On the highway to growth

Published : Mar 11, 2005 00:00 IST

Indian investors and industrialists and foreign companies turn to West Bengal as the pro-active policies of the State government create a conducive atmosphere for growth.

in Kolkata

IT has been a longstanding, even popular, practice to brand West Bengal an industrially backward State. But the State is actually making steady progress up the path of industrial resurgence. According to a Confederation of Indian Industry (Eastern Region) Business Perception Survey, the greatest advantages of having an industrial base in West Bengal are the availability of skilled labour, low attrition cost, relatively low cost of living, a stable political situation, proximity to South-East Asian markets, and a pro-active industry-friendly government. Another survey ranked the State fifth in the country in terms of the potential to attract foreign direct investment (FDI).

Although the recession triggered by the policies of globalisation and liberalisation undertaken at the national level has had its impact on the State, West Bengal, thanks to its inherent strengths, has overcome the difficulties, as is evident in the noticeable increase in industrial investments in the recent years. In 2003, as many as 137 projects in the large and medium sectors, involving an investment of Rs.2,335.19 crores, were implemented. This is a perceptible increase from 113 projects, involving an investment of Rs.2,323.95 crores, implemented in 2002. During 2001-2003, the average annual investment involved in implemented projects in West Bengal stood at Rs.2,285.23 crores.

In 2002-03, West Bengal's state domestic product (SDP) grew by 7.14 per cent at constant 1993-94 prices. (In the same period, the gross domestic product of the country grew by 4.3 per cent.) This rate of growth is particularly impressive because it occurred despite the decline of the SDP in the agricultural sector owing to an unfavourable monsoon that year. In fact, West Bengal registered an SDP growth at constant prices in excess of 7 per cent for most of the 1990s. In the period from 1993-94 to 2001-2002, its average annual growth rate was 7.11 per cent, the highest among comparable States in the country.

Between 1991 and December 2003, the West Bengal government's Department of Commerce and Industries approved 3,562 proposals worth Rs.67,970.91 crores, of which 1,429 proposals worth Rs.14,833.81 crores were approved during 2000-03. From January 1991 to December 2003, as many as 795 projects involving an investment of Rs.24,436.34 crores were implemented.

The iron and steel, Information Technology, petrochemicals, agri-business and food processing sectors registered encouraging growth in recent years. According to the Union Ministry of Industry, West Bengal stood second only to Gujarat in terms of industrial investments in the past five years. This indicates that there is a gradual change in perception regarding West Bengal among Indian investors and industrialists and foreign companies.

A study of the projects implemented in 2003 shows that the maximum investment came in the chemicals and allied sectors, followed by the iron and steel sector and agriculture and allied industries. One of the thrust areas is iron and steel. That the State has made significant progress in this sector is evident from the fact that during 1991-2003, as many as 175 iron and steel units were set up with a capital investment of Rs.7,359.09 crores. These include mini steel and ferro alloy steel plants, and steel casting and sponge iron units. Thirty-three new iron and steel units worth Rs.590.88 crores were set up in 2003. Several mega projects are on the verge of completion and numerous new units are coming up in Bankura, Purulia and Birbhum districts. The product range is diverse - steel ingots, ferro-alloys, sponge iron, billets, forgings, bars and plates.

Several factors account for the increase in investment in the iron and steel sector: a boom in demand, especially within the State, driven by infrastructure growth; the repeal of its freight equalisation policy which helped West Bengal leverage local resources; and the proximity to raw materials and power sources.

West Bengal has for long not had an adequate number of cement-manufactur<147,2,1>ing units. Over 60 per cent of the local demand has been met by factories in neighbouring States. Before 2000, the State had just two cement units - Damodar Slag Limited in Purulia and Birla Corporation in Bardhaman - with a combined capacity of just 1.13 million tonnes. In 2001, two new plants came up, Ambuja Eastern Limited at Howrah and Larsen & Toubro Limited at Bardhaman. Both units have cement-grinding facilities with a capacity of one million tonnes each. Recently, some cement companies evinced interest in setting up more units or expanding their existing capacities. Once these proposals materialise, West Bengal will be self-sufficient in cement.

One of West Bengal's main strengths comes from the Communist Party of India (Marxist)-led Left Front government's emphasis on the improvement of the agrarian sector through comprehensive reform of the land-holding system in rural areas and the promotion of a strong panchayati raj system. Over the past 10 years, thanks to these initiatives, West Bengal has had the highest agricultural growth rate in the country, with an average of around 4.5 per cent. In 2003 it ranked first in the production of vegetables, pineapple, rice and inland fishery items, accounting for 24 per cent, 27 per cent, 18 per cent and 33 per cent respectively of the total national production. With 22 solvent extraction plants producing about 1,805 tonnes of oil a day, the edible oil industry is expanding fast. Major companies such as Acalmar of Singapore and M.P. Glychem invested Rs.115 crores in this sector in 2003.

