In these times of economic slowdown and confidence crisis, it is difficult to ignore the sheer quantum of investor interest that the recently-held Vibrant Gujarat Global Investment Summit 2009 has elicited. The event saw the signing of around 85,000 memoranda of understanding envisaging investment of a staggering Rs 12 trillion ($250 billion). The investment can potentially provide employment opportunity to 25 lakh persons.
To put this in some perspective, the investment pledged at the event is around 30 per cent of the total investment that is currently taking place all over the country. According to ProjectsToday, India had 27,500+ projects
with a total investment of Rs 38.61 trillion, under various stages of implementation, as of December 31, 2008.
Although one can argue that signing of an MoU is only a token of inclination without any binding whatsoever, Gujarat must get credit for at least galvanising investment of such magnitude. The state has been holding such annual investor summits for the past four years, and this by itself stands for a proactive approach in eliciting investment.
Going by the past performance, around 35 per cent of the investment committed at the preceding three investor summits is now under implementation. Applying the same ratio, Gujarat could stand to get new investment of Rs 4 trillion in the coming years, assuming all other influencing factors remain unchanged. In the period April to September 2008, the most buoyant phase for project investment, India saw fresh investment of Rs 5 trillion.
Gujarat has been doing well in terms of nurturing private sector investment. The recent case of Tata Motors’ seamless relocation of the Nano project from West Bengal to Gujarat is an important case in point. By expediting land-related issues, Gujarat did well to clear a crucial hurdle on which most states are known to stumble. Studies done by ProjectsToday also suggest that Gujarat is amongst the very few states where private sector investment stands much higher than that of the public sector. As of September 2008, private investment accounted for almost two-thirds of the total investment in the west coast state whereas the national share for private sector investment stood at 45 per cent. Some of this could be attributed to the investor summits being held over the past four years.
Gujarat has emerged as an energy hub and the investor summit points to the sustenance of this momentum. Nearly Rs 4 trillion of investment (out of the total Rs 12 trillion) has been in the energy sector and that too with emphasis on renewable energy. As already reported in Projectmonitor, Gujarat is breezing its way on to India’s wind energy map and is likely to be amongst the top three states in terms of wind power capacity by 2012.
Gujarat has traditionally been in the top five investment destinations of India and the state could capitalise on the unprecedented interest in the recent summit, to improve its position. As of December 2008, the total outstanding investment in Gujarat was Rs 2.66 trillion with an all-India share of 6.9 per cent. The fourth-ranking state could also take steps to improve its project implementation ratio—a metric that measures the amount of investment that is under physical execution as a percentage of the total investment. In December 2008, this ratio for Gujarat stood at 41 per cent—comparable to the national average, but lower than the top two states of Maharashtra and Andhra Pradesh.
Gujarat could also do better in terms of retaining investments in these times of turmoil. According to ProjectsToday, over Rs 2 trillion of investments have been put on hold, mainly by private promoters, all over India. This was on the basis of primary information collected during November. Out of this “shelved” investment, Gujarat accounted for 2.9 per cent. This was relatively better than Andhra Pradesh (8.4 per cent) and Orissa (24.9 per cent) but worse than Tamil Nadu (2.3 per cent) and Maharashtra (2 per cent). Gujarat has much scope for improvement here. (All these states are top five with respect to total outstanding investment as of December 31, 2008.)
If taken seriously, Gujarat’s recent investor meet could mean much to the state, not just in terms of overall investment but also in terms of furthering private enterprise and capital. As earlier mentioned, Gujarat is a rare case where private sector promoters dominate the investment landscape. Hence, the state will have to contend with the inherent tendency of some investment intentions fading away. The state needs to deftly match the aggression in soliciting investment with the tenderness to retain them.
Gujarat—which has the world’s largest petroleum refinery complex and the world's smallest-car plant— seems to be on its way to domicile everything else in between.
Source : www.projectsmonitor.com
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