Maharashtra yielding ground to Gujarat, Andhra, Karnataka as manufacturing hub

Maharashtra, the torch bearer of country's industrialisation, is losing focus on key manufacturing industries, according to a report by global property consultancy firm Knight Frank India.

Although, the state's economic position is salvaged by rising service sector industries like information technology, information technology-enabled services and banking, financial services and insurance sector (BFSI), the Indian government's target of increasing the share of manufacturing in the economy from the current 16 per cent to 25 per cent within a decade, highlights what is at stake for the state.

This report provides extensive scenario of the states of Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka that are identified as the leaders in manufacturing capabilities.

The chemical industry is one of the important sectors where Maharashtra has witnessed a fall out.

The relative performance of the chemical sector over the last decade has been disappointing with the sector achieving an annual average growth of 8 per cent in comparison to the other leading states like Andhra Pradesh, and Karnataka which recorded 17 per cent and 18 per cent, respectively.

The share of this industry in the state's manufacturing pie has declined from 22 per cent to 13 per cent between FY1999 and FY2009. Labelled as a ''retreat'' industry in the report, the state has lost the employment potential offered by the industry.

''During the last decade, the state did not add any meaningful employment in the chemical sector. While annual employment growth in Andhra Pradesh, Karnataka and Gujarat was 7.2 per cent, 2.3 per cent and 1 per cent, respectively, for Maharashtra it was a meager 0.2 per cent. Now, that Maharashtra has lost on Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) policy benefits, an enormous opportunity to boost manufacturing, exports and employment is lost to states like Andhra Pradesh and Gujarat,'' Samantak Das, National Head – Research, Knight Frank India said.

Similarly, the Indian automobile industry has been growing by leaps and bounds over the last decade. Taking cognisance of the opportunity offered by the sector, Maharashtra government labeled it as one of the focus sectors in its 2006 industrial policy thereby offering various fiscal and policy incentives.

However, during the last decade, automobile in Maharashtra grew at a lower rate in comparison to Karnataka and Tamil Nadu. And now, Maharashtra is losing to Gujarat.

As a result, when Tata Motors moved out of Singur in West Bengal it chose Gujarat over Maharashtra. For its second plant, Ford Motor, which is already present in Tamil Nadu, has signed a deal of special incentives with Gujarat instead of going ahead with Maharashtra.

Even when Peugeot, the French automobile major considered setting up a plant in India, it shortlisted Tamil Nadu as Maharashtra was not even a distant contender. Finally, it went along with Gujarat. Thus, while India is making its mark as a global automobile manufacturing hub, Maharashtra, the early mover in manufacturing is losing the battle to its more proactive and vibrant counterparts.

Indecision and delays on giving out the promised tax incentives to existing players in the state has already infuriated players like Bajaj Auto. Earlier, other automobile majors like Volkswagen and Mahindra & Mahindra have also complained about similar problems.

Bajaj Auto, which has a facility in Chakan at Pune has also complained about the labour problems faced by itself and its vendors. Research finds this in contrast to the key policy initiatives for simplification of labour laws.

The report says, for Maharashtra, land requirement of 43,623 acres is estimated to sustain a projected manufacturing growth rate of 20 per cent per annum until 2016. However, as witnessed in the recent past the government has struggled to provide large land tracts for mega projects.

As a result, the recent opportunity of Maruti Suzuki's plant with close to 1,000 acres and estimated Rs18,000 crore investment may land up in Gujarat. Maharashtra was not even a strong contender because of its inability to make available such land parcel.

The automobile sector will have strong backward linkage with the metal and engineering industries. Therefore, ignoring automobile can have a cascading effect on these sectors as well. In our manufacturing sector report the metal industry of Gujarat and Tamil Nadu is placed in the ''rising star'' category, whereas that of Maharashtra as ''retreat'' implying its weakening position in this sector as well.

In case of the engineering sector, Gujarat is branded asa  ''rising star'' and Tamil Nadu as ''outperformer''. However, here again Maharashtra has ''lost opportunity''. After all these developments all hopes are pinned to the much awaited industrial policy of Maharashtra.