Another sector with largely untapped growth potential is the preservation and processing of horticultural produce. The large variety of fruits and vegetables available in the State round the year makes multi-product plants viable. Moreover, studies indicate that only 1 per cent of the total produce in the State is processed. Major companies such as Frito Lay, a Pepsico subsidiary for fruit processing, have expressed interest in investing in the sector. Five Agri Export Zones have been identified for processing pineapple, litchi, mango, potato and vegetables.

A RECENT important development on the West Bengal industrial scene was the turnaround of Haldia Petrochemicals Limited (HPL). After a successful debt restructuring exercise, it registered a maiden net profit of Rs.100 crores in fiscal 2003-2004. HPL's turnover increased by 45 per cent to Rs.4,298 crores. Earnings before interest, depreciation and tax went up by 132 per cent to Rs.758 crores, and the plant registered a 109 per cent capacity utilisation as against 80 per cent in the previous fiscal.

HPL offers investment opportunities in polymers and chemicals. Investment opportunities are available in manufacturing plastic processing machinery, dies, moulds and ancillary equipment. Several such industries have come up in the State, producing household plastic items such as buckets, mugs, containers and moulded furniture. Moulded furniture companies such as Nilkamal Industries, Supreme Industries and Uma Plastics have become household names in West Bengal. The government received several proposals from various companies to set up downstream plants based on chemical intermediates such as butadiene, benzene and cyclopentane from HPL.

The leather industry will get a shot in the arm once the Calcutta Leather Complex (CLC) becomes fully operational. The complex will have units to process basic raw materials, produce chemicals, manufacture and service leather machinery, process finished leather, and manufacture leather goods. The State government is planning to declare the CLC an industrial township and to set up an industrial township authority to monitor the municipal and other functions within it. The Government of India recently accorded in-principle approval for setting up a Special Economic Zone on the campus of the CLC. A Special Economic Zone is a duty-free enclave that is considered to be foreign territory for purposes of trade operations, duties and tariffs.

Considering the increasing potential of the biotechnology sector, the State government formulated a State Biotechnology Policy. One of the most important components of the policy is the creation of high-quality infrastructure, such as biotechnology parks, in various parts of the State for biotechnology-based industries.

The Left Front government has formulated a plan to start a Rubber Park at Howrah so that small industries manufacturing rubber goods can be accommodated under one roof. This will prevent them from causing damage to the environment in various localities. Also under consideration is a proposal to set up a foundry park.

THE industrial resurgence in West Bengal need not surprise anybody. It is the logical result of high economic growth, a strong rural economy, greater homogeneity in income distribution and a steady rise in disposable income. A 2002 report of McKinsey and Co. notes that West Bengal has access to 10 per cent of India's total market. In five areas of Kolkata alone, the estimated annual consumer expenditure is Rs.1,500 crores. This points to the fact that a wider distribution of income has increased per capita incomes and given more spending power to the people. Rural Bengal cannot be left out either. Its consumer expenditure is estimated at Rs.13,100 crores in one fiscal.

In the last five years, especially in the last two years, Kolkata has witnessed a boom in organised retailing. Malls catering to middle-income groups coexist with shopping chains selling major brands. This indicates that the consumer market is expanding at every income level.

Rahul Saraf, managing director of Forum, the biggest and most popular shopping complex in the city, said: "The retail market is the barometer of the people's mood. Judging from the huge business being generated in this market, we can say that there is a tremendous feel-good factor and confidence among the people of West Bengal. They no longer consider themselves to be lagging behind Mumbai or New Delhi or Bangalore in any way." This new-found confidence and attitude, Saraf feels, is a reflection of the attitude of the Left Front government in the State. "The Chief Minister [Buddhadeb Bhattacharjee] is largely responsible for restoring the urban people's confidence in the government. The people of West Bengal have faith in their government and believe in the genuineness of their efforts," he said.

The notorious traffic jams in Kolkata have come down drastically over the years. With several flyovers coming up in some of the most congested areas of the city, being stuck in traffic for hours is now a thing of the past. In the last three years, three major flyovers across the busy areas of Gariahat, AJC Bose Road and Park Street have speeded up Kolkata traffic.

Making the State conducive to investment is its strong infrastructural base. It has two airports - the international airport at Kolkata and another at Bagdogra, in North Bengal. The two ports, in Kolkata and in Haldia, together handle about 40 million tonnes of cargo a year. In 2003-04, the total cargo handled was 41.26 million tonnes, with Kolkata and Haldia handling 8.69 and 32.57 million tonnes respectively. The State has one of the most extensive regional railway networks in the country, with over 3,800 km of double track and 10 million tonnes freight capacity. It has 5,069 km of highway and 44,000 km of other roads. Road density in West Bengal is higher than the national average. With the improvement in road and railway links, mobility of entrepreneurs has increased considerably. Moreover, the West Bengal Industrial Development Corporation (WBIDC) has promoted an industry-friendly work culture in the State (see box).

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