Project Report On A Economically (factors) study on Madhya Pradesh as a investor point of view

Submitted to: PROF. SURTA MEHTA

Submitted by:SHARMIL MEHTA

Investment climate in M.P. The new Madhya Pradesh government is committed to Growth with Employment. To facilitate Growth with Employment the M.P. Govt. has taken bold policy initiatives & has drawn out strategies to ensure desired outcomes from these policy frame works. A brief summary of Industrial development and Investment Scenario in Madhya Pradesh is given below:

MADHYA PRADESH INDUSTRIAL DEVELOPMENT SCENARIO: Earlier days the investments used to follow trade but in the present global scenario trade is followed by pouring investments in opportunity areas. All recent reports from FICCI, World Bank, Mckinsey & others have confirmed that investments in Infrastructure, Manufacturing, Agriculture & Service sectors fuel growth. These reports also suggest that the G.D.P. growth of India can be enhanced by at least 2-3% points if the procedural bureaucratic delays can be avoided. Taking cue from these two focal points the new Madhya Pradesh Government has put forward its vision, & strategies to meet the national objective of attaining 8-10% annual GDP growth on a sustained basis. The Madhya Pradesh Government has now come up with Industrial Promotion Policy, 2004 (being restructured again based on feedbacks from Investors). It is advantageous to set up units in Madhya Pradesh because the land and knowledge workers are available at a very low cost. It is an industrially peaceful state with fewer law & order problems. As per the CMIE report September 2009, Investment proposals worth about Rs. 3, 19,418 crore ($67b approx) are in different stages of consideration in Madhya Pradesh. Never before has the investment climate been so upbeat. To a great extent, the Industrial Policy 2004 is responsible for generating an atmosphere of confidence in industry. This is a new Madhya Pradesh, which truly means "Business". Whether in the field of infrastructure or manufacturing or the service sector, fresh investments are pouring into Madhya Pradesh. On it's part, the Madhya Pradesh Government is making every possible endeavor to market the State, invite investments, and offer incentives and conducive environment to facilitate fresh investments. HIGHLIGHTS OF INDUSTRIAL POLICY 2004-2007 A promotional assistance equivalent to 50-75% of the Commercial Tax & Central Sales Tax deposited in the first year shall be given in the second year. This promotional assistance

shall be given for 3-10 years depending upon the category of the district & the amount of assistance shall not be more than the total investment of the installed unit. v v v v v Special package for mega project. Concession/Exemption of stamp duty. Exemption from Electricity Duty for first 5 years on Captive power generation. Partial reimbursement of expenditure for Quality Certification. Capital Investment Subsidy, Exemption from Entry Tax for 5 years.

v Subsidy to Industry under thrust sector, Exemption from Mandi Tax for Agro Processing Industry.

(1) What are the strengths/advantages of that economy from an investors point of view? Analyze the countrys economy and then state economy if you are working on Indian state.
Ans.

Advantage Madhya Pradesh

Central Location of the State

Being centrally located, companies in the state have access to key consumer markets and major cities such as Delhi (740 km*), Mumbai (780 km*), Kolkata (1,350 km*) and Chennai (1,435 km*). Because of this advantage, a large number of consumer goods companies have manufacturing bases in the state.

Policy Incentive
The state offers wide range of fiscal and policy incentives for businesses under the Industrial Promotion Policy - 2010 & Action Plan. Additionally, the state has policies for the IT, biotechnology, tourism sectors and Special Economic Zones (SEZ).

Agricultural and Forest Resources

Around 31 per cent of the state is under forest cover with abundant natural resources. Favourable soil and climatic conditions have helped the state to be a leading producer of coarse cereals, oilseeds and soybean in the country. The state has attracted a large number of agro-based industries because of its agricultural products.

Mineral Resources
Madhya Pradesh has rich mineral resources and has the largest reserves of diamond and copper in India. Besides, the state has significant reserves of coal, coal-bed methane, manganese and dolomite.

Large Industrial Base

The state is a manufacturing base for a number of large and medium scale industries from diverse sectors such as automobile and auto-components, cement, agro-processing, consumer goods, pharmaceuticals, etc. It also has a large pool of industrial labour.

Potential for Tourism

Because of its forest cover, the state has immense potential for tourism, particularly, wild-life and adventure tourism and eco-tourism. It also has globally renowned locations of historical and religious significance. The state attracts large number of domestic and international tourists.

