Gujarat, located on India’s west coast, is one of the country’s most industrialized states. Its geographical expanse of roughly 2 lakh square kilometers accounts for about 6% of India’s overall area. It has a 1600-kilometer coastline and is well connected to all major ports on all continents and countries.
Gujarat produces 7.3 percent of the national GDP despite having only 5% of the population. Gujarat’s GDP increased by 13% at current prices in 2019-20 compared to the previous year. Gujarat has consistently experienced double-digit growth.
Gujaratis are known over the world for their entrepreneurial spirit and work ethic. The State has become the birthplace of a new business because of its risk-taking abilities and sophisticated commercial expertise. In industries like diamonds, chemicals, petrochemicals, and pharmaceuticals, Gujarat’s workforce is reasonably skilled.
Gujarat’s labor costs are very competitive, contributing to the State’s total productivity and excellent infrastructure. With approximately 40% of the population living in urban areas, Gujarat is one of the most urbanized states in the country. This has helped the State’s economy grow.
Consumers benefit from the State’s excellent transportation network and consistent power supply. Compared to other Indian states, it boasts one of the greatest per capita power usage and affordable commercial real estate. The State is home to 41 ports and India’s longest coastline.
Gujarat was one of the first states in India to establish an industrial park and is a pioneer in wind energy utilization. More critically, this infrastructure is supported by good public policy and is crucial to the country’s overall infrastructure needs.
Overview of the MSME Sector in Gujarat
Gujarat is one of the country’s most heavily industrialized states. Textiles, chemicals & petrochemicals, fertilizers, cement, dairy, pharmaceuticals, sugar, engineering, and other sectors are among the key industries. Gujarat produces roughly 16 percent of India’s industrial production, although accounting for only 5% of the country’s population and 6% of the country’s geographical area.
Gujarat has approximately 3.5 million MSMEs, which are a key source of employment and play an essential role in the larger industrial ecosystem. MSMEs in the State has a strong foundation with modern manufacturing technologies, with a 60.7 percent increase in MSME establishment from 2015 to 2020. According to the Department of Industrial Entrepreneurship and Investment Technology (DPIIT) data, Gujarat ranks first in terms of the number of IEMs (Industrial Entrepreneurship Memorandum).
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Based on the current context, Gujarat assumes a vital role in India’s rapidly changing commercial dynamics, where the economy has begun to recuperate. Several aspects, such as that Gujarat is home to a great industrial belt, including a petrochemical hub, contribute to Gujarat’s status as a major contributor to the national economy.
As the State prepares for this paradigm change, adopting and maintaining progress-friendly policies that encourage strategic growth falls increasingly on its governing institutions. The main goals are to establish a niche and provide incentives and help to SMEs while boosting entrepreneurship, assisting new and current businesses in meeting the demands of modern manufacturing methods, and developing the IT and ITES industry.
MSMEs in Gujarat are not self-contained; global and national economic trends and technology and trade changes have a considerable impact on their performance.
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Vision of State Government towards the Growth of MSME
Gujarat’s government launched a policy in 2020: Gujarat Industry Policy 2020. Gujarat Industrial Policy 2020 is a forerunner for inclusive growth and regional development. Gujarat will be established as the top business location on the global map due to the policy, and it will serve as India’s business card.
To remedy regional disparities, the government continues to introduce incentive packages to boost industries, mostly in the State’s underdeveloped districts. Gujarat has become a highly industrialized state due to all of these endeavors. Many current initiatives are anticipated to position the State as a strong contender for becoming a worldwide model state.
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To move the State even further towards “Atmanirbhar Gujarat,” concentrated efforts have been undertaken to boost jobs, value addition across industries, adoption of cutting-edge technology, increased productivity with Industry 4.0 manufacturing, and an innovation-driven ecosystem with a concentration on R&D. This will allow a Modern Gujarat to emerge, spearheading India’s aspirations.
The Gujarat government’s Vibrant Gujarat plan includes a built-in framework to foster scientific advocacy within the government. The difficulties to SME competitiveness have increased due to fast changes in the global economy, into which India and Gujarat are becoming increasingly integrated.
