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R E S E A R C H A N D B U S I N E S S A N A LY T I C S G R O U P | M a r c h 2 0 0 9

I N D I A R E P O RT
INDUSTRIAL SECTOR IN INDIA
The oasis of economic growth

INDIA R E P O RT

INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

CONTENTS

1 Executive Summary 2 Major Growth Drivers of Manufacturing in India 4 Industrial Sector - The Real Estate Perspective 4 Some of the Major Issues and Concerns in Land Acquisition 6 Major Manufacturing Clusters 7 Western Corridor:
Maharashtra, Gujarat EXECUTIVE SUMMARY Despite the current economic slowdown and a downsizing of India's expected GDP from 9% to approximately 7.1% as per the latest report by Central Statistical Organisation, India still remains one of the fastest growing economies in the world, ranking only second to China. The pace of this growth has largely revolved around India's service exports, backed by a robust and ever-increasing domestic consumption. Strong long term fundamentals like dynamic industrial environment, positive trend in outsourced manufacturing, increasing domestic demand and growth in exports have led the Indian economy to gain greater foothold in the world market over the past decade. Distinct advantages such as lower costs of production and superior output quality makes India a viable destination for outsourcing of manufacturing for several multi-national corporations (MNCs) across the world. The manufacturing sector in India has witnessed a healthy average growth of approximately 9% in the last four years, with a record growth of 12.3% in 2006-07, primarily attributed to the global cost competitiveness – competitive capital and operative costs – that India has been able to provide vis-à-vis other locations. Further, the expanding domestic market together with the scaling up of operations by Indian companies, emergence of new industry segments and

10 Southern Corridor:
Andhra Pradesh, Karnataka, Tamil Nadu

15 Eastern Corridor:
West Bengal, Jharkhand, Orissa

19 Northern Corridor:
Himachal Pradesh, Uttarakhand, Punjab, Rajasthan, National Capital Region (NCR), Uttar Pradesh, Haryana

24 Outlook 26 Conclusion

amendments in the regulatory framework such as incentives and subsidies, single-window clearances, investor friendly policies by several state governments, etc., have provided a further boost to the manufacturing scenario in India. An increased and sustained focus on the manufacturing sector is inevitable as well as advisable to achieve the projected average growth of 9% growth during the 11th Five Year Plan (2007-2012). India has always enjoyed certain core advantages in the manufacturing sector, like rich mineral resources (iron ore, coal etc.), developed processing base, natural sea ports (Kandla, Kochi, Visakhapatnam, Paradeep, etc.) and abundant supply of cost-effective labour. Owing to these natural advantages, the manufacturing sector in India has spread across primary, secondary and tertiary processing segments. While the traditional manufacturing strongholds in India which have been steel, cement, heavy engineering, textiles, etc., the emerging industrial and related sectors include agro-based/food processing industries, pharmaceuticals, automobiles, logistics and warehousing, among others which are also gaining grounds in India. Like the manufacturing industry on the whole, the Indian industrial real estate market has also delivered a strong performance in recent years,

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INDIA R E P O RT

INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

with average rental growth reaching around 2530% in key markets. Supply shortages, however, in prime centres such as Mumbai and Delhi –

NCR have forced much of the manufacturing and logistics facilities to relocate to industrial parks in emerging tier-II and III locations

MAJOR GROWTH DRIVERS FOR MANUFACTURING IN INDIA The compounded growth of the manufacturing industry over the past decade has been a result of the combined factors as enumerated below: Economic Growth A renewed initiative to strengthen India's industrial policies, focus on infrastructure development, easing tax regulations and access to finance will further enhance competitiveness of Indian manufacturing sector. The Indian economy has witnessed GDP growth of over 8% since 2003-04 and has emerged as a favoured manufacturing and outsourcing destination. Escalating demand from the growing mid-economic stratum and increasing exports has brought in an upsurge of emergent industry segments including pharmaceuticals, automobiles and auto ancillaries, FMCG, consumer durables, logistics, etc. The manufacturing sector, striving to increase its growth rate from current 7% in the ongoing financial crisis which has adversely impacted household income there by putting pressure in consumer demand. However recent easing of inflation and stable domestic demand, will require significant increase in expansion of plant capacities and increase in productivity. Infrastructure Developments Approximately US$ 350 billion has been set aside for infrastructure development expenditure by the 11th Five Year Plan period. The upcoming Dedicated Freight Corridors (DFC) by the Indian Railways and the proposed development of approximately 1,500 km of Delhi – Mumbai Industrial Corridor (DMIC) will lead to further development of 13 new industrial corridors. The central government is also in the process of setting up a dedicated fund of INR 50,000 crore for future infrastructure projects. The 11th Five year plan aims to create an integrated transport system in the country to include some of the following key infrastructure development projects: • Doubling existing handling capacity of ports from 505 million metric tonnes to 1017 million metric tonnes by 2012. • An increase of 51% in rail freight movement through development of DFC and development of logistic services. Completion of National Highway Development Program (Phase 3 to 7) and integrate road development with railways and other modes of transport.

Government Initiatives According to the World Economic Forum's Global Competitiveness Report 2008-09, India currently ranks 50th among 134 most competitive economies across the world and a renewed initiative to strengthen India's policies, infrastructure, tax regulations, access to finance, inflation etc. will further increase the competitiveness of the economy when compared to others. In order to accelerate growth and improve competitiveness of the Indian manufacturing sector, several initiatives have been undertaken by the Central Government as below: • Liberalisation of Foreign Direct Investment (FDI) policy by allowing 100% FDI in the manufacturing sector Implementation of technology up-gradation schemes which provides benefits like interest reimbursement, capital subsidy and protection against foreign exchange fluctuations for various sectors including several small scale industries, textiles and apparel, food processing, etc. Introduction of Special Economic Zones (SEZ) Act which will increase exports and facilitate job creation. At the same time companies operating from these zones will reap the benefits of sound infrastructure, tax exemption, improved efficiency and margins due to potential synergy from the development etc.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

The construction of DMIC spanning across approximately 1500 kms and the development of Manufacturing Investment Regions (MIRs) across India which is expected to double employment, triple investment and quadruple exports within this region in a five year time frame. Exemption from central excise duty, subsidies on capital investment and transport, rebate on land and rationalisation/ reduction in other duty rates are some of the benefits extended to the manufacturing sector. Amendment of the 1984 Land Acquisition Act, the proposed new policy on Rehabilitation and Resettlement, and the repealment of the Urban Land Ceiling and Regulation Act by several state governments will further eliminate ambiguity in present land acquisition procedures.

have already explored the opportunity of setting up production bases in India, prominent amongst which are automobile majors , such as Nissan, Suzuki, Fiat and Hyundai and iron and steel majors like POSCO, Arcelor Mittal, Dow Chemical, etc. are moving towards making India their manufacturing hub for global exports. Outsourced Manufacturing India, only behind China, is the most preferred global destination for outsourced manufacturing activities. This is predominantly due to advantageous factors like lower cost of production, availability of skilled technical and management talent coupled with an investorfriendly government. Manufacturing companies in sectors such as automobiles, pharmaceuticals, food processing, electronics and hardware are increasingly outsourcing production to obtain cost efficiency and hedge revenues and production risks over geography. According to the “Made In India” Report by McKinsey and Confederation of Indian Industries (CII), revenues from manufactured product outsourcing are expected to raise five times the current value to over US$ 300 billion by 2015.

Manufacturing companies in sectors such as automobiles, pharmaceuticals, food processing, electronics and hardware, are increasingly outsourcing production to obtain cost efficiency and hedge revenues and production risks over geography.

Increasing Presence of Multinationals Over the last few years, India has been increasingly pursued by multinational organisations for gaining access to its marketplace, and to avail its cost competitive resources. Several multi national corporations

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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INDUSTRIAL SECTOR - THE REAL ESTATE PERSPECTIVE Real estate is a major cost component for most capital intensive manufacturing industries. Unlike other real estate segments like residential, hospitality, retail and commercial office space, which focus on built-up space and related costs, the manufacturing sector requires large land parcels in the range of 30-200 acres and above. The quality of land and supply chain connectivity are other crucial factor for the development of this sector. Being an extremely complex and cumbersome process, setting up or relocation of manufacturing unit is not always viable and therefore each manufacturing set up has to maintain long-term sustainability as an inherent feature of the industrial space. Operational and capital costs are the other important criteria for site selection in this segment, followed by industrial infrastructure support and logistics/supply chain connectivity. Easy availability and cost efficiency of both skilled and unskilled labour is another important factor which guides the manufacturing industry, together with pro-active Government policies and incentives for industrial thrust areas. The presence of ancillary industries is also kept in focus during selection and set up of a manufacturing base. The establishment pattern of ancillary industries, presents an interesting study in itself. While there have been instances of industrial land
Consideration for Industrial Land Acquisition:
= Clear title

to road, rail and ports to labour catchments = Sound Physical infrastructure = Accessibility of raw material and resources =chain connectivity Supply = Proximity to large markets
= Proximity

= Good connectivity

Being an extremely complex and cumbersome process, setting up or relocation of manufacturing unit is not always viable and therefore each manufacturing set up as to maintain longterm sustainability as an inherent feature of the industrial space.

