On the upswing

West Bengal sees phenomenal industrial growth as its government concentrates on thrust areas and appropriate policies.

The West Bengal

WEST BENGAL has emerged as one of the fastest-growing States in India and is the third largest economy in the country. So its growing reputation as a preferred investment destination should come as no surprise. The State has registered a high growth in real State domestic product (SDP) over the past eight years and is one of the top-ranking States of the country in terms of growth in per capita income. Despite being one of the most populous States in the country and the State with the highest population density, West Bengal achieved a growth in per capita income of 5.72 per cent in 2004-05, well above the national growth rate of per capita income in the same year, which was 5.2 per cent.

In the period between 1991 and 2004, West Bengals share of foreign direct investment (FDI) was $1,789.3 million. However, between 2004 and 2006 alone, the State attracted FDI worth $119 million, spread over 178 new industrial units that are being set up now. The States exports also grew from $816.1 million in 1995-96 to $3,769.5 million in 2004-05. In fact, with respect to the volume of export, it has been found that West Bengal ranks seventh amongst all the States.

According to different human development index indicators such as literacy rate and life expectancy at birth, the State has performed impressively. In the National Census 2001, West Bengals literacy rate was estimated to be over 69 per cent as against the national average of 65 per cent.

The sheer volume of the States market is its primary attraction. With a population of around eight crore, according to the 2001 Census, and with steady economic growth in terms of the net State domestic product (NSDP) and per capita income, West Bengal has more people with greater disposable income than many other States. West Bengal is, in fact, the third largest State in terms of savings, with the commercial banks accounting for almost Rs.855 billion. Besides, West Bengal is ideally located, with a vast hinterland, comprising Bihar, Jharkhand, Orissa, Sikkim and the north-eastern States, that increases the market size by about another 180 million consumers.

West Bengal is also one of the most urbanised States in the country, with an urban population, according to the 2001 Census, of 22.5 million persons, 60 per cent of whom are below 30 years of age. This, in the context of rising incomes and the general boom in urban renewal and economic activity, has resulted in an increasing demand for quality goods and services. Kolkata, the State capital, alone accounts for a consumer profile of around 10 million, and major towns such as Siliguri, Durgapur, Asansol and Malda are also on an upswing.

South City, a

It is not just the urban market that is undergoing a paradigm shift; it is happening in the rural sector too. With the enormous potential that exists in agriculture and farm products and food processing and agro-based industries, the State government is looking into investment proposals of considerable value from corporates for the procurement and large-scale marketing of agro products. This is expected to facilitate an increase in rural purchasing power and consumption profile.

With six agro-climatic zones, West Bengal offers an extensive variety of environments for the development of temperate, sub-tropical and tropical agricultural and horticultural produce. Agriculture contributes 30 per cent of the SDP and employs 57 per cent of the workforce. In fact, the State accounts for 30 per cent of Indias potato production, 27 per cent of its pineapple production, 12 per cent of its banana production and 16 per cent of its rice production.

The State ranks number one in the country in meat production (including poultry) and is one of the largest producers of fish, satisfying nearly 80 per cent of the countrys carp seed demand. West Bengal also accounts for around 10 per cent of Indias edible oil production and is the second largest tea-growing State in the country, contributing around 21 per cent of the total production in the country.

A study conducted by the Government of India estimates that the investment potential in the States food processing industry is Rs.154.52 billion over the next 10 years if the processing level is increased from the existing 2 per cent to 10 per cent in the same period. West Bengal has certain intrinsic strengths that give it an advantage in the field of food processing: vast agro raw material resources, six agro-climatic zones, an abundant supply of water from the many rivers across the State, fertile alluvial soil, low-cost and skilled labour, self-sufficiency in power, a large domestic market, and easy access to markets in the Asia-Pacific region, Bangladesh, Nepal and Myanmar.