Even if the government’s efforts are commendable, Gujarat’s MSME growth is more of a spillover of general growth. However, legal and institutional reforms are required to assist the MSME sector is reaping the advantages of such expansion in a more meaningful way.
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A Competition Law for the MSME sector, for example, is required, as is a particular fund for its development. However, these cannot be realized by government efforts alone. This takes us to the arena of action and advocacy working hand in hand in a federal system.
Gujarat’s economy is indisputably vibrant and buoyant today, thanks to a robust entrepreneurial culture among its citizens and a strong infrastructure focus among policymakers.
Gujarat’s administration is working on various projects and ideas to keep the momentum going on a larger scale and accelerate growth in the State’s primary industries. Furthermore, this could result in a more widespread improvement in the living conditions of Gujarat’s citizens, resulting in a more inclusive growth environment.
State Government Initiative and Schemes
- Gujarat Industry Policy 2020
Industrial businesses will now be allowed to lease government land for projects for up to 50 years for 6% of the market cost. To take advantage of the global pandemic crisis, the Gujarat government will offer special incentives to businesses looking to migrate their operations from other parts of the world to Gujarat.
Units receive capital subsidies and tax breaks under the policy. Gujarat was the first State to decouple incentives from the SGST, allowing major enterprises to receive up to 12% of fixed capital investment as a capital subsidy for establishing manufacturing operations.
The new policy allows MSMEs to source foreign innovations, with the government subsidizing up to 65 percent of the entire cost of technology acquisition up to a limit of Rs 50 lakh. MSMEs would likewise be qualified for a capital appropriation of up to 25% of the qualified advance sum up to 35 lakh and motivations to construct sun-based roof projects on units with higher taxes for solar power produced at 2.25 per unit rather than 1.75 per unit.
- Assistance For Technology Acquisition
During the scheme’s operational time, assistance for the acquisition of acceptable technology from a recognized institution for its product/process would be granted in the form of 65 percent of the cost payable, up to a maximum of Rs.50 lakh, including royalty payments for the first two years.
Within one year of establishing an MOU/agreement/contract with a technology supplier, the company must receive MSME Commission approval.
New and existing businesses will be able to obtain technology with the program’s help. Plant, machinery, and equipment will not be eligible for assistance. Patented technology obtained from both Indian and foreign corporations will also be eligible.
- Patent Assistance
The initiative would provide help to individuals as well as legal entities. During the policy period, 75 percent of the cost/expenditure incurred for any number of patent applications is up to Rs.25 lakh per application/enterprise for securing Patient registration of created product/process.
Inside the general cap of 75% of the expense/consumption of patent enrollment inside the general roof, the most extreme charge for a lawyer for public licenses should be covered at Rs.50000 for homegrown licenses and Rs.2,00,000 for unfamiliar licenses. After the patent is distributed/told, a big part of the help will be conveyed.
- Assistance with SME Exchange Capital Raising
MSME can now raise equity financing on the SME Exchange, thanks to a new SEBI guideline. Assistance would be offered under this scheme to encourage MSMEs to go this route. Expenditure of up to Rs.5 lakhs on raising money through the SME Exchange after successfully raising equity as per the approved scheme by the SME Exchange within the program’s operative period.
- Capital Investing Subsidy
Capital Investment Subsidy is available at 25% on eligible loan amounts up to INR 35 lakhs. If the qualified fixed capital investment exceeds Rs. 10 crores, the unit will also be eligible for an extra capital subsidy of up to Rs. 10 lakhs.
- Rehabilitation of Failing Businesses
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MSME sick industrial firms that meet the RBI parameters for sick enterprise registration will be eligible for the MSME commissioner rate. The application would be scrutinized by the MSME commissioner based on the balance sheets.
Sick enterprise registration will be awarded after the applications have been reviewed. The cost of obtaining a diagnostic report from an expert/expert agency would be reimbursed at 50% of drafting a draft rehabilitation scheme as assistance, up to a maximum of Rs. 1 lakh to the sick firm.
Gujarat must also focus on fundamentals such as creating skilled people, enhancing personnel quality, adopting environmentally friendly technologies, and focusing on research and innovative industries as it seeks to prosper.