Source: Cushman & Wakefield Research

being selected on the basis of a strong presence of ancillary industries in the vicinity, in many cases the development of ancillary industries have also been influenced by the existence of major manufacturing facilities. As the demand for new industrial locations rises, companies are increasingly considering setting up plants and manufacturing units that are customised to their individual requirements. Though small and medium enterprises (SME) are usually content with industrial sheds in a location of their choice, larger players are keen on acquiring land and developing the area as per their specific requirements. Land, by virtue of being a state subject, has its own complexities and the process of acquisition poses many challenges which require professional assistance and guidance.

SOME OF THE MAJOR ISSUES AND CONCERNS IN LAND ACQUISITION Fragmented Land Holding: In India, land ownership is usually fragmented with multiple owners and thus there is low availability of large contiguous land parcels with single owner. This also leads to reduced availability of land with clear title. A part of the problem is lack of clearly zoned/demarcated land which is largely due to archaic paper based land records lacking standardisation across the various states. Even though India is moving towards digital land records, various legal bottlenecks threaten to make the process painfully slow. Title Issues: 'Title' is the most vital part of any land deal, however in India, due to heavy fragmentation, unclear succession laws and other factors, land title is usually shrouded in controversies. Land deeds are segregated as leasehold and freehold land, where leasehold land only gives the user the right to usage of land without the right to sell / re-sell or amend the usage while freehold land gives the owner complete rights to alter usage and even secede from the land. However, there have been many cases where leasehold lands have been garbed as freehold and sold to unsuspecting buyers thus

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INDIA R E P O RT

INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

A new policy on Rehabilitation and Resettlement has been proposed with the focus on curbing real-estate players from creating land banks and to encourage development of land.

increasing the opaqueness in the titles, possibly leading to multiple claims on the same land parcel. Due to the fact that land holdings are fragmented, amalgamation of large land parcels can be a very painfully slow process as various owners need to be converted into sellers. Further, with the ambiguities in land titles and ownership, there is no actual existence of title insurance as the costs far exceed the risks. Although certain insurers are said to be providing title insurance, the premiums are very high therefore for all practical purposes title insurance is non existent in India. Zoning of Land and Conversion of Use: Another aspect which can be precarious is the aspect of zoning and land conversion process which is under the jurisdiction of the town planning authorities i.e. land use can be changed from commercial to residential to industrial or any combination. Thus upon acquisition, the developer has to ensure that the land is converted into the correct zone for industrial use giving adequate reasons for conversion, which is usually a slow as well as expensive process to undertake. Legal & Regulatory Issues: The legal and regulatory framework for land acquisition in India is also rather complex. Inconsistent and overlapping state and union government laws lead to further complications and delays. Amendment of Land Acquisition Act 1984 and new policy on Rehabilitation and Resettlement have been proposed by central government to eliminate ambiguity of land acquisition. The proposed amendment in Land Acquisition Act of 1984 aims at redefining forceful acquisition of land for “public purpose”. A new policy on Rehabilitation and Resettlement has been introduced with the focus on curbing real-estate players from creating land banks and to encourage development of land. As every state has a separate legal and regulatory framework, the mode of operation differs from state to state. Technicalities like Floor Space Index (FSI) and Floor Area Ratio (FAR) benefits also differ between states, as a result of which the amount of land being

acquired in a state can be different from another state for the same project. High Transaction Cost Due To Complicated Tax Structure: Complicated property tax regimes and stamp duty structures also amounts to higher transaction costs on purchase of real estate assets. In India, stamp duty and property taxes are state functions and it differs from state to state and in certain cases even between cities within the same state. Currently stamp duty paid on real estate purchases ranges from 6% to 12% while property tax and registration fees paid in addition to stamp duty can increase the transaction cost to as much as 10-15% of total market value of the land. Disparity in stamp duty rates is a hindrance for real estate. This leads to a further lack of transparency in pricing and creates valuation issues. Proposal for uniform stamp duty structure across the country along with rationalisation of stamp duty rates to realistic levels would generate more revenues. Valuation: Valuation of land is one of the key areas of concern in India as there is a wide spread discrepancy between the circle rates and actual market rates. Currently India has no independent appraiser body that can meet international standards like those set by International Asset Valuation Committee, International Federation of Surveyors, Royal Institution of Chartered Surveyors, The Appraisal Institute, American Society of Appraisers etc. Thus the appraisers use various different methods of valuations in India, the most commonly used method being the discounted cash flow. However, even that measure, is difficult to apply uniformly due to the wide spread discrepancies in the variable factors such as circle rates, actual rate of acquisition, stamp rates etc. Therefore different appraisers can arrive at different values for the same asset based upon the valuation method, model and assumptions being taken into consideration. This allows for a large variance between the valuation arrived upon.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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MAJOR MANUFACTURING CLUSTERS Several industries are diversifying and expanding their operations in India to provide added impetus to the manufacturing sector. High growth sectors such as automobiles and pharmaceuticals are the key beneficiaries of the global trend in outsourced manufacturing activities. Emerging sectors like food processing, logistics, warehousing, and the growth in the consumer goods segment have also provided a fillip to the manufacturing sector. The manufacturing sector is usually concentrated in clusters to enable them to leverage from the one another's operations. In India, these clusters can be divided into four major zones North, West, East and South. There are several states across India that are promising industrial destinations and are at various stages of development. We have selected certain prominent states to feature in each of the respective zones. These zones have been explored to focus on attractiveness, incentives and initiatives of established and emerging industrial locations along with types of
Major Manufacturing Hubs in India

The manufacturing sector is usually concentrated in clusters to enable them to leverage from the one another's operations.

Automobile Machine Tools Textile Drugs & Pharmaceuticals
Source: FedEx and Cushman & Wakefield Research

industries both existing and emerging in each of these locations.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

WESTERN CORRIDOR
Western Corridor
Western Corridor - Land Value Trend Existing Corridors Pimpri Chinchwad Panvel Emerging corridors Talegaon Chakan Sanaswadi Ranjangaon
Automobile Machine Tools Textile Drugs & Pharmaceuticals

Land Values Outlook (YOY growth) 0% 0%

0% 0% 0% 0% -30% -15%

Trans-Thane Creek Taloja
Source: Cushman & Wakefield Research

Source: FedEx and Cushman & Wakefield Research

Maharashtra Maharashtra has for long been a major manufacturing hub and one of the most industrialised states in the country. Existing industrial base and availability of skilled manpower have encouraged the growth of the manufacturing sector in Maharashtra. In order to further stimulate the state's economy, the revised Industrial, Investment and Infrastructural Policy of Maharashtra aims to achieve industrial growth of approximately 10% by 2010. As a result, apart from sustaining growth of traditional industries like automobile, pharmaceuticals, engineering, chemicals and textiles, the new policy also focuses on emerging industries like bio-technology and food processing. Building up quality infrastructure, incentivising the manufacturing sector and attracting investments are some of the key strategies of the state to realise its industrial policy objectives. Some of the key policies and incentives that are likely to play a critical role in the growth of the manufacturing sector in Maharashtra are as follows: • • • Industrial Promotion Subsidy for new units and expansion of existing units in the state. Interest subsidy to small scale units in apparel and textile industry. Customised package of incentives to industrial projects with investment of over INR 250 cores. Exemption from electricity duty and waiver on stamp duty. Refund/ Exemption of Octroi for 15 years Development of manufacturing clusters and industrial townships to improve competitiveness. Promote setting up of Special Economic Zones (SEZs) to promote exports from the state. Specific policies for vital industries like Biotech, Textile and Agro Processing.

