Small is beautiful in Gujarat

Gujarat has forever been the land of brave entrepreneurs and industry friendly policies have led to the proliferation of many successful micro, small and medium enterprises (MSMEs). Fifty-two-year-old Kishore Patel of Ankleshwar based printing and packaging firm Techno Packaging credits his success to the business friendly and technology savvy nature of his state Gujarat. Patel started out from a small godown (warehouse) in 1998 supplying cartons and labeling equipment to local industries in the vicinity. His familiarity with computers and an inherent urge to expand the business matched other similar entrepreneurs around and he quickly graduated to more sophisticated offset colour printing, scanning and visualisers. As businesses grew big feeding on the state′s industry friendly policies, so did Patel.

"If I had been in any other state, perhaps I would not have been this successful or worse may not have succeeded at all," he says. "People in Gujarat are very progressive and do not shy away from embracing change. It helps governance as well. We are early adapters of technology and for a company like ours that is very essential." Another Surat based businessman Vipul R. Bhatt, who runs an international courier and cargo business - New Creation International - concurs with Patel. As traders from the state expanded their horizons and spread out in the world, Bhatt realised the potential for a trusted merchandise delivery business and quickly got into it. Easy access to finance, his networking skills and knowing the importance of every penny helped him in his cause. "Our community understands business. You cannot fool us in accounting," Bhatt says. "When you do business with people with the same mindset it becomes easier. You know you cannot fleece the customer but also are confident you will not be fleeced in the bargain. The government realises that too so they talk our language." Bhatt and Patel are part of a burgeoning tribe of small and micro businesses in Gujarat that have thrived in the state for well over a decade. Between 2005-06 and 2015-16, the number of micro, small and medium enterprises (SMEs) classified as units with investment in plant and machinery up to Rs 25 lakh ($37,000), between Rs 25 lakh and Rs 5 crore and between Rs 5 and 10 crore ($0.75 and 1.5 million) respectively, has shot up more than 90 times from 4,131 units to 376,348 units.

In isolation, these units do not matter much to a state's overall economy but in cumulative terms, the MSME sector depicts the real health of any economy. Nationally there were 4.89 crore MSME units employing 11.14 crore people in 2013-14 contributing 8 per cent to the country's GDP, 45 per cent of its manufacturing output, 40 per cent of exports and is the second-largest employment generator after agriculture. Gujarat has always scored high on this count. In 2014-15, a total of 64,160 “Entrepreneur Memorandum” (EMs) - a key barometer in the sector - were filed in Gujarat. It ranked second behind only Tamil Nadu and accounted for 15 per cent of overall EMs filed across the country. Like the number of MSME units, filing of EMs has also shown an uptrend in the state from 13,185 in 2007-08 to over 36,000 in the first half of 2015-16 alone. The units are also well spread out in the state, sectorally as well as geographically. There are 106 activity clusters in the state - 23 for chemicals, 21 engineering, 18 textile clusters and 16 mineral based among others. As Bhatt and Patel testify, the encouragement by the state government in tangible terms has been a big reason behind this proliferation. The state provides capital investment subsidy of 10 per cent for loan amounts up to Rs 15 lakh ($22,000) in municipal areas and 15 per cent for loan amounts up to Rs 25 lakh ($37,000) in non-municipal areas. At the same time interest subsidy of 5 per cent with maximum amount of Rs 25 lakh per annum for five years in municipal areas and 7 per cent with maximum amount of Rs 30 lakh ($44,000) per annum for five years in non-municipal areas is also provided. Similar assistance for venture capital or fund raising, quality certifications, technology upgradation or patent registration is also given. Further, for small businesses financial help by way of 50 per cent of rent paid up to Rs 50,000 ($750) per annum in municipal areas and Rs 25,000 ($375) per annum in non-municipal areas has been provided. The overall quantum of assistance is widely regarded the best by any state in the country. It does not come as a surprise then to find success stories like Savji Dholakia, a school dropout who started out his diamond polishing business with a mere Rs 3,900 ($60) in his pocket or Chandu Virani who started out selling snacks outside a cinema hall and today owns a potato chips manufacturing firm. Dholakia's Hari Krishna Exports today has presence in 75 countries and employs 9,000 people while Virani's Balaji Wafers is a Rs 4,000 crore ($595mn) brand and an annual turnover of Rs 1,200 crore ($180mn). Dholakia often grabs headlines for his generous Diwali gifts to his employees. This year he handed out 1,260 cars - Datsun Redi GO and Maruti Alto - to his workforce. “Gujarat is without doubt one of the best states for investments,” says state chief secretary J.N. Singh. “When the industry looks for investment there are only four or five states. When it comes to where you will get the overall infrastructure, raw materials, we feel we are strong.” As the lowest common denominator in the business cycle, the small enterprises and businessmen in the state are clearly a happy lot.