In a recent conference on industries, Chief Minister Buddhadeb Bhattacharjee emphasised the need for a modern market mechanism in the agricultural sector in the State. Even though agricultural production is increasing, there is no proper method of preservation. As a result 10 to 20 per cent of the vegetable produce perishes every year mainly because of the lack of a modern marketing mechanism. We want more companies investing in this sector, and that will also help the economy in rural areas grow, he said.

Floriculture, including ornamental plant production, is an emerging industry in West Bengal. The State produces around 58,000 tonnes of flowers every year and has more than 10,000 acres (1 acre is 0.4 hectares) of land devoted to that purpose. Flowers are mainly grown in Kalimpong, Panskura, Ranaghat, Thakurnagar, Bagnan and in regions around the State. The main flowers produced are tuberose, gladiolus, rose, gerbera, carnation and cockscomb, and the countries that import flowers from West Bengal include the Netherlands and the United Kingdom and West Asian states, mainly Sharjah.

The State government has already set up a floriculture park at Mungpoo in north Bengal, and a mega flower mart is also coming up in Kolkata at a project cost of Rs.250 million. Apart from these, there is a multi-storied flower market at Panskura, and another floriculture park is being developed at Jagulia in Nadia district. The State government recently received a $33-million proposal for setting up an open-air floriculture park on 200 acres of land at Rajarhat in Kolkata.

Haldia Petrochemicals Ltd.

Apart from being one of the main priorities of the State governments industrial drive, the iron and steel sector is one of the oldest industries in the State. The establishment of the Bengal Iron Works at Kulti in Bardhaman district in 1870 ushered in the era of iron and steel in the State. The growth of the industry in the State is largely related to the proximity of raw materials, skilled manpower, port facilities and the vast market for iron and steel products.

In the period 1991-2004, as many as 243 new iron and steel units were set up, involving a total investment of $1,856.8 million. In fact, between 2002 and 2004 alone, 108 iron and steel projects, with a total investment of $414.3 million, were implemented. According to the State government, the largest investment in 2007 also came in the steel sector. JSW Steel of the Sajjan Jindal Group is setting up the 10 million-tonne-capacity integrated steel plant the largest of its kind in eastern India at Salboni, near Kharagpur, at an estimated cumulative investment of Rs.35,000 crore. The modernisation of the Indian Iron and Steel Company (IISCO), following its merger with Steel Authority of India Ltd. (SAIL) in 2005, will be complete by 2009, and the company is expected to produce 2.5 million tonnes of crude steel per annum. Seven more steel projects are under way in the State.

However, the State government is aware that West Bengal does not have enough downstream industry for the iron and steel sector; therefore, those who invest here will have to depend mainly on export. To remedy this and at the same time facilitate growth in the sector, the State government has initiated a number of policies for all-round growth. It is encouraging the use of steel in the construction of bridges, crash barriers, flyovers, buildings, and so on; promoting strategic alliances with buy-back arrangements and dedicated export production through 100 per cent export-oriented units; encouraging the use and development of indigenous iron and steel industries by giving them preference in procurement; and setting up foundry and iron and steel parks in the State.

Some of the existing major players in this sector are the Durgapur Steel Plant and Alloy Steels Plant of SAIL; Electrosteel Casting Ltd., the largest producer of spun iron pipes in the subcontinent and the fifth largest in the world; Gontermann-Peipers (India) Ltd., the second largest producer and largest exporter in India of iron- and steel-based rolls; and Vesuvius India Ltd., which manufactures specialised refractories for the steel industry at its 3,000-tonne unit in West Bengal.

Another thrust area of the State government is the automobile and auto components industry. The State government recently got a feather in its cap when Tata Motors set up its Small Car factory at Singur in Hooghly district, from where the Rs.1 lakh car, Nano, will roll out. This very important project is expected to change the industrial face of not just Hooghly district but the whole of West Bengal. In addition, Telcon, a subsidiary of Tata Motors, is setting up an equipment manufacturing unit in Kharagpur. Other major companies, such as Ashok Leyland and Ural from Russia, have also shown an interest in setting up manufacturing units in the State.

