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Deceleration in industrial projects lead to dormancy in job market in Gujarat

By Rajiv Shah 
Industrial investment trend suggests that much of the propaganda around Gujarat development has little or no basis. While there has been sharp rise in industrial investment intentions, the actual implementation has taken a backseat, and so has employment generation. 
At a time when there is an acceleration in propaganda across India about Gujarat’s developmental model, which has allegedly helped attract highest-ever investment in the state compared to any other of state of India, resulting in the claim of a sharp rise in employment, the Gujarat government’s own industries department data suggest that there is a huge gap between intended industrial investments and projected job creation and actual investment commissioned resulting in real employment. Worse, the data suggest that there has been a sharp deceleration in the rate of job creation as also actual implementation of projects in Gujarat. A major reason for this could be that, according to experts, Gujarat has all along been encouraging largely capital intensive industries, which require very little manpower.
First, bare facts: In the 12 years between 1989 and 2000, industrial investment proposals for as many as 6,713 industrial projects were made in Gujarat. The amount of investment proposed for these projects was Rs 2,21,817 crore, and a projected employment of 11,84,464 persons. In the 12 years that followed – between 2001 and 2012 – while the number industrial projects proposed to be implemented in Gujarat went down to 6,103, the total projected investment sharply zoomed to Rs 9,36,252 crore. Despite a 322 per cent rise in investment intentions, the projected employment because of this employment during 2001-12 was just 12,28,092 persons – a rise of merely 3.68 per cent against the previous 12 years (1989-2000), suggesting that even in intended investments, automotive industries requiring fewer workforce were being proposed to set up projects in 2001-12.

Now, coming to the actual projects commissioned, between 1989 and 2000, as many as 3,294 industrial projects began their production activity, and the amount of investment involved was Rs 88,654 crore. As against this, between 2001 and 2012, as many as 2,028 industrial projects were commissioned for Rs 1,09,708 crore, suggesting a rise of 23.74 per cent over the previous 12 years. While this suggests a sharp gap between investment intentions and actual investments, the employment generation story tells an even more pitiable story. Between 1989 and 2000, total employment generated as a result of the projects commissioned was 6,07,363 persons. In the 12 years that followed – 2001-12 – the actual employment generation was just half of the previous 12 years. It was just about 3,44,281 persons, suggesting a fall of 43.31 per cent.
Experts believe that for a deeper analysis decadal trends over the years show ground realities more clearly. With this intention in mind, effort was made to see if, for each of the decades that followed 1989-1998 right up to 2003-2012 (in all 14 decadal slots), how industrial investments have taken place in Gujarat and what has been their impact on the employment scenario of the state. The trend suggests that while there has been a sharp acceleration in the investment intentions made in the 14 separate decadal slots analyzed, there was a deceleration in the projects commissioned. As for employment, while there was a not much change in the jobs which were proposed to be created as a result of the intended projects, there was a deceleration in the actual employment created as a result of the commissioning of industrial projects.
Even as parting the data, the state industries department officials gave no explanation as to why such a trend has emerged despite the fact that the actual growth rate of the state economy is claimed to be around 10 per cent per year. Giving her view, senior economist Indira Hirway says, “There is nothing unusual. One should not forget that in recent years the number of projects commissioned or postponed in Gujarat has down up drastically, and the main reason for this is economic slowdown, whose impact continues even now.” She believes that this has adversely impacted the job market, too.

The decadal trend should be especially disturbing for those policy makers who organized Vibrant Gujarat business summits every two years in order to attract investment from across the globe. Clearly, while investment intentions may have gone up, this did not favourably turn into actually implementation. If growth of the economy has taken place in Gujarat, it is not because of industrial investment, but due to the geographical location of state, which has 20 per cent of India’s shoreline and some of the most vibrant ports, at Kandla, Mundra, Dahej, Hazira and Pipavav.

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