• • •

Major Industrial locations are spread across the state, however locations of Mumbai, Pune, Nashik, Nagpur and Aurangabad are key

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

industrial hubs in Maharashtra. The proposed development of a four-lane road connectivity between these locations and a greater emphasis on knowledge based manufacturing along with agro based industries is likely to further stimulate growth of the manufacturing sector in the state. Approximately 80,000 acres of land is being developed for industrial use across 12 major locations. Mumbai Trans-Thane Creek which is the largest industrial area near Mumbai and has witnessed increasing presence from engineering, electronics and pharmaceutical sectors in recent past. This increasing demand is likely to drive demand in adjoining areas of. Rabale, Ghansoli, Mahape and Turbhe. Scarcity of land parcels and rising land prices has led to the development of peripheral corridors in Mumbai. The demand for industrial land in the peripheral locations has been fuelled by several infrastructural developments like the Maha Mumbai SEZ, the proposed international airport and the Mumbai Trans-Harbour Link project (connecting Sewri to Nhava Sheva) Panvel, Taloja, Trans-Thane Creek, Khopoli and Uran are likely to witness accelerated growth in near future. Panvel is a strategically placed, rapidly growing location near Mumbai. Availability of large land parcels, octroi exemption and proximity to Jawaharlal Nehru Port Trust (JNPT) make it an ideal location for logistics and warehousing industry. Taloja, another prominent industrial hub in Navi Mumbai which is expected to witness an upsurge in demand from the warehousing industry owing to its closeness to the PanvelPune Road and the proposed airport. Additionally, Trans-Thane Creek which is the largest industrial area near Mumbai and has witnessed increasing presence from engineering, electronics and pharmaceutical sectors in recent past. This increased demand is likely to drive demand in adjoining areas of Rabale, Ghansoli, Mahape and Turbhe. Pune With over 9,500 acres of land under development by Maharashtra Industrial Development Corporation (MIDC), Pune has reaped benefits of its existing industrial experience, while also becoming one of the largest industrial hubs in the state of Maharashtra. It is also one of the largest

automobile manufacturing hubs in India, along with engineering and electronic industries. More recently sectors such as food processing, pharmaceutical and biotechnology industries have also set up their manufacturing bases here towards the north and north-eastern part of the city. Pimpri - Chinchawad is an established auto cluster that currently houses many major automobile players, along with several auto ancillary units. Shortage of land in existing locations has led to the emergence of new corridors like Talegaon and Chakan. Chakan is especially attractive due to existing tax benefits, proximity to Jawaharlal Nehru Port Trust (JNPT), National Highway (NH) 3 and 4, and proposed airport at Rajgurunagar. In addition to the presence of automobile sector, MIDC has also started acquiring large areas of land to set up Biotechnology and Infotech Parks between Talegaon and Vadgaon. Mundwa, Poonawala and Monshi also provide good opportunities for industrial development. Ranjangaon is emerging as a major industrial center with several greenfield projects currently underway. It has already attracted several manufacturing companies from automobile and consumer good sectors. About 4500 acres of land is being acquired by MIDC for proposed development of industrial parks and SEZs which will lead to development of the area of Sanaswadi, north-east of Wagholi, as another major location for industrial parks. Nashik Nashik is another key automobile and engineering goods manufacturing centre. Over the last few years, the district has also witnessed increasing presence of agro processing units. There are several industrial estates which are currently operational in Nashik. Development of 4 additional industrial estates, proposed construction of a 4 lane highway between Mumbai - Nashik and proposed rail terminus are some of the key infrastructure projects aimed to accelerated industrial growth.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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Spread over 2700 hectares of land, Sinnar is the largest industrial estate in the district with about 174 medium and large operational manufacturing units catering to engineering, automobile components and food processing. Satpur, Ambad, Pimpalgaon and Manmad are the key industrial hubs in Nashik. Gujarat Gujarat is distinguished as one of the most rapidly evolving industrial states in the country. The state has set a growth target of 11.2% for the 11th Five year plan which will require the industrial sector to grow over 14% during the same time period. To achieve this accelerated growth, the state government has put special emphasis on manufacturing sector. A front runner in attracting investments, presence of a large industrial base, large scale development of SEZs and investor friendly industrial policy are major drivers for industrial growth in Gujarat. While historically Gujarat has been a prominent manufacturer of textile, engineering products and pharmaceuticals, the emerging industries include the automobile and food processing. Key highlights of the current state industrial policy are as follows: • Financial assistance at the rate of 20-50% of fixed capital investment to industrial parks.

• • •

Exemption of stamp duty on development of industrial park. Availability of interest subsidy to small and medium enterprises. Cluster Development Scheme (CDS) to promote competitiveness of small and medium enterprises by creating common facilities to reduce cost, strengthen infrastructure facilities and marketing of products. Up-gradation of industrial infrastructure along with promotion and development of SEZs.

Gujarat is distinguished as one of the most rapidly evolving industrial states in the country. The state has set a growth target of 11.2% for the 11th Five Year plan which will require the industrial sector to grow over 14% during the same time period.

The proposed development of DMIC is expected to provide more opportunities for industrial development in the state. About 40% of the total proposed corridor will pass through Gujarat influencing industrial growth in 18 out of 25 districts in Gujarat. Vadodra, Ankhleshwar, Dahej, Bharuch, Surat, Navsari,Valsad and Umargaon are key industrial locations which are likely to be benefited from the upcoming corridor. Peripheral locations of Ahmedabad are also likely to witness major industrial developments due to the proposed development of automobile and pharmaceutical manufacturing units at Sanand.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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SOUTHERN CORRIDOR
Southern Corridor
Southern Corridor - Land Value Trend Existing Corridors Bommasandra Peenya Jigani Sriperumbudur Irungattukottai Vishakapattam Balanagar Land Values Outlook (YOY growth) 5-7% 5-7% 5% 5% 5% 5% 10%

Andhra Pradesh ranks second in producing Value Added food products and has a 10% share of beverages within the country.

Emerging corridors NH 5 Dobaspet Oragadam Ennore Kanakpura Tumkur Narasapura Krishtanapatnam Kadapa 10% 5% 5-10% 5% 5% 5% 5% 20% 15%

Automobile Machine Tools Textile Drugs & Pharmaceuticals

Source: FedEx and Cushman & Wakefield Research

Source: Cushman & Wakefield Research

Andhra Pradesh Andhra Pradesh has historically been an agricultural state rather than industrial, but the government is keen to ensure a more wholesome growth for the state and is attracting investments from various industries. The state is rich in minerals, horticulture, agricultural and food related production thus making it a valuable centre for raw materials and processing. The state also boasts of a large presence of research & development institutions around the urban centre of Hyderabad thus enabling the city to achieve the title of 'bulk drug capital of India.' The thrust industries as per the state government are information technology, pharmaceuticals and biotechnology. Andhra Pradesh has some key advantages like skilled population and a central location along with good connectivity by road (major national highways such as NH 7 and 9), Air (major airports being redeveloped and Greenfield airport being commissioned), Ports (2 major ports and 10 minor ports with an additional port at Gangavaram which is currently being developed) with a proactive government providing strong infrastructure - the only state to have an exclusive infrastructural development act and subsidised land attracting various industries to set up in this state. Some incentives offered by the Andra Pradesh government in the Industrial Investment Promotion policy 2005-2010 are as follows: • 100% reimbursement on registration of land and building / leased property for industrial use Reimbursement of power at Rs 0.75 per unit for eligible industries and Rs 1.00 per unit for eligible food processing industries VAT reimbursement of 25% paid by the industry for a period of 5 years 15% investment subsidy subject to a certain limits Additional 5% on fixed capital investment up to a limit for SC/ST

• • •

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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Hyderabad Hyderabad is a major centre for pharmaceuticals and biotechnology industries in the country. Its prominence as an industrial town is due to the robust infrastructure provided by the government and the connectivity to other parts of the nation through major national highways. Development projects such as Genome Valley, Fab City and the hardware park that are being set up around Hyderabad are expected to attract corporations to the city. Patancheravu on NH 9, which has access to Bangalore and Vijayawada, has an established manufacturing hub and has recently witnessed the growth of sectors such as warehousing and logistics. Visakhapatnam Visakhapatnam is an important centre for industrial development in India as it is also the largest port in the country. The second port at Gangavaram will further increase trading opportunity and efficiency thus attracting more industries to set up base in this region. Warehousing facilities, strong connectivity and upcoming infrastructural initiatives such as the international airport make this location attractive for various sectors like heavy industries, fertilizer, oil and gas. The proposed Petroleum, Chemicals and Petrochemical Investment region (PCPIR) on the KakinandaVisakhapatnam coastal corridor is expected to be spread over 604 sq. km which has already attracted large corporations to the area and smaller support industries are following suit. There are various food processing units that are established and currently being set up in order to cater to the seafood export industry that leverages from the established fishing industry. In the recent years there has been an influx of large textile corporations moving into the city due to the SEZ and textile parks being set up in the city limits. The setting up of the Jawaharlal Nehru Pharma City (SEZ) - a 2200 acre campus development - has worked as the necessary catalyst for the growth of the pharmaceutical industry.

