Date: 07/10/2022

Relevance: GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Key Phrases: Gujrat’s Model Of Development, Investor Perceptions, Jyoti Gram Yojana, Prompt Implementation Of Schemes, Political Zeal For Policy Implementation

Why in News?

• The Vedanta has recently chosen Gujarat over Maharashtra to set up its $20 billion semiconductor manufacturing unit along with Taiwan's Foxconn although the facilities and infrastructure which are offered by the Gujarat administration are also available with the neighbours Maharashtra, Tamil Nadu, Haryana, and now Uttar Pradesh.

Gujarat’s model of development with investor friendly policies:

1. Power sector reforms:
   • The state's Jyoti Gram Yojana of 2003 freed the industrial electricity consumers from the burden of subsidising rural consumption which was split into domestic and agricultural feeder lines.
   • A parallel rural distribution network of 78,454 km of new lines was set up and thus, freeing the state owned power distribution companies from opaque accounting and giving the administration room to offer industries more incentives.
2. Advertisement and overstating of rankings and awards:
   • The state is mindful of publicising and overstating its achievements occasionally.
   • For instance, Gujarat was recently ranked as the“ best performer” state for startups in India jointly with Karnataka in the “Ranking of States on Support to Startup Ecosystems” released by the department of internal trade and industry in the commerce ministry.
   • However, unlike Karnataka, the Gujarat government went overboard in advertising this ranking.
   • On cumulative foreign direct investment (FDI) into India for the past two decades, Maharashtra accounts for the largest at 30 per cent, Karnataka is at 9 per cent and Tamil Nadu at 7 per cent while Gujarat accounts for only 5 per cent of FDI
   • However, the state has been lauded as the number one in FDI by the Gujrat government although it has led in only one of those years.
3. Political zeal for policy implementation:
   • The political zeal to implement the right policies has helped the state to excel the development process and that too with hardly any natural resources to support those.
   • For instance, Gujarat has the longest route to coal mines in India, which potentially increases the cost of manufacturing process.
   • However, instead of letting the difficulty become a roadblock, the state adopted a gas economy becoming the first state in India to adopt it aggressively.
   • In 1994, the state set up the Gujarat State Petroleum Corporation Limited, beginning gas production from a small field in Hazira, in 1996 and by 2004, India's first RLNG (regasified liquefied natural gas) terminal came to Dahej.
   • The state government made laws permitting the use of compressed natural gas in vehicles and the industries promoted were less water dependent and were able to ride the gas economy, including chemicals and petrochemicals, besides pharmaceuticals and a host of ceramic goods.
4. Prompt Implementation of schemes:
   • The states announce attractive schemes for investors and Gujarat has set the example by the way of prompt implementation of these schemes.

What are the emerging challenges for the state government?

1. Demand for rejection of National Pension Policy System:
   • There is a demand among the state government employees for reversion to the expensive old pension system and abdication of the National Pension Policy System.
   • In order to prevent the costly promise in the upcoming elections, the government has announced immediate payment of the seventh pay commission outstanding payments besides raising the state government's contribution to 14 per cent from the current 10 per cent.
2. Heavy dependence of the state on imported gas:
   • The global gas prices have risen to new highs on account of the emergence of Europe as a major competing buyer of gas from West Asian sources as it seeks to reduce dependence on Russian supplies after the country's invasion of Ukraine.
   • This can further skew costs for industrial users in the state.
3. Water intensive nature of fab plants:
   • Vedanta's proposed semiconductor complex may prove to be a test case since fab plants typically require huge quantities of water, which is hard to come by in this water scarce state.

Conclusion:

• Among the leaderboard states of Maharashtra, Tamil Nadu, Gujarat, and Karnataka, the ranks for attracting investments domestic and foreign vary.
• However, Gujarat always leads among them in the perception of industrial friendliness.
• The growth strategy of the state included quantum jump in infrastructure to facilitate inflow of corporate investment; governance reforms to address the requirements of corporate units; and unprecedented rise in incentives and subsidies on investments to the corporate sector to attract investments.
• The diligent and sustained publicity for decades has stood the state in good stead in terms of investor perception.

Source: Business Standard

Mains Question:

Q. The Gujarat Model of development has helped the state outpace the competitor states in terms of investor friendly policies. Analyse. (150 words).