In August 2020, the State government of Gujarat announced the New Gujarat Industrial Policy (GIP) 2020. The policy is designed to strengthen Gujarat's manufacturing ecosystem as well as provide a thrust to the 'up and coming' sectors of India's dynamic business ecosystem. The policy objectives include employment generation, new generation manufacturing, the advancement of thrust sectors, technology adoption, support to Micro, Small and Medium Enterprises (MSMEs), and balanced development of industry and infrastructure.
The previous policy, which was widely regarded as a success, was applicable from 2015 to 2019, was extended until the launch of GIP 2020. Over the last five years, Gujarat ranks first in the 'number of Industrial Entrepreneurs Memorandum' (Intent to Invest), contributing to ~51% of the national list. The new policy is expected to provide businesses a quantum of ~INR 40,000 crores (USD 5.3 billion1 ) as incentives over the next five years. The policy also provides 'relocation incentives' to attract a host of multinationals looking to shift their manufacturing bases from China. As summarized by the Chief Minister of Gujarat, the policy lays down a foundation to develop Gujarat as a key pillar in 'Strengthening the Aatma-Nirbhar (self reliant) spirit of India'.
Classifications defined in the New Policy
The new policy provides a broad range of incentives to promote manufacturing setups in Gujarat. It classifies enterprises into four categories, and the eligibility for the types and quantum of incentives is based on the type of manufacturing unit, the location of investment, and the nature of the business or enterprise.
Investment upto INR 0.5bn (~USD 6.67mn) and turnover upto INR 2.5bn (~USD 33.33mn)
Investment between INR 0.5bn (~USD 6.67mn) to INR 10bn (~USD 0.13bn)
Investment between INR INR 10bn (~USD 0.13bn) to INR 40bn (~USD 0.53bn)
Ultra Mega Projects
Investment above INR 40bn (~USD 0.53bn)
Marking the location of investment as a deciding factor is important to ensure sustainable growth and balanced development within the state, which is divided into three territory categories of 'Talukas', with varying incentive eligibility levels.
Incentives and Subsidies
The initiatives and subsidies announced to position Gujarat's enterprises on a global level and enhance competitiveness are briefly tabulated below:
- It is crucial to note that several of these incentives (Infrastructure development, Green practices, etc.) are available regardless of the region of setup or type of industry
- The State took a significant step by de-linking incentives from State GST, with capital subsidy linked to the Fixed Capital Investment for setting up manufacturing projects in the State
- The State recognizes that 'Green and Clean manufacturing' has been a responsibility borne by businesses, and has provided incentives for sustainable efforts in the direction
- Following the COVID-19 outbreak, the government realized the need to offer relocation incentives to attract investment from organizations looking to move out of China and other countries
With the decline in the manufacturing sector following the COVID outbreak, the revamped incentives and subsidy offerings by the Government of Gujarat are certainly a positive step towards boosting business and investment. The policy may prove to be a benchmark for other states in the process of renewing their industrial policies, such as Telangana and Tamil Nadu. These business and investment reforms position Gujarat as a leader in strengthening India's position as a manufacturing hub.
Additional note: Gujarat's Thrust Sectors
The focus or 'thrust' sectors have been categorized into two major groups, as distinguished below.
Nine sectors where Gujarat already has a strong manufacturing base and has significant potential for growth and consolidation of global businesses.
- Electric Machinery & Equipment
- Industrial Machinery & Equipment
- Auto & Auto Components
- Technical Textile
- Agro & Food Processing
- Pharmaceuticals & Medical Devices
- Gems & Jewelry
- Chemicals (designated areas)
Six sectors that have a significant potential for technological advancement and can contribute to sustainable economic development, including:
- Industry 4.0 manufacturing
- Electric Vehicles and components
- Waste Management projects
- Green Energy (Solar & Wind Equipment)
- Eco-friendly compostable material (substitute to traditional plastics)
- 100% Export oriented units from any sector
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