Vijayawada Vijayawada emerged as an industrial hub due to the connectivity with a natural harbor. Located on NH 5 this location is accessible to large markets such as Chennai and Kolkata by road and a developed railway network, to be connected it to other parts of the nation. There are various small to medium scale industries in the automobile body building, garment, iron and hardware sector. It is also a major trading hub due to the location and connectivity thus being referred to as the commercial hub of Andhra Pradesh. Emerging locations such as Tada, which is being promoted by the Andhra Pradesh state government, has an industrial park set up by the government with strong infrastructure and good connectivity by being on the golden quadrilateral. Karnataka Karnataka is among the top five industrialised states in India and was the first to introduce a state Industrial Policy in1982-83. It is ranked as one of the largest exporter of software in India and also one of the largest recipients of FDI in the country. It is one of the leading states for biotechnology while also being a manufacturing hub for some of the largest public sector industries namely Hindustan Aeronautics Limited, National Aerospace Laboratories, Bharat Earth Movers Limited, Bharat Heavy Electricals Limited, United Breweries Group and Hindustan Machine Tools. There are various industrial zones within the state and although majority of them are concentrated in and around Bangalore city, there is a steady disbursement of industrial corridors to different areas of the state. The Commerce and Industry Department, Karnataka Industrial Area Development Board and Karnataka State Industrial Investment Development Corporation (KSIIDC) have promoted industrial infrastructure development, in addition to the incentives, in the state thus attracting various new industries to set up within the state. The key thrust areas for the state are aerospace, engineering, automobile,

The second port at Gangavaram will further increase trading opportunity and efficiency thus attracting more industries to set up base in this region.

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machine tools, steel, cement, pharmaceuticals, food processing, apparels and textiles, electronics, IT and biotechnology. Some of the Incentives and concessions under the New Industrial Policy (2006-2011) • • • • • Capital investment subsidy to small scale industries (SSI) in all areas Exemption of electricity duty on captive power plants Exemption of stamp duty and reduction of registration charges in thrust areas Waiver of conversion fee for up to 50 acres in thrust areas Reduction of 18% on land acquisition charges through Karnataka Industrial Areas Development Board (KIADB) in thrust areas Subsidy of up to $200,000 for setting up of effluent treatment plant in any area Entry tax concessions for 3/5 years on capital goods/ raw materials in thrust areas

Mangalore Mangalore is predominantly characterised by the oil and gas, port (ship building) related activities and food processing industries. Some of the established locations around Mangalore are Baikampady and Yeyyadi which house small scale industries. The upcoming export promotion industrial park's at Ganjimutt is expected to provide a further fillip to the export oriented industries in these locations. Mysore Mysore has established industries such as weaving, sandalwood products, and lime and salt production. The Karnataka Industrial Areas Development Board (KIADB) has established four industrial areas in and around Mysore which are located in Belagola, Belawadi, Hebbal (Electronic City) and Hootagalli areas. Currently the city is witnessing heightened interest from the IT sector and is proving to be a competitor to Bangalore. There is considerable growth, powered by IT on the State Highway 17 which connects Bangalore and Mysore. Tamil Nadu Tamil Nadu is a major contributor to the nations GDP as it is one of the largest state economies within India and considered as one of the most industrialised states in India. In 2006-07, the manufacturing sector contributed 20.23% to the GSDP and by 2011 the state plans to raise the contribution to 27% as specified in the State Government Industrial Policy 2007. The government is working with various nodal agencies such as Tamil Nadu Industrial Development Corporation (TIDCO) aimed at identifying and promoting establishment of large and medium scale industries within the State, State Industries Promotion Corporation of Tamil Nadu (SIPCOT) aimed to identifying, developing, and maintaining industrial areas in backward areas of the State, Tamil Nadu Industrial Investment Corporation (TIIC) which assist financially new or existing units in operations

The Commerce and Industry Department, Karnataka Industrial Area Development Board and Karnataka State Industrial Investment Development Corporation (KSIIDC) have promoted industrial infrastructure development, in addition to the incentives, in the state thus attracting various new industries to set up within the state.

• •

The new Industrial Policy for 2006-2011 aims to achieve a Gross State Domestic Product (GSDP) growth rate of 9% per annum and 12% average annual growth over the policy period in the industrial sector, which accounts for 18% of GSDP. This growth target will ensure that the government continues to play an important part in attracting industries to choose Karnataka as an ideal location for manufacturing. Bangalore Bangalore is home to various industrial houses which have set up manufacturing units around the city giving rise to several industrial zones, of which Bommasandra, Peenya and Jigani are the most prominent locations. However, to keep pace with the rapidly growing industrial sector new locations like Tumkur, Mysore, Dobaspet and Kanakpura are gaining prominence in and around the city. Major industries find Bangalore favourable due to factors like availability of skilled workers, easy connectivity, favourable climate, relatively lower costs.

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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commencement and expansion and Tamil Nadu Industrial Guidance & Export Promotion Bureau - which provides comprehensive information, guidance and support to investors. These agencies along with other government initiatives such as single window clearance and incentives which are sector and location specific and often customised to the investor depending upon their needs and the quantum of investment have contributed to the growth of industrialisation and investment in the state. Tamil Nadu has historically been a prominent state for trading and manufacturing this can be attributed to the locational benefits of the state. Tamil Nadu has historically been a prominent state for trading and manufacturing which can be attributed to the locational benefits of the state. It is the only state that houses three major ports - Chennai Port, Ennore Port and Tuticorin Port, in addition to 14 minor ports. Further government’s infrastructural initiatives have ensured that the state remains a strong competitor in investment and presence of manufacturing and industrial units. Some of the more prominent industries in the state are textiles, automobiles and heavy vehicles, auto components, railway coaches, power pumps, leather tanning industries, cement, paper etc. While currently the government is promoting other industrial sectors such as rubber, floriculture, biotechnology, and agriculture. Chennai Chennai also referred to as the 'Detroit of India' due to the existence of large auto and auto auxiliary cluster in and around the city, has also recently attracted the electronic hardware manufacturing sector in a large way with companies like Nokia, Samsung, Motorola, Foxconn, Dell, Flextronics etc., setting up their manufacturing facilities in and around the city. The development of the IT/ITeS sector has also brought about large migrant population from neighbouring cities and states. Chennai is a very attractive location for industries due to excellent connectivity through road, rail and sea, additionally availability of skilled manpower and presence of international air transport makes it an ideal location for exporters.

Sriperumbudur Sriperumbudur, situated just a little over 40 km from Chennai, gained prominence due to the setting up of manufacturing units by companies like Saint Gobain and Hyundai in the area and is now being showcased as an ideal location for future development due to the establishment of various telecom manufacturers such as Nokia, Motorola, and Samsung. Emerging locations such as Oragadam, Ennore and the NH 5 corridors are also gaining prominence due to the availability of large land parcels, availability of land subsidised by the state government and robust infrastructure development. Industries are biased towards certain locations due to their advantages that can be leveraged in order to make the operations more efficient and develop a viable business model as seen with various export oriented firms being attracted to Ennore due to the existing port. Industries like logistical firms prefer to be located on the NH 5 due to the already existing goods warehousing facility and the excellent connectivity through the golden quadrilateral to east India. Tiruchirappalli Tiruchirappalli with the presence of BHEL, ordnance factory, Dalmia Cement and other prominent corporations is a major engineering, manufacturing and fabrication hub. There are also smaller agricultural and food processing based industries on the peripheries of Tiruchirappalli and towards Coimbatore which is expected to grow in the future due to its logistical advantage of being connected to large cities such as Chennai, Madurai, Nagappattinam and Coimbatore. With multiple national highways (NH 45, NH 45B, NH 67, NH 210, NH 227) running through it and multiple railway stations such as Tiruchirapalli Junction, Tiruchirapalli Town, Tiruchirapalli Fort, Tiruchirapalli Palakkarai etc. and an international airport that is being upgraded, the city is expected to transform itself as not only a manufacturing centre but also as a logistical trading hub.