Cost Advantage for Business Investment in Madhya Pradesh

Land Cost Advantage Man Power Cost Advantage

1 $=INR 45.00

1 $=INR 45.00

Cost to Company for the same executive is cheaper by 30-35% in Madhya Pradesh with greater saving potential for the executive
Quantification of estimated overall " Cost Advantages" for a unit in Madhya Pradesh vis-a vis developed States & Metros. Item Land Cost Advantage Manpower Cost Advantage Logistic Advantage Fiscal Advantage of Industrial Policy Capital Subsidy Advantage Total Savings Capital Savings 10-15% 1-5% 4-7% 15-27% %Annual Revenue Savings 4-7% 5-8% 5-10% 3-5% 2-3% 19-33%

At current prices, the Gross State Domestic Product (GSDP) of Madhya Pradesh for 201011 was US$ 57.0 billion.

Between 2004-05 and 2010-11, the average annual GSDP growth rate was 14.6 per cent.

Madhya Pradesh - Gross domestic product, current prices (INR)

Date Value
2011 2010 2009 2008 2007 2006 2005 259,903.00 226,934.00 196,556.00 161,479.00 144,577.00 124,276.00 112,927.00

Change, %
14.53 % 15.46 % 21.72 % 11.69 % 16.34 % 10.05 % 9.81 %

Gross domestic product, Current

300000 Prices (Rupee in Crores) - Madhya 250000 200000 150000 100000 50000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Pradesh

CAGR increased by 14.56% so is indicate regular growth of state, so is right decision to invest in state also there is all industries in growth stage that why for investor is advantage.

Per capital income of Madhya Pradesh

Per capita income (current rates) 2004-05 15,442 2005-06 16,631 2006-07 19,028 2007-08 20,935 2008-09 25,278 2009-10 28,712 2010-11 32,223 2011-12 37,994 2012-13 (Advance) 43,864

Rich in natural resources Fuel/Mineral/Agri/Bio etc. 31 % of the lands under forest cover with a largely unexploited species of rare, Valuable medicinal-herbal plants . Largest producer of soyabean, pulses, gram, and garlic. Third largest producer of cement in India Over 144 BCM of coal bed methane reserves available Investor friendly and peaceful environment Centre for quality professional education Skilled and technical manpower Natural logistics hub of the country 11 Agro climatic zones Strategic location Low cost of land Tourists delight Vibrant industrial base Non Parochial culture

31%of the State under forest cover with a largely unexploited species of rare, valuable medicinal- herbal plants Over 2,000 kms of roads being developed with Private Partnership (BOT) Over 18,000technicalgraduates and230,000graduates add to workforce each year Over 144BCM of coal bed methane reserves available Over 100agricultural farms within area of over 20,000acres is available on lease to investor Indias1stoperationalGreenfield SEZ at Indore Favorable climatic conditions for cotton and over 40,000power-looms are driving the textile industry Availability of coal and natural gas(G.A.I.L pipeline) along with support from Government to make investment in Thermal Power Plants lucrative Offers diverse tourists destinations catering to various segments of tourism such as religious (Bhojpur ),eco/ adventure (Panchmari), heritage(Sanchi,Khajuraho) tourism etc.

2) What are the weaknesses of that economy from an investors point of view? Ans. Weakness: All area are not developed still. So there is many type of risk available. There literacy rate high after many incident happen. In Madhya Pradesh many area travel and transportation closed because theft chance much more high. So much corruption also there so, may be many time work only done after bride. Transportation service so bad, and govt. also not done nice work that why in MP Poor and inadequate infrastructure. High dependency ratio Prevalence of unemployment and under employment Low rate of capital formation. Poor quality of human capital Absence of proper marketing linkages. Absence of R&D facility. Tourism could not make much headway in the State due to the problems of accessibility. Highly precipitated zone restricting the working season only for five months. The working population of the State is engaged in agriculture. Thus, agriculture is the main stay of the economy of the State
Water Scarcity

