Column : In the driver’s seat

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: Gujarat’s success in winning the relocated Nano car project, beating down other states’ enthusiastic efforts to entice the Tatas, comes as no great surprise. That the state has been the most attractive destination for investors is well known, having attracted proposals amounting to more than Rs 5 lakh crore since the early nineties. In fact, the most recent figures on industrial projects being implemented with institutional support brought out by the RBI two months back only reiterate Gujarat’s position as the country’s leading investment destination. The state’s share of total planned investments in 2007-08 touches Rs 62,442 crore, far ahead of the Rs 36,202 crore flowing to Maharashtra, ranked second.

But what makes the Nano project rather special is that this is the first major automobile plant in a state that is more famous for its chemical and petrochemicals sectors, and the more mundane textiles and diamond polishing units. Together, they have enabled the state, which accounts for just about 5% of the national population and 6% of its geographical area, to attract 17% of the total fixed capital investments and account for 16% of the industrial production in the country.

But the launch of the giant new automobile unit is only a logical outcome of the rapidly evolving industrial structure in the state. At independence, the state’s industrial structure centred mainly on its textile units, concentrated around Ahmedabad, and an emerging chemical industry. But it became the first to take advantage of the strong forward and backward linkages between these sectors. Salt and soda ash production units were pushed to the background as giant refineries, petrochemical units and new ports started to dot the horizon, increasing the state’s share in strategic segments like pharmaceutical and oil products to 25% and 58% respectively.

Now the state is well on its way to build a chain of industries across the entire engineering value chain, stretching across ship breaking, foundry, steel re-rolling, oil engines, fabrications, machine tools and auto components. What is not so well known is that the state contributes to over 8% of the total engineering output in the country, with over 600 units in the large sector and over 75,000 units in the small and medium enterprises sector. In fact, 30 out of the 83 product clusters in the state are dedicated to the engineering and auto industries, a base that the Nano project can usefully tap to its advantage.