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Coimbatore Coimbatore district's primary industries are engineering, textiles, hosiery and poultry with the city having headquarters of corporates such as Pricol, LMW, ELGI, Suguna and Bromark Pioneer Poultry. It is also known as the Manchester of South India due to the strong presence of textile industry especially seen in the town of Tiruppur - the largest garment manufacturing and exporting cluster in India. The cotton fields in the district helps to keep input costs low thus making it a highly competitive market. Investment from Suzlon and Hansen transmission could transform the area to a major player in the alternative energy and manufacturing components arena.

Karur Karur is an established hub for the bus body building industries where most of the private buses used in south India are manufactured in this region. The state government owned Tamil Nadu Newsprint and Papers which is the world's biggest bagasse based paper mills is also present here. There are other industries such as textiles, sugar and cement that are prevalent in this region. Although the region is centrally located within the state it offers limited connectivity through rail and other means of transport thus hampering the growth in this region. The government is also concentrating on certain corridors such as the Chennai-Manali-Ennore corridor and the Chengalpattu-SriperumbudurRanipet corridor currently and at a later stage the Madurai-Thoothukkudi and Coimbatore Salem Corridors will also be developed.

Coimbatore district's primary industries are engineering, textiles, hosiery and poultry with the city having headquarters of corporates such as Pricol, LMW, ELGI, Suguna and Bromark Pioneer Poultry.

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EASTERN CORRIDOR
Eastern Corridor

Some key policies and incentives offered by the state that have helped the industrial sector are: • • • • Waiver in electricity duty for 5 years 50% refund on stamp duty and registration Subsidy on interest, employment generation and investment capital Guidance in identification, allotment, conversion of land and other infrastructural facilities Subsidy for quality improvement in the Small Scale sector

West Bengal has industrial areas in many districts but the government has identified four major industrial centers namely Kolkata, Haldia, AsansolDurgapur and Kharagpur.

Automobile Machine Tools Textile Drugs & Pharmaceuticals

Source: FedEx and Cushman & Wakefield Research

West Bengal West Bengal has traditionally been the centre for manufacturing and trading. It continues to be a leading industrial state in the eastern region with availability of skilled manpower which has provided the required stimuli for growth. According to the CMIE -Centre for Monitoring Indian Economy - estimates in March 2007 the outstanding investments in the state was US$ 50 billion registering a growth in excess of 100% over the year. This exceptional growth was mainly driven by investments in the construction, manufacturing and power sectors. Traditionally the state has been the home to several industries like tea, steel and foundry, leather, chemicals, coal and textiles to name a few. The state's initiative to offer a cordial environment to the investors has resulted in the formation of "Shilpa Bandhu" a single window agency for providing investors with every possible assistance in setting up industrial units within the state. This has resulted in greater interest from new industries that are now planning to enter the state such as metals, ceramics, food processing and automotives.

West Bengal government has identified four major industrial centers namely Kolkata, Haldia, Asansol-Durgapur and Kharagpur. Salt Lake is an exclusive centre for IT/ITeS. The state already has good connectivity through the golden quadrilateral and is currently the gateway to the north eastern states. Good support infrastructure such as power, communication, ports and waterways also add to the attractiveness of the state. The east -west freight corridor is also expected to provide the required impetus to the overall industrial growth of the state. Kolkata The state capital is the major hub for the IT/ITeS sector in locations of Salt Lake and Rajarhat. The city was forced to expand to the peripheries due a shortage of land and has since emerged as the technology centre catering to the growing requirements of the services industry. The adjoining districts of South and North 24 Parganas and Howrah are major manufacturing hubs for industries like jute, steel, leather and textiles industries. Haldia A city on the Haldi River is the home to many national and international oil and petro chemical companies. It is the chemical hub of the state where the existing industrial base, social infrastructure and transport linkages make it a favorable choice for further growth of industries

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of petrochemicals products, fertilizers, oil refineries, chemicals, ship building and breaking. A mega petro - chemical industrial estate is expected soon which will add a new dimension to the up stream and down stream oil industries. Another project for Purified Terephthalic Acid (PTA) is also on the anvil. Asansol - Durgapur Located in the western part of the Burdwan District in South Bengal, Asansol - Durgapur region has been a prominent industrial belt of the state due to the presence of major steel plants in Burnpur and Durgapur. The coal belt in the Raniganj area along with many chemical and engineering industries in the vicinity have helped the region to be established as a preferred destination for industrial and mining activities. Biotech and automobile SEZs are planned at Kanksha near Panagarh and Andal which is also expected to have the first Aerotropolis in the sate. Bankura and Purulia have also successfully attracted industrialists keen on setting up steel and cement plants in the region due to the presence of cost effective land and labour. All these locations have large land parcels along with the availability of skilled work force. Kharagpur Situated in the prime railway junction approximately 120 kms from Kolkata, Kharagpur shares the borders of Jharkhand. Several engineering industries are already present and are projected to be the home for steel and auto components industry. Proposed biotech and iron and steel parks will add significantly to the industrial prominence of the sector. Jharkhand Jharkhand, by virtue of being in the Chhota Nagpur area, is rich in natural resources. The area was one of India's first industrial locations to be developed by the government. Many public- private partnership endevours were set up in Jharkhand through the first phase of industrialisation of modern India. The state has large reserves of iron ore, coal, copper, mica,

bauxite, manganese, limestone, china clay, fire clay, graphite, kainite, chromite, asbestos, thorium, sillimanite and uranium. The state holds the distinction of having the first iron and steel plant at Jamshedpur, the largest fertilizer factory at Sindri and the biggest explosives factory at Gomia. The industrial sector has shown impressive growth over the years. As per the Annual Survey of industries, the number of factories increased from 1,382 in 1999 to over 1,600 in 2007. The Jharkhand Industrial Infrastructure Development Corporation (JIIDCO) facilitates and develops infrastructure for industrial development. Currently, the state has three Industrial Area Development Authorities (IADAs) headquartered at Adityapur, Bokaro and Ranchi. These authorities are responsible for acquisition of land, development of support infrastructure facilities like road, drainage, water supply and public utilities within their jurisdiction. To provide a boost to the industrial development in the state, several initiatives of the government are listed below: • • • • Single Window Clearance for all industries Assistance in land acquisition Investment and Interest subsidy at growth centres Priority in power allocation in growth centre

The Jharkhand Industrial Infrastructure Development Corporation (JIIDCO) facilitates and develops infrastructure for industrial development.

The state is mainly dependent on mining and agriculture, however industrialisation in some pockets has been the key drivers of the state economy. The main industrial centres in Jharkhand are Ranchi, Jamshedpur, Dhanbad and Bokaro. The government also plans to promote Ranchi and Jamshedpur as key centres for IT/ITeS sector. Steel plants, automotives, power, mining and engineering are the key industries that are already dominant in the state. Strengthening of the transport infrastructure has become a priority for economic, industrial and social development of Jharkhand. The state is planning to develop expressways along the main high-density corridors. It is also in the process of starting inter state and intra state bus terminals. The state has an extensive and well developed

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railway system providing vital links to the mining industry with important cities and ports of the country. Ranchi The capital city of Jharkhand is also an important industrial location housing several heavy engineering companies within its vicinity along with various coal mines. Due to the rapid pace of urbanisation and the lack of space, the state aims to develop a technology park in the suburbs to attract the growing services sector. The industrial area around the city is dotted with companies engaged in the production of heavy engineering, automobiles, steel rods, aluminium, electric equipment, transformer oil, paraffin and petroleum jelly. Jamshedpur Tata Nagar at Jamshedpur is the first iron and steel city in India and is located in East Singhbhum district. The city was founded by late Jamshedji Nusserwanji Tata. The areas surrounding Jamshedpur has abundant natural resources like iron ore, coal and lime, which form raw materials for the steel industry. Adityapur, located in close proximity to the steel plants of Jamshedpur and Bokaro, Heavy Engineering Corporation in Ranchi, Uranium Corporation in Ghatsila and Hindustan Copper Limited in Jadugoda are fast emerging as the industrial centre of the east. This forms the heart of the Chhotanagpur belt which has transformed to an industrial hub. To provide the necessary impetus to the development of sectors like automobile and auto components. A SEZ is also notified in Adityapur. These areas have the advantage of being in the area richest in natural resources. Dhanbad and Bokaro This district sharing borders with West Bengal and Bihar is the coal capital of the nation. The metallurgical coal of the Jharia coalfield has given Dhanbad an important place in the industrial map of the nation. Coal has attracted and brought about a concentration of numerous