(3) Identify the fastest growing / most promising sectors of the economy you are studying.
Ans.
Auto Sector: Auto manufacturing & Auto components units have a sizable presence in Madhya Pradesh. Companies like Bajaj Tempo, Eicher & Hindustan Motors have their units at Pithampur near Indore. It is projected that fresh investments of almost Rs. 1000 crore from the Auto and Auto Components Industries shall come in soon. The Government of India, through the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry, has formulated an Industrial Infrastructure Upgradation Scheme (IIUS), targeted at improving the global competitiveness of functional clusters in the country through the provision of grant funding for the creation of quality infrastructure. The automotive cluster in Pithampur near Indore is one of the identified clusters under the IIUS. Under the IIUS, the Government of India will provide a grant of up to 75% of the total cost of infrastructure creation and upgradation in the identified clusters, subject to a limit of Rs. 50 cr per cluster. The balance investment requirements would be financed by local (cluster) stakeholders, with cluster industry contribution at a minimum level of 15% of the total project cost. An Auto cluster is being developed at Pithampur to make it India's most vibrant hub for the production of Medium/Heavy Commercial vehicles for passengers/cargo.

Likely turnover of OEM in Pithampur area will be Rs. 10,000 crore in the year 2009-2010, and Auto Components industry will have estimated turnover of Rs. 4,500 crore in 20052010.

Auto components: Engine and engine parts Suspension and braking parts Transmission and steering parts Electric start mechanisms Machine tools Engineering service outsourcing Power equipment Electronic components for consumer and industrial applications

Information Technology: Various facilities are available in Madhya Pradesh for starting of Call Centers and IT units. A fully integrated IT Park known as the Crystal IT Park is being built at Indore. It has 32740sq meters(3.5 lakh sq.ft.) built up space. It will be an intelligent building with all modern facilities and management systems etc. A Rs. 100.00 crore ISRO facility has started functioning at Bhopal from April, 2005 this would enable IT related industry to grow around Bhopal. At last; the stage has been set for IT growth in Madhya Pradesh, which now has 107, Engineering Colleges & one National Institute of Information Technology and Management at Gwalior. Government of India has recently sanctioned an Institute of Information Technology & Design at Jabalpur. POWER: Apart from on-going projects on the river Narmada at Punasa and the Onkareshwar Project, several other projects are being flagged off. The Maheshwar Hydro Electric Project shall start its work soon. Madhya Pradesh Govt is setting up a 1000 Mega Watt Thermal Power Plant at Khandwa. We are striving hard to make M.P. a power surplus state by the year 2011. This means that we shall have sufficient power for Agriculture use in next 2-3 years. Power reforms like bifurcation of State Electricity Board into 3 organizations has already taken place and the Electricity Regulatory Commission is in operation. Following are the major power projects coming up in the state. Name Reliance Energy Ltd. Essar Power Ltd. BLA Power Malwa TPS Sanjay Gandhi Birsinghpur- Unit V MW 4000 MW 1000 MW 140 MW 2*500 MW 500 MW

Major Proposed Mega Investments (Infrastructure Sector) Name Reliance Energy Ltd. Essar Power Ltd. Auto Testing Track (NATRIP) BLA Power GAIL TOTAL Rs. Cr. 20,000 8,000 434 300 276 29010 US $ Mn 4,000 1600 86.8 60 55.2 5802

Finally looking all point in M.P. most growing sector is I.T. so for any investor only suggestion his invest in IT sector. And second sector is power because many big player also invest in sector.

POTENTIAL CLUSTERS

INDORE BHOPAL JABALPUR GWALIOR REWA SAGAR

Pharmaceutical, Textile, Food Processing, IT, Auto Components Engineering, Textile, Biotech, Herbal, IT, Food Processing Garment, Mineral, Stone, Forest, Herbal, Food Processing Electronics, IT, FMCG, Engineering, Stone, Food Processing Mineral, Cement, Forest produces Mineral Processing, Stone

4) If you want to invest in those identified sectors, what economic factors would affect your decision? Ans. Invest in M.P. consider this main factors.
Transparency of the country Growth rate Low inflation rates Reasonable exchange rate fluctuations Liberal foreign trade strategies Incentives for investors Favorable international taxation Strategic positioning of the country and having favorable geographic conditions Growth rate of the market Entry opportunities into the market Consumer preferences Structure of market Raw material Labor force Infrastructure Research and Development (R&D) Economic, politic, and social stability Taxation strategies Privatization strategies Investment incentives Costs Lending rate, (%) Inflation, (%) Exchange rate change, (%) Oil Production (bbl / day) Population Railways (km)

5) APPENDIX/BIBLIOGRAPHY
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