As states compete for investments, Gujarat's industrial clout keeps growing

Its lead in adding factory assets has widened even as states like Tamil Nadu do better on other parameters in nationwide competition for investments

Gujarat has more machinery, equipment, buildings and other factory assets than any other Indian state and the gap keeps growing as governments compete to get industrial investment.

Gujarat’s share in the total value of such assets — called fixed capital — nationwide has increased from 14.96 per cent in 2012-13 to 20.59 per cent in 2019-20, shows data from the Annual Survey of Industries that tracks organised manufacturing across India. The government releases the data with a lag. It put out the provisional data for 2019-20 in May.

The fixed capital share of other top industrial states, like Maharashtra, Tamil Nadu and Karnataka, declined in the same period as seen in chart 1.


 

Gujarat takes a dominating share of productive capital as well. Productive capital includes assets like raw materials, semi-finished goods and cash in addition to fixed assets. Gujarat’s share of productive capital has gone up from 15.1 per cent in 2012-13 to 19 per cent in 2019-20.

Gujarat gets the largest share of capital investment, but Tamil Nadu maintains the record of having the highest number of factories. It accounts for 15.8 per cent of India’s factories by number. Gujarat is second with an 11.6 per cent share, followed by Maharashtra at 10.4 per cent.

There is a similar trend in the share of people engaged in manufacturing. This includes all workers, working proprietors and family members, as well as unpaid persons engaged in factory work. Tamil Nadu tops in terms of providing the highest number of such factory jobs, taking a 16 per cent share in the national total. Gujarat replaced Maharashtra in the second spot in the latest survey. It had a 12.4 per cent share compared to Maharashtra’s 12.3 per cent for 2019-20 (see chart 2).

 

The share in the value of output from factories has not changed much for industrialised states. Gujarat maintained the top spot with an 18.1 per cent share of total output. This is, however, lower than the 2012-13 figure of 18.5 per cent. Maharashtra has seen its share in total output declining from 17 per cent in 2012-13 to 13.8 per cent in 2019-20. Tamil Nadu has maintained its share at 10.3 per cent over the same period (see chart 3).



 

India, historically, has had a strong regional concentration of industry. The share of the top five states in the 1959 Annual Survey of Industries showed Maharashtra accounting for 21.5 per cent of the capital expenditure in the year, and a similar share of workers directly employed. It was inevitable that this would come down as the years passed.

Gujarat’s ascendancy almost seems immune to the changes of time. Other states wooing industrial investors are likely to keep their fingers crossed.