other industries. This region is home to several mines, coal washeries, engineering, fertilizer and cement industries. This area is ideally suited for coal products and small engineering industries. Bokaro Steel City is located in the eastern part of the state and is home to one of the largest steel plants in India, Bokaro Steel Plant, which is a part of Steel Authority of India Limited. The first blast furnace was started in 1972. The first methane gas well was also established here at Parwatpur. The Damodar Valley Corporation (DVC) runs two thermal power plants in the district. There are other industries like LPG bottling plants as well as oil and gas companies in the district. Orissa Orissa is the second most mineralised states in India with vast mineral deposits of coal, iron ore, manganese ore, bauxite and chromites. Several well known mineral-based industries have been attracted to the state. Traditionally an industrial state, due to its proximity to the Chhota Nagpur area, in recent times, Orissa has once again started to attract attention of national and international investors as a prominent destination for industrial investment. Rourkela Steel Plant was a major initiative to provide the required momentum to this state. Metals and mining has been the key industries in the state along with the traditional textiles industry. The state government has taken several steps to improve industrial infrastructure and promote investments in the state. Significant among them are: • Development of industrial and social infrastructure in steel and mining corridors, including setting up of railway corridors, upgrading ports, creating expressways Major expansion of Paradeep Port underway through public private partnership (PPP); Land allocation at subsidised rates Exemption of electricity duty for 5 years

Orissa has once again started to attract attention of national and international investors as a prominent destination for industrial investment.

• • •

The state government has reaffirmed its commitment to transform Orissa into a vibrant

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industrial state and has reformulated the Industrial Policy in March 2007 which aims at creating a more conducive business environment that will raise income, employment and economic growth. The Industrial Promotion and Investment Corporation of Orissa Ltd (IPICOL) is a key promotional institution that was incorporated in 1973 with the main objective of accelerating the pace of industrial development by promoting large and medium scale industries. An efficient network of roads, railways, ports and aviation provide the necessary impetus for the development of the industrial zones. Power and telecom also form a part of the robust physical infrastructure of the state and is the binding force for the key industrial locations of Angul and Bolangir, Cuttack, Jharsugda and Jagatsinghpur. Angul and Bolangir Due to the availability of rich mineral deposits, this locations is dotted with several mining and

metal based industries, power generation and engineering industries. These locations have many small scale industries that help generate significant investments and employment. Cuttack Famous for its the traditional textiles and handicrafts, Cuttak also houses several other industries such as paper mills, metal work and food processing industries. Hosiery and knit wear are the key industries that are instrumental in the industrial development of the region. Jharsugda and Jagatsinghpur The districts of Jharsugda and Jagatsinghpur are known for the manufacturing of steel and related products. Availability of the requisite talent pool has helped this location to emerge as a preferred industrial centre. Shipping and food processing are some new age industries that have gained importance in the past.

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NORTHERN CORRIDOR
Northern Corridor Northern Corridor - Land Value Trend Existing Corridors Okhla Faridabad NOIDA Kanpur Bhiwad Baddi Pantnagar-Haridwar Land Values Outlook (YOY growth) 5% 10% 10% 0% 2% 7% 15%

Himachal Pradesh has witnessed significant increase in number of medium and large scale industries in addition to small scale industries.

Emerging corridors Manesar Greater NOIDA Rothak Balwal Pontasahib Balabgrah Neemranah
Source: Cushman & Wakefield Research

Automobile Machine Tools Textile Drugs & Pharmaceuticals

0% -10% 0% 0% 5% 8% 0%

Source: FedEx and Cushman & Wakefield Research

Himachal Pradesh Himachal Pradesh has emerged as key industrial destinations in the northern region largely due to the various initiatives of the state government for promoting industrial development in spite of the geographical challenges in the state. Over the last few years, Himachal Pradesh has witnessed significant increase in the number of medium and large scale industries in addition to small scale industries. State government has developed over 40 industrial parks and 15 industrial estates with an aim to provide high quality infrastructure. Apart from existing industries like pharmaceuticals, cement, agroforest based industry and biotechnology several other industries like textiles, leather and engineering products have also set up manufacturing plants in the region. The state's industrial policy of 2004 aims at boosting industrial development in the state by creating and upgrading existing infrastructure, providing several incentives and concessions and streamlining rules and procedures. Some of the key incentives and facilities available to industrial sector in Himachal Pradesh are as follows: • Units based on consumption of local raw materials have been categorised as priority sector and are provided with interest subsidy along capital investment subsidy. Exemption from Goods and Service Tax (GST) and levy of Central Sales Tax (CST) at concessional rates. Himachal Pradesh also enjoys special package of incentives from the Central Government. This includes: – 100% exemption from payment of Central Excise Duty for 10 years – 100% income tax exemption for 5 years – 25% and 30% exemption for the next block of 5 years, capital investment subsidy at 15% of investment in Plant & Machinery and central transport subsidy.

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Simplification of rules and procedures by the existing state level "Single Window Clearance and Monitoring Authority"

Promote private sector participation in development of infrastructure projects.

The above incentives from state and central government have attracted fruitful investments and major industrial players (like Blue Star, TVS, Cadbury, Pidilite, Hindustan Unilever Limited, Nestle, and Mahindra & Mahindra). Locations like Baddi in Salon, Sirmour, Kangra, Una and Mandi are key industrial locations in Himachal. Agro food, pharmaceuticals and electronic sectors and their allied industries have registered their presence in Uttarakhand. Uttarakhand Uttrarakhand is one of the latest states carved out of Uttar Pradesh in November 2000. Since its inception, the state government has taken rapid strives in development of industrial hubs in the state. High literacy rate of over 72%, availability of rich mineral deposits and availability of uninterrupted power are key advantages available to state of Uttarakhand. Agro food, pharmaceuticals and electronic sectors and their allied industries have registered their presence in Uttarakhand. The state's share of the total investment proposals in the country has more than doubled since its inception in 2000. Approximately US$ 2 billion worth of investment is expected to be made in the automobile, pharmaceuticals, processed food, and fast moving consumer goods sectors in the near future. Major fiscal and non fiscal incentives being made available by state government of Uttrakhand includes: • • • • 100% relief in Excise duty for 10 years and 100% income tax exemption for first 5 years Central Sales Tax levied at concessional rate of 1%. Stamp duty concessions to be provided for land in identified areas. Capital investment subsidy of 15% and interest subsidy of 3-5% for small scale industries. Simplification and rationalisation of labour laws and single window clearance to reduce project delays.

Pant Nagar and Haridwar have emerged as attractive industrial locations in the state. Currently 3 integrated industrial corridors have been developed at Haridwar. Sitarganj and Siggadi are other prominent locations in Uttarakhand which have witnessed major industrial development in the state. Punjab In Punjab small scale industries dominate the industrial scene with approximately 47% of the total manufacturing sector in Punjab. The other thrust sectors for the state are chemicals, metals and pharmaceuticals. The state's key industries include automotive and auto components, bicycles and bicycle parts, food products, light engineering goods, paper and paper products, sports goods and textiles. The established industrial locations are Ludhiana, Patiala, Roop Nagar, Amritsar, Bathinda and Jalandar. Industrial infrastructure, roadways as well as housing projects and commercial complexes have seen the maximum investment inflow in the recent past. The state is also focused on sector-specific infrastructure for food, apparel, biotech, IT and electronics sectors. In terms of SEZ space, Quark City, Mohali, has been granted SEZ status to promote IT/electronics industries, as well as to the Ranbaxy SEZ at SAS Nagar, also in Mohali. The Industrial Policy of Punjab is aimed at developing infrastructure and speedy clearance of new projects. Key highlights of industrial policy are as follows: • • Replace Octroi and entry tax with a single Local Area Development Tax (LADT) Infrastructure development though private sector participation by setting up of Special Purpose Vehicles (SPVs) Freight subsidy for exports Customised sector specific policies for biotech and apparel sector and proposed industries in border areas.

