the Vibrant Gujarat summit venue. (Express Photo by Nirmal Harindran)

The Gujarat government put on hold the 10th edition of the biennial Vibrant Gujarat Global Summit (VGGS) that was to begin January 10, due to the rising Covid-19 cases in the country and abroad. Though the state was a trailblazer in hosting the investment extravaganza, emulated later by other states, data shows that after the initial gains, other states have overtaken Gujarat.

Foreign Direct Investment

In 2020-21, Gujarat accounted for 35 per cent of the total Foreign Direct Investments (FDIs) in the country. The Covid pandemic notwithstanding, it had attracted investments worth Rs 1,62,830 crore, beating the leader Maharashtra that got investments worth Rs 1,19,734 crore. Traditionally queued behind Maharashtra, Karnataka and Tamil Nadu in attracting foreign investments (TABLE 1), Gujarat’s growth in 2020-’21 was 262 per cent compared to the previous year.

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The latest figures from the Union Government’s Depart-ment For Promotion of Industry and Internal Trade (DPIIT) show that the glory of 2020-’21 was short-lived as Gujarat failed to sustain the interest of foreign investors. In the first six months of the 2021-’22 fiscal, the state got investment worth just Rs 11,145 crore, 10 times less than the Rs 1.19 lakh crore of April-September 2020-’21, pushing it behind Karnataka, Maharashtra and Delhi (TABLE 2). In percentage terms, foreign investments dipped by 90 per cent compared to the same period last year.

The DPIIT figures show that while Maharashtra accounted for 30 per cent of the cumulative FDI inflow into the country between April 2000 and 2020, Gujarat accounted for only 5 per cent of the inflows, well behind Karnataka (9%) and Tamil Nadu (7%).

According to Neelam Rani, managing director of Industrial Extension Bureau (iNDEXTb) — an investment promotion agency of the Gujarat government that organises the VGGS, “Taking about six months does not give the real picture. It may happen that Gujarat gets more FDI than what it did in first six months. It is up to the investor. Investments do not follow a set pattern.”

YK Alagh, former union minister, noted economist and professor emeritus at Ahmedabad-based Sardar Patel Institute of Economic and Social Research (SPIESR), whose governing body is headed by Gujarat Chief Minister Bhupendra Patel, said, “Most of the investments are domestic in nature. There is no doubt that Gujarat is doing well. But states such as Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu are growing faster,” he said.

At the venue of Vibrant Gujarat summit, Gandhinagar. (Express photo by Nirmal Harindran)

Asked if Vibrant Gujarat summits have helped, Professor Alagh said, “There is a wide gap when we cross check the claims made by the Gujarat government in Vibrant Gujarat summits with the data from Factories Inspectors and Annual Survey of Industries data. I have myself done this exercise about eight years ago. Vibrant Gujarat summit is a good platform to get together. When visitors get a visual impression of a place, it influences their decisions. Such events also leads to a certain amount of good will.”

Foreign investors also feel that the summits have helped “cut the red tape”.

Memorandums of Understanding

For a state badly bruised after the 2001 Kutch earthquake and communal riots of 2002, then chief minister Narendra Modi launched the Vibrant Gujarat Global Investors Summit (VGGIS) in 2003 in Tagore Hall, Ahmedabad, signing less than 100 MoUs in the presence of then deputy PM and Lok Sabha MP from Gandhinagar, LK Advani, projecting Gujarat as an ‘ideal investment destination’.

The first international recognition came in 2009, when Japan joined as partner, in the backdrop of the United States refusing Modi a diplomatic visa on account of the 2002 riots. Canada joined in 2011. The 10th edition had 27 partner countries but had to be postponed for the second time on account of the Covid-19 pandemic.

Gujarat government officials on multiple occasions have claimed 70 per cent success rate for the 1.11 lakh MoUs signed during the previous nine Vibrant Gujarat summits. Before the 9th edition in 2019, The Indian Express had reported how only 7.35 per cent of the MoUs worth Rs 5.48 lakh crore signed since 2003 in the renewable energy sector were fructified and of the 1.92 lakh jobs promised, only a meagre 12,343 jobs were generated.

At the venue of Vibrant Gujarat summit, Gandhinagar. (Express photo by Nirmal Harindran)

PK Laheri, former chief secretary of Gujarat who helmed the 2003 and 2005 VGGIS, said, “He (PM Modi) wanted us to start an investment drive to boost development. We contacted more than 200 people and invited them to Tagore Hall which had a seating capacity for 800 people (in 2003). For starting any major project, an LOI or a Letter of Intent needed to be filed, which is a passive exercise. We wanted it to be collaborative and so we went with MoU… Many people exaggerated the investment figures in the MoUs… In other cases, those having projects at very preliminary stage also signed MoUs without a market survey or a detailed project report. Such MoUs could not materialise and became a point of criticism.”

Among the large MoUs that never saw the light of the day were a Rs 40,000-crore agreement done by Hindustan Construction Company (HCC) in 2011 to develop a waterfront city at Dholera SIR (Special Investment Region) near Ahmedabad. The other MoU promising investments worth Rs 80,000 crore, including those for Dholera SIR, was done by Prasoon Mukherji-led Universal Success Group in the 2009 edition of the summit. Smaller pledges such as GVK Power Infrastructure Ltd to build a port and maritime city at Rs 7,000 crore— also dropped out.

