Gujarat Beats Maharashtra, Becomes India’s #1 Manufacturing Hub: Find Out How This Happened?

Maharashtra has been replaced by Gujarat as the largest manufacturing hub in the country, as the latter’s Gross Value Addition (GVA) in manufacturing has grown by 15.9% annually on an average, in a period of 8 years until FY20, now standing at Rs 5.11 lakh crore, compared to a 7.5% rise recorded in Maharashtra’s manufacturing GVA.

The Reserve Bank of India has released data which entails the annual growth rate of different states for varying parameters, like manufacturing and services.

MH Ranks #2 After Gujarat in Manufacturing

According to RBI’s data, Maharashtra’s manufacturing Gross Value Addition (GVA) has grown 7.5% annually between FY12 and FY20, taking the total to Rs 4.34 lakh crore in FY20, compared to Gujarat’s figure in the same period to Rs 5.11 lakh crore.

Other states including Tamil Nadu, Karnataka, and Uttar Pradesh, too were among the list of states with the stellar manufacturing GVA growth at Rs 3.43 lakh crore, Rs 2.1 lakh crore, and Rs 1.87 lakh crore respectively.

For this 8-year period, the country’s manufacturing GVA, as a whole, grew at an average rate of 9.7% to Rs 16.9 lakh crore. 

However, despite being shifted to the second position, Maharashtra continues to lead as the nation’s biggest services hub.

Among the worst performing states in the top 10 list, were Rajasthan, Telangana and Andhra Pradesh, growing with annual rates of 3.8%, 5.5%, and 6.9% respectively.

What is GVA?

Gross Value Addition is an economic productivity metric, which measures the contribution of a corporate subsidiary, company, or municipality to an economy, producer, sector, or region. 

Mathematically, it is GDP minus net product taxes and reflects growth in supply of goods and services.

What Led to Gujarat’s Position Spur?

During the period in focus, Gujarat witnessed the highest level of capital investment in terms of gross fixed capital formation (GFCF), which is a measure of investments, meaning that an increase in investment in the state is a major contributor to its rise as the manufacturing hub of the country.

From FY12 to FY19, the state’s GFCF stood at Rs 5.85 lakh crore, compared to Rs 4.07 lakh for Maharashtra.

According to a KPMG report, factors like 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 most attractive destinations for FDI played contributed to Gujarat’s manufacturing GVA growth.