• •

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Upcoming industrial infrastructure in Punjab includes: Electronics Township (ELTOP), Mohali, which also includes a Software Technology Park, is jointly promoted by Punjab InfoTech Corp and the Department of Information Technology. Food Park Project, Sirhind spread over 25 acres, which is a joint initiative between an NonResident Indians group and Punjab Agro Industries Corporation. One of India's largest and most sophisticated integrated food processing complex, it has an annual capacity of over 5,000 MT. Apparel Park, Doraha, is an Integrated Textile Park, with 115 plots, jointly developed by the Punjab Small Industry and Export Corporation Limited and the Association of Textile Industry. Biotech Park, Dera Bassi, a Public Private Partnership initiative between the Punjab State Council for Science and Technology and Beckons Industries, it would comprise 10-15 industrial units in agri-biotech and health care sectors. Rajasthan Industrial performance of Rajasthan has been driven largely by small scale industries dominated by key industries like food processing, agro industries, engineering products, cement, ceramic and marble and handicrafts. The state's proactive role in developing skilled and semiskilled work force has helped in increasing the attractiveness of this region, in establishing it as a preferred industrial location for food processing and engineering products. State is focusing on developing sector specific infrastructure for food, apparel and electronic sector. While the export promotion industrial park near Jaipur is one of the largest parks in north India, similar industrial parks are being developed at Alwar and Jodhpur. Theme parks with facilities for a particular industry and upcoming SEZs are other major infrasture developments currently underway in Rajasthan. Some of the incentives offered by the state are:

Project of upto 3 crores to be cleared by the District level committee under the Chairmanship of the District Collector 2% interest subsidy at documented rate of interest of Financial Institutions to an SSI project having plant & machinery worth not exceeding INR 100 lakhs. 25% of the cost of DG Set limited to INR 250,000 is granted to SSI units for the purchase of DG Set. SSI units are eligible to get INR 10,000 per product to get BIS certification mark To encourage cottage industries amongst women entrepreneurs to motivate them to opt for self employment women are being provided training through DICs and NGOs. To promote and help in marketing the products of Handicrafts, Handlooms and SSI Sector, Udyog Mela/ Exhibitions are organised at Naitonal, State and District Level.

Alwar and Bharatpur are other prominent industrial hubs which have presence of major industries like cement, chemicals, dyes, electronics, engineering machines and food processing.

• •

Major existing industrial belts of Rajasthan include Jaipur, Alwar, Kota, Bhilwara and Jodhpur. The proposed development of DMIC is likely to further develop industrial areas in Jaipur, Dausa and Bhilwara. Alwar and Bharatpur are other prominent industrial hubs which have presence of industries like cement, chemicals, dyes, electronics, engineering machines and food processing. Prominent industrial hubs such as Kota, Jaipur, Bikaner and Bhilwara have the presence of textile, leather, engineering goods, and electronics. Bawal, located on the Haryana border, provides a link between Jaipur and Delhi thus allowing goods to move both upstream and downstream into neighbouring states. The National Capital Region (NCR) The National Capital Region (NCR) is the focal point for many commercial and IT/ITeS activities in North India and has historically been an attractive location for industrial activities such as automobiles, light engineering, textiles,

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Traditional industrial locations of Okhla, Mohan Cooperative Area and NOIDA have been saturated especially with the entry of IT/ITeS companies which have preferred these locations as they are situated in the heart of the city.

pharmaceuticals etc.Various companies have established their corporate headquarters as well as production units in the NCR mainly because of good connectivity through land and air, its large existing consumer markets and robust infrastructure initiatives. The North Western Freight Corridor, Golden Quadrilateral, Eastern and Western Peripheral Roads and the North South Corridor have all helped increase connectivity to this region. The proposed airport in Greater Noida along with the expansion of the cargo hub in the existing Delhi international airport will be added advantages of this location. Traditional industrial locations of Okhla, Mohan Cooperative Area and NOIDA have been saturated especially with the entry of IT/ITeS companies which have preferred these locations as they are situated in the heart of the city. Additionally the Delhi Government's drive to relocate polluting units outside of the city has further helped peripheral locations to develop into industrial locations while maintaining the advantage of being close to the national capital. This move has increased rentals due to high demand, forcing industrial facilities to relocate to peripheral locations of NCR in U.P and Haryana such as Rohtak, Bhiwadi and Greater Noida etc. Uttar Pradesh (UP) Uttar Pradesh offers easy availability of land in 239 fully developed industrial areas, spread over 37,388 acres. Its industrial infrastructure also includes several Industrial Infrastructure Development Centres (IIDCs) and approximately eight notified SEZs. There are various prevalent industries in this state which enables it to achieve the title of the 2nd largest economy in the country. Agriculture continues to remain the most prevalent sector after this the cottage industries of handlooms and handicrafts would be the most prevalent in this state providing employment to the large skilled and unskilled worker base. The UP government or the governing body (in the case of NOIDA, Greater NOIDA etc.) offer attractive incentives which are customised to

the investors needs depending upon the investment quantum, employment opportunity, region and type of industry being established. UP's thrust industries include sectors like Biotech, IT/ITeS, Food and agro-processing units, and textiles. Varanasi has attracted a proposal for a Textile Park and SEZ. Integrated Logistics Hubs/Free Trade Warehousing Zones have been proposed in collaboration with IL&FS, Mineral & Mining Trading Corporation and Mitsui (Japan). An Integrated Agro/Food Processing Zones has been proposed at Hapur. Ghaziabad, NOIDA & Greater NOIDA: Ghaziabad is already home to several small and medium industries and with the upcoming Taj and Ganga Expressway the attention is steadily moving away from the established corridors of NOIDA towards Greater NOIDA. Apart from IT/ITeS, there are several other industries that are also evaluating possible opportunities of foraying into the newly planned developments of Greater NOIDA, along with developers who have already begun developing commercial, retail and residential projects to cater to these industrial pockets. Haryana Haryana is one of the leading industrialised states with an inclination towards the automobile industry. The state has the presence of various manufacturing corporations such as Maruti Udyog, Honda, Escorts, Hero Honda. Already existing locations of Gurgaon and Faridabad constitute towards the bulk of production and revenue generation for the state. Industries are considering other locations in order to avail cheaper rentals, incentives and robust infrastructure that is being provided by the government. Some incentives include: • Interest free loan, quantified at 50% of tax paid on sale of goods sold and 75% for food processing units, repayable after a period of 5 years

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• •

Subsidy up to 1% of FOB of export units subject to a maximum of INR 1 Million P.A. Exemption from electricity duty for 5 years

Manesar, Dharuhera & Rewari: Located in Haryana (along NH 8) and in close proximity to Delhi and Gurgaon, these regions have availability of large land parcels and lower cost of labour which has provided the necessary The focus of development is gradually shifting from the peripheries of major metropolitan centres to the emerging locations along highways, railway corridors and Tier II and III cities, which are fast emerging as the future growth centres.

impetus to transform the area into industrial zones. Haryana State Industrial Development Corporation (HSIDC) has successfully developed an Industrial Model Township in Manesar and is planning to develop an additional 2 IMT's. Companies like Hero Honda and Maruti Udyog are some of the major automobile giants already present here, along with several auto ancillary units in the pipeline.

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OUTLOOK To maintain an accelerated growth of the economy, which is triggered mainly by the booming services sector, the government has taken a keener interest in the country's industrial sector.Various state governments have also taken major initiatives to attract industries and generate revenue as well as employment in their respective states by promoting existing or new industrial sectors. It is observed that certain industries prefer certain specific geographical locations due to their inherent attributes and classical factors of economies of scale and benefit from the synergies due to the presence of other industries in the vicinity. However, this scenario is rapidly undergoing a transformation and industrialists are now willing to explore newer horizons and leverage incentives offered by the various state governments and ease of operations. The state governments have been conscious in assessing their states both in terms of the traditional benefits enjoyed states enjoy as well as evaluating their regions for setting up of new age industrial activities which would enhance their state's revenue flows and economic growth. New age sectors like food processing, pharmaceuticals and biotechnology, along with IT/ITeS are some of the industries are being preferred for promotion by most state governments due to their non-polluting and high return nature. However, the western and southern zones have been the principal hubs, where most of the major players of the new age sectors are already present. Whilst there is not exactly an equitable distribution of industries across the country with clear pockets of development of a certain kind of industry in certain specific states, however, most states are trying to attract more and more industries from different sectors. The northern states of Himachal Pradesh and Uttaranchal have been promoting their industrial locations to attract industries like food processing and pharmaceutical units. Similarly, the textiles and apparel industry is also spread across the country, with most state governments eager to set up such units. The western and southern states of Maharashtra and Tamil Nadu have successfully attracted various domestic and global automobile manufacturers and numerous auto ancillary units. In the north, the automobile sector is limited to NCR, while the eastern states have a major focus on steel and heavy engineering. State governments have also geared up in their own ways to develop themselves as facilitators. They have proactively announced many incentives and are developing areas to cater to the growing demand from the industrial sectors. The Central Government has in turn eased certain regulatory requirements to further the cause pioneered by the state government. States such as Himachal Pradesh, Jharkhand and Andhra Pradesh have initiated single window clearance in an attempt to accelerate and ease the processes. Similarly the eastern states of Jharkhand and Orissa have assured assistance and subsidy in land acquisition. Uttaranchal, Gujarat, Jharkhand and Tamil Nadu have provided tax holidays and concessions on investments industrial development. There are also special subsidies for employment generation in West Bengal and capital investment and fixed assets in Uttaranchal and Maharashtra. Our studies have revealed that various industrial growth centres have been developed across the country, covering a total development of approximately 363,263 acres. The southern zone being the frontrunner, has the largest share amounting to approximately 236,656 acres spread across the three major states of Tamil Nadu, Karnataka and Andhra Pradesh, followed by the west. The government acknowledges the role of SMEs and their growth has been exemplary, particularly of industries like automobile, steel products, machine tools, textiles and apparels, chemical and pharmaceuticals. Several international corporations continue to exhibit their confidence in India for outsourcing their manufacturing facilities and backend