However, the MoUs helped the state to continue building on its strengths in the manufacturing sector, where it accounted for 21 per cent share in the country’s exports in 2020-’21. The total exports from Gujarat last fiscal was valued at a massive USD 60.5 billion.

It is through the summit that the Gujarat government marketed and operationalised the Gujarat International Finance Tec (GIFT) City project. With help from the Government of India, Gujarat set up India’s first international financial service centre, first international exchange, attracted Rs 11,000 crore in investments and provided over 11,000 jobs. In near future, investments in GIFT City could propel Gujarat as a hub for Banking, Financial Services and insurance, that could provide an alternative to Mumbai.

According to Laheri, the “entire exercise was to convince people that Gujarat is the best destination for investment”.

“The summit has kept the tempo (of investments) going. It has continued to act as an interface between prospective investor and state government machinery at all levels. The summit has helped build on our strengths in chemicals, petrochemicals manufacturing, pharmaceuticals. Though we still lag in services sector and information technology sectors, new sectors such as automobiles emerged. Earlier our FDI was low and we were not even among the top seven. Today we are among the top five states with maximum FDI,” the former top bureaucrat said.

Despite Gujarat attracting three large car manufacturers such as Tata Motors, Maruti Suzuki and MG Motors, it lost a few firms in the past 20 years. French auto major PSA Peugeot Citroen signed an MoU for setting up a Rs 4,000-crore car manufacturing unit and conducted a foundation stone laying ceremony at Sanand, but later quit the project. One of the first to move to Gujarat, General Motors, too, closed its car manufacturing unit near Vadodara and now Ford Motors too has announced shutting of its car manufacturing unit at Sanand.

Foreign partners

Before the 2019 edition, the United Kingdom withdrew as “partner country” from the summit citing “unsatisfactory commercial outcomes”. The UK, which partnered with the Gujarat government in organising the summit in 2015 and 2017 when Modi was PM, had then said it spent 50,000 pounds in each of the two summits in bringing ministerial and business delegations to Gujarat but ended with just 2-3 business deals. It had also refused to take up space in the exhibition organised every year alongside the summit.

The US also disassociated as partner the same year citing “unresolved trade issues”. Recently, US Consul General David J Ranz told this paper that the US-India bilateral relationship was better today “than it ever has been”.

“In fact, although the final numbers are not yet in, it appears that bilateral trade in 2021 broke our previous record, and this despite the challenges of the global pandemic,” Ranz had said. About VGGS he said that it showed “an appetite on the part of the state government for cutting red tape”.

After Modi became the Prime Minister, the flagship event saw US Secretary of State John Kerry visit and speak at the summit in 2015, when Gujarat also hosted the Pravasi Bharatiya Divas. At this edition, Prime Minister of Bhutan Tshering Tobgay got a standing ovation after his speech on Bhutan’s Happiness Index. Vibrant Gujarat 2018 also saw a special event with nine Noble Laureates from across the globe.

Generating employment

Gujarat Chief Minister Bhupendra Patel recently said that employment exchanges in the state provided more than 17.31 lakh jobs in the past five years. State government officials are, however, tight-lipped about the salaries at which these jobs were provided.

If one considers employment generation under the Prime Minister’s Employment Generation Programme (PMEGP) —where the Centre gives upto 35 per cent of project cost as subsidy for setting up micro enterprises in rural areas and 25% subsidy for urban areas — Gujarat not only lags behind large states such as Maharashtra, Tamil Nadu and Uttar Pradesh, but also trails union territories like Jammu and Kashmir. (See TABLE 4).

Similarly, under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), the flagship scheme of Ministry of Skill Development and Entrepreneurship, Gujarat trained and certified over 3.08 lakh candidates, but placed just 67,682 candidates — 22 per cent of those certified. In comparison, Andhra Pradesh, which certified a similar number of candidates (3.62 lakh), ended by placing 1.09 lakh of them (See Table 5).

As per data of registrations of new companies at the Ministry of Corporate Affairs, Gujarat ranks eighth among states where new companies got registered between April 2016 and November 2021 (See TABLE 3).

“We haven’t checked this data. Some companies might have their headquarters in other states, but they might have their units in Gujarat. Every year states are competing with each other. So it is not necessary that a state can remain number one consistently. Covid is also now playing a big role where investors are making plans and dropping them. We have always got very good response from the industry ,” said Neelam Rani.

As far as start-ups are concerned, Gujarat ranks fifth going by jobs created by start-up firms recognised by DPIIT. While a total of 40,313 jobs have been created by start-ups in the state, competing states like Maharashtra (1,21,097 employees), Karnataka (92,444 employees, Delhi (75,784) and Uttar Pradesh (54,500) have done better.

Slipping in ease of doing business rank

When the DPIIT first came out with the Ease of Doing Business (EODB) rankings in 2015, Gujarat topped, seen as a measure of a good investment destination. However, in 2016 and 2017, Gujarat fell to third and fifth positions and by 2019, it stood tenth, with states like Uttar Pradesh and Rajasthan scoring better.

“The parameters of EODB is currently undergoing revision. World Bank itself has taken a note of the complexities. The parameters chosen earlier may not be appropriate. We have very progressive policies. Government is always open. It has tried to liberalise the regime and has tried to hand-hold the investors,” Rani said.

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