Hindustan Motors Ltd., one of the first automobile manufacturers in the State, has a recent collaboration with Japans Mitsubishi Motors Corp. to bring out a wide range of cars and also manufacture other products related to the automobile industry.

According to a McKinsey Report, India is expected to produce $40 billion worth of auto components by the year 2014-15. West Bengal has been quick to tap into this huge potential and has geared up with appropriate plans and policies to boost this sector. Hindustan Motors Ltd. has plans to invest Rs.850 million in the manufacture of automobile forgings, stampings and castings. A special economic zone (SEZ) for auto components is also scheduled to come up in Kharagpur, and Jetro, a division of the Ministry of Economy, Trade and Industry, Government of Japan, has expressed an interest in setting up auto component manufacturing units in the State.

At SAILs Durgapur

The service sector has emerged as the largest contributor to the States gross domestic product. Its share in the SDP increased from 42.79 per cent in 1993-94 to 57.15 per cent in 2004-05. In fact, West Bengal is one of the leaders among all the States as far as growth in the service sector is concerned, and the major contributor in the States service sector are information technology (IT) and information technology-enabled services (ITeS).

According to the National Association of Software Services Companies (NASSCOM), the IT industry in India grew by 32 per cent in 2005-06, registering a revenue of $22 billion.

The State governments aggressive marketing and the series of initiatives it has undertaken have put West Bengal on the global map of IT expansion. With over 32,000 IT professionals working in the more than 233 companies operating in the State, the IT sector in West Bengal has grown at a compounded average growth rate (CAGR) of 88 per cent between 1996-97 and 2002-03. Between 2001 and 2005, the sector witnessed 70 per cent growth as against the national average of 37 per cent. It is the State governments ambition to place the State among the top three IT destinations in the country by 2010, contributing 15 per cent to the countrys IT revenue.

Almost all the major IT companies, such as IBM, Tata Consultancy Services, Wipro, Cognizant Technology Solutions, PwC, Skytech and HCL, have set up offices in West Bengal. The State government has been busy setting up IT Parks, and the IT Park at Bantalla has received SEZ status. The State government is also in the process of acquiring over 300 acres of land, which may house the States third IT hub, after the Salt Lake Electronics Complex and New Town in Rajarhat. Apart from Kolkata, major towns in the State such as Durgapur, Haldia and Siliguri, are also emerging as IT destinations.

With more money in a greater number of hands, the retail industry in West Bengal is beginning to boom. The countrys $8 billion retail market has grown at a CAGR of 35 per cent, and West Bengal has played a major role in this. Investments in the retail sector are flowing into the State, and this is reflected in the number of shopping malls coming up in urban areas, particularly Kolkata. Indian retail giants such as Pantaloons and Westside are already enjoying a thriving business in the State. Growing urbanisation coupled with brand consciousness, the increasing per capita income of the State, and the huge market in nearby eastern and north-eastern India have contributed to this retail boom.

In fact, lifestyles in West Bengal, Kolkata in particular, have undergone a paradigm shift in the past few years. Global fast food chains and cafes such as KFC, McDonalds, Subway and Barista have set up outlets in the city as there is a lot more dining out even among the middle classes, especially young working couples.

According to official reports, the housing stock in the country is around 20 million units, of which about two million are in West Bengal. With the urban population in the State pegged at around 27.8 per cent and expected to increase to 40 per cent in the next 10 years, the real estate sector is booming in West Bengal.

A lot of players in this sector have already set up their housing complexes in different parts of the State. One of the first among them is Bengal Ambuja with its Udayan Condoville, which was set up in the 1990s. The Sureka Group has also emerged as a major player and is the co-promoter of South City, a Rs.10-billion multi-use project in the heart of Kolkata. Spread over 31 acres, with a built-up area of 4 million sq ft, South City is the one of the most prestigious projects being developed in the city.

