BS Round Table - Firm governance key to growth: Saurabh Patel

Policies have focused on promoting manufacturing, says minister, for income and job purposes; notes issues with GST rollout

Political stability, clarity on policies and firmness in decision making have all led to Gujarat’s growth, said Saurabh Patel, minister for energy and petrochemicals in the state government.

Giving the keynote address at the Business Standard Gujarat Round Table Conference, 2013, the minister said, “The important factor in Gujarat’s inclusive growth has been political stability. Two, firmness in decision making and clarity on policies, and then the implementation.”

The theme of the meet was “Gujarat: A story of balanced growth or inclusive growth?”

He said Gujarat’s strength has always been the manufacturing sector; the state has also been able to focus on the agricultural sector. “Take the issue of water conservation in agriculture. We offer around 50 per cent subsidy to farmers who opt for drip irrigation or sprinklers, as it saves water, power and also increases the yield,” Patel explained. The share of the manufacturing sector in Gross State Domestic Product is presently 27 per cent, which the government plans to take up to 32 per cent in the next five years, said Patel.

Importance is given to the sector as students coming out of schools and colleges from rural areas would need employment. “So, certain sectors are being promoted, such as textiles in the rural sector, with an objective to improve the income of the people of the state, improve employability and bringing investment in industry and agriculture,” explained Patel.

Gujarat has managed to achieve a seven per cent growth in agriculture and 11 per cent each in manufacturing and services between 2005-06 and 2011-12. “The last decade has been wonderful for Gujarat,” said Patel. “The earthquake (of early 2001) had ruined the economy, with the revenue deficit, and the plan size getting reduced (in 2002-03) from Rs 6,000 crore to Rs 5,000 crore. With norms in place, coupled with financial stability and a good taxation, the (annual) plan size has gone up to Rs 59,000 crore now (2013-14).”

GST
He also presented the Gujarat government’s perspective on a Goods and Services Tax (GST) regime, “We have never said that we do not want GST.” However, he said, if state revenues were not protected in planning to roll out a GST, it would impact those like Gujarat, focused on the manufacturing sector. “According to the Constitution, states have been given certain sources of revenue; all that would eventually go under GST. The question arises, will the income of the state be protected?” he asked.

For goods that go out of the state, Gujarat gets two per cent revenue, and that adds to around Rs 7,000 crore. “After the GST rollout, this Rs 7,000 crore would not be there; it is a direct loss to the state,” he said.

He reasoned that around 35 per cent of the country’s exports go through Gujarat. The state government is investing close to Rs 20,000-30,000 crore to build infrastructure in the Dholera region. “Who will put money for developing infrastructure in the manufacturing sector, if there is no return?” asked the minister. While Gujarat contributes significantly to the national revenue, it gets only 2.6 per cent share; poorer states get a higher proportion. He also said for an efficient rollout of GST, the information technology infrastructure had to be in place. Else, it cannot be implemented.

The state government was trying to focus on road connectivity, water issues and urban issues. “In the urban sector, housing is a priority. Cost of housing should be affordable, such that people from lower and middle income groups can own houses. In the next five years, we target to provide five million houses, of which 2.2 mn will be in the urban sector and 2.8 mn in the rural sector. Our plan is to convert every kucha house in the rural sector to a pucca house,” the minister stated.