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

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activities. Industrial segments like retail, telecom, banking, logistics and IT are expected to sustain their performance, leading to increased demand for land in and around key growth centres. The clustering of industries will continue to take place resulting in greater efficiency and lower costs for manufactures. Encouraging the growth of sector-specific industries in suitable locations. This in turn will add to the unique dynamics prevalent in the distribution of land holdings, town planning and developments in each location.

There is a definite movement of industrial clusters from peripheries of major Tier I cities to locations along highways, railway corridors and other means of connectivity there by promoting tier II and III locations.

Corridor Analysis North*
• Food Processing • Pharmaceutical and Biotechnology
Industries

East**
• Steel and Engineering • Food Processing and Agro Based industries • Chemicals and Pharmaceuticals

West***
• Automobile and Auto Components • Pharmaceutical and Biotechnology • Textiles

South****
• Automobile and Auto Components • Food Processing • Pharmaceutical and chemicals • Textiles/ Apparel • Engineering

• Textiles and Garments • Gems and Jewellery

• Automobiles and White • Food Processing and Agro Based industries goods • Mining and Minerals • Textiles and Hosiery • Single window clearance • Subsidy on capital investment • Exemption on excise Advantages duty and income tax • Priority of land allotment on industrial areas • Octroi exemption • Waiver on electricity duty for 5 years • 50% reduction on stamp duty and registration

• Simplified procedures & • 100% exemption of electricity duty in group single window clearance C category and beyond for 15 years • Develop and modernise sea ports • 100% exemption of stamp duty • Foreign Investment promotion Board for speedy clearance • Investment subsidy on on fixed assets for industries in backward area • Sales tax concessions • Sales tax deferment for 10 years • Incentives to rehabilitate sick industries 107

• Refund of octroi • Assistance in land acquisition and subsidy • Special Capital in allocation Incentives (SCI) to all SSI units • Priority in power allocation in growth • Assistance for Research centers and Development and Patent registration • Subsidy on interest, employment generation, • Interest subsidy to new use of piped gas and textile, hosiery, and investment capital knitwear SSI units

SEZs Industrial Growth centers (Acres)

21

11

42

50,804.42

11,009.57

64,793

236,656

* Haryana, Uttaranchal, Himachal Pradesh, Punjab, Uttar Pradesh and Rajasthan ** West Bengal, Jharkhand and Orissa *** Maharashtra and Gujrat **** Karnataka, Andhra Pradesh and Tamil Nadu

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

CONCLUSION India Inc has already started to look beyond Tier I and II and established industrial hubs for more cost effective/improved solutions in the wake of rising values and the increasing space crunch in established business districts, especially in order to attain first - mover advantage in these maiden locations. In the same way, the industrial locations too are undergoing transformation as new locations are being explored by aspiring industrialists, eager to accrue the benefits offered by emerging corridors through improved and innovative infrastructure. It is also witnessed that major industrial players are also considering these upcoming locations for their expansion plans, resulting in rapidly changing topography of many exurbs along strategic locations such as freight corridors and highways. As India moves towards becoming more and more industrialised, in the long run there would be growth of several other regions which are currently under-utilised from an industrial stand point, leading to a strengthening of their base and to a healthy, more competitive relationship with other traditionally strong industrial states and clusters. This process would inevitably lead to enhanced local employment opportunities coupled with a more equitable spread of wealth within India. However, India has not escaped unscathed from the global financial meltdown. The fall in GDP growth from 9.0% in the previous years to an estimated 6.5-7.0% for 2009 is likely to impact all sectors of the economy. Slump in exports, coupled with high interest rates has reduced consumption in domestic market. This has led to a steep deceleration in industrial production growth which dropped from 12% in October 2007 to 5.45% in September 2008. Although India has a large domestic aspirant consumer base which will eventually help mitigate the ripples of this global meltdown, going forward India will not remain completely insulated from the global occurrences. It is anticipated past this period of economic slowdown, India will be one of the stronger economies to be able to recover faster than others and continue its growth story to reinforce the possibility of an undisputed increase in GDP growth rate in the future. This will potentially rejuvenate the urban markets which is evident from the diverse availability of indigenous products and increasing middle class consumables, which will lead to the generation of a stronger consumer base, entrepreneurs and businesses. The economic growth will be sustained by increased capital expenditures and infrastructure initiatives undertaken by the government to boost various sectors within the nation leading to the emergence of a new generation of Indian entrepreneurs.
A Cautious Note Observations Impact

Industrial production Dropped from 12% in October 2007 to 5.45% in September 2008 Economic Exports 9% in the last 4 years to 6.9% in 2008 15% fall in exports in October 2008 compared to same time last year Reserve bank of India PLR between 12.75% to 13.25%

High Interest Rates

Source: Ministry of Commerce,World Bank and Cushman & Wakefield Research

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INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

ABOUT THE INDUSTRIAL SERVICES GROUP Our industrial services team works closely with clients to understand and evaluate their overall business and growth strategies and provides solutions in sourcing, developing or disposing industrial properties across India. Our professionals offer a comprehensive range of services, including facility, site and land acquisition and disposition; lease/ sale negotiations based on market knowledge and current trends; project management as well as build-to-suit analysis and planning. Our services are applicable to any of the diverse product types categorised as industrial buildings, from manufacturing plants and traditional warehouse/ distribution facilities to more specialised research and development facilities, warehouse/ showroom (flex) space and hightech laboratories. Our diverse portfolio is spread across sectors that include telecom, ceramic, food processing, automobile & automotive components and electrical industry to name a few.

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INDIA R E P O RT

INDUSTRIAL SECTOR IN INDIA - The oasis of economic growth

A RESEARCH PUBLICATION

Bibliography: Brochures / Information booklets • World Economic Outlook, October 2008 – International Monetary Fund. • The Global Competitiveness Reports 2008-09, October 2008 – World Economic Forum. • “Made in India”, September 2005 - McKINSEY and Confederation of Indian Industries (CII). • Industrial, Investment and Infrastructural Policy of Maharashtra – 2006, Government of Maharashtra. • Gujarat Industrial Policy – 2003, Government of Gujarat. • Website: www.sezindia.nic.in

About Research & Business Analytics Group Cushman & Wakefield is committed to collation of high quality base data and assembling detailed statistics for the major India markets on a regular basis. This commitment to quality research provides a strong foundation for all of our services. Customized, analytical reports are also developed to meet the specific research needs of owners, occupiers, and investors. Through the delivery of timely, accurate, high quality research reports on the leading trends, markets and business issues of the day, we aim to assist our clients in making pertinent and competitive property decisions. In addition to producing regular reports such as global rankings and local quarterly updates available on a regular basis, Cushman & Wakefield also provides customized studies to meet specific information needs of owners, occupiers and investors. For more information: Tanuja Rai Pradhan National Head - India +(91 124) 469 5555 tanuja.pradhan@ap.cushwake.com Author of the report: Ashim Bhanja Chowdhury Senior Manager ashim.chowdhury@ap.cushwake.com Ray Kallimel Manager ray.kallimel@ap.cushwake.com Satish Tiwari Manager satish.tiwari@ap.cushwake.com

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