The development of the new town at Rajarhat in Kolkata has also opened up new opportunities in this sector. The township development area has been divided into three action areas of 660 ha, 1,050 ha and 1,365 ha respectively. Sureka Groups flagship project, Park Chambers Ltd., has also entered into a joint venture alliance with the West Bengal Housing Board and kicked off a two-hectare housing project at Rajarhat, at a project cost of Rs.750 million. The State government prefers joint venture projects with private companies in areas such as housing.

The DLF group is also setting up a township of 4,900 acres, in Dankuni. This project is possibly the largest of its kind in the State. The largest FDI in a township project in the country is also in West Bengal the Indonesia-based Salim Groups Calcutta West International City.

Japanese sweet peas

West Bengal accounts for around 4 per cent of Indias petroleum products and 13 per cent of polymer production. The growth in the petrochemical sector has been quite impressive, in terms of both investment volume and the number of units set up, primarily owing to upstream and downstream industry linkages to the oil refining and petrochemical units set up in the State.

Apart from Haldia Petrochemicals Ltd. (HPL), Indias second largest integrated petrochemical complex, there are major international players such as Mitsubishi Chemical Corporation (MCC) and South Asian Petrochem Ltd. MCC is Japans largest chemical firm and one of the worlds top 10 chemical companies. It has set up a purified terephthalic acid (PTA) plant at Haldia in Purbo (East) Midnapore district at a project cost of $355 million. The plant, which already has a capacity of 425,000 tonnes per annum, is also undergoing an expansion programme at a cost of $370 million that is expected to increase its capacity by 800,000 tonnes per annum. In fact, the total number of HPL downstream industries set up in the period from January 1998 to December 2006 was 816, of which 737 are in West Bengal.

Of the units set up in the State, 708 are in the small-scale category, 103 are medium-scale units and five are large-scale units. Realising the potential of this sector, the State government has undertaken a number of policy measures, with the following thrust areas:

Setting up a petroleum, chemicals and petrochemicals investment region (PC&PIR) in the State to promote investment on a global scale; encouraging public sector companies and nationalised banks to enter the capital market to raise resources and offer new investment avenues; inviting private sector investment to accelerate growth; and inviting foreign technology investments in the industry along with foreign equity participation. The State government has also decided to allow foreign companies to set up 100 per cent owned subsidiaries in plastic processing and other related sectors.

On a recent visit to Mumbai, in his efforts to woo investors, State Commerce and Industries Minister Nirupam Sen met Mukesh Ambani, chairman of Reliance Industries, and representatives of the Hinduja Group to discuss investment possibilities in the PC&PIR. According to reports, the status of gas supply from the Krishna-Godavari basin by Reliance Gas following the companys signing of a memorandum of understanding (MoU) with the West Bengal Industrial Development Corporation (WBIDC) was also discussed.

West Bengal accounts for almost 25 per cent of Indias leather exports. There are more than 530 leather goods manufacturing industries in the State, and from August 1991 to December 2005, as many as 24 FDI approvals were obtained, involving an investment of $56 million. The State government has also set up a state-of-the-art integrated leather complex, spread over 1,100 acres, on the eastern fringe of Kolkata. Two of the leading players in this sector are Bata India Ltd. and the Khadim Group.

In its industrialisation efforts, the State government has laid emphasis both on building new and strengthening existing infrastructure. West Bengal has more than 92,000 kilometres of total road length and its road density is 1.04 km per sq km considerably higher than the national average of 0.75 km per sq km. With the vehicle population growing at over 11 per cent per annum, the State government has taken up an ambitious infrastructure renewal and expansion programme. Already the infamous traffic snarls of Kolkata are becoming less common.

The State has two modern ports, in Kolkata and Haldia. Together, they handled 49.8 million tonnes of cargo between April 2006 and February 2007 as against 37.8 million tonnes the previous year. Both ports are undergoing modernisation.

A proposal for setting up a deep sea port has also been taken up with the Government of India. According to Nirupam Sen, the State government has approached the committee set up by the Centre for the project to skip the process of appointing consultants and directly invite bids from investors and developers. In addition, a new 3,000-acre port-cum-SEZ is coming up at Kulpi in South 24 Parganas district.