Gujarat has emerged as the biggest manufacturing hub in India with the state’s Gross Value Addition (GVA) in manufacturing growing at 15.9 per cent annually on average between FY’12 and FY’20 to touch Rs 5.11 lakh crore, displacing Maharashtra, according to data released by the RBI. Maharashtra’s annual growth rate during the period was 7.5 per cent, taking the state’s total manufacturing GVA to Rs 4.34 lakh crore in FY’20. Maharashtra continues to lead as the nation’s biggest services hub.
The worst performers among states which were already among the top ten manufacturing states during the period were Rajasthan, Telangana and Andhra Pradesh, with average annual growth rates of 3.8 per cent, 5.5 per cent and 6.9 per cent, respectively during the period. The GVA is essentially GDP minus net product taxes, and reflects growth in supply of goods and services. The other states with the highest manufacturing GVA were Tamil Nadu at Rs 3.43 lakh crore, Karnataka at Rs 2.1 lakh crore and Uttar Pradesh at 1.87 lakh crore. India’s manufacturing GVA grew to Rs 16.9 lakh crore in FY’20 at an average growth rate of 9.7 per cent since FY’12.
Higher investment in Gujarat during the period likely played a key role in allowing the state to outpace the rest of the country in manufacturing growth.
Gujarat witnessed the highest level of capital investment in terms of gross fixed capital formation (GFCF) – a measure of investments – between FY’12 and FY’19 at a total of Rs 5.85 lakh crore ahead of Maharashtra which saw investment of Rs 4.07 lakh crore during the period and Andhra Pradesh which witnessed a cumulative GFCF of Rs 1.49 lakh crore.
A report by KPMG noted that key reforms by Gujarat, including the introduction of a single window for business clearances, easing of labour norms as well as smoother administration of incentive schemes, contributed to boosting ease of doing business in the state and making it one of the country’s most attractive destinations for Foreign Direct Investment.
Maharashtra, however, retained its spot as the leading provider of services in the country with the state’s services GVA growing at 12.6 per cent per annum hitting Rs 15.1 lakh crore in FY’20. Karnataka posted the fastest growth in services GVA at 15.1 per cent per annum during the period and achieved the second highest services GVA in the country at Rs 9.72 lakh crore in FY’20.
Telangana was the second fastest growing service economy in the country with an annual services GVA growth of 14.8 per cent leading the state to leapfrog Gujarat and Kerala to become the seventh largest services economy in the country.
Tamil Nadu, Uttar Pradesh and West Bengal were the third, fourth and fifth largest service economies in India in FY’20.