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Construction : Press Release | February 2013 | Source : Construction Update

MP has attracted live investments worth only Rs 6 lakh crore as of December'12: ASSOCHAM

Poor implementation of investments a worry

Bhopal , 5th Feb 2013 : Despite being the second largest state of India, Madhya Pradesh (MP) could attract only about 816 live investment projects worth just about Rs six lakh crore out of the total of over 17,000 such projects worth over Rs 141 lakh crore announced across India, apex industry body ASSOCHAM said today.

"The implementation of investments in MP has been quite poor as about 33 percent of investments are in the announcement stage while about 60 percent of investments are under different stages of implementation and implementation of projects involving 0.7 percent of total investments has been stalled due to various reasons," said Mr Anil Aggarwal, chairman of the Madhya Pradesh Council of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while jointly releasing the chamber's strategy paper titled 'Realising the Growth Potential of Madhya Pradesh,' along with Mr D.S. Rawat, national secretary general at a press conference held here in Bhopal today.

Although, the private sector accounts for about 65 per cent of total investments announced in MP, the state has a share of a paltry four per cent in the total investments announced by both government and private sources across India, highlights the paper prepared by the ASSOCHAM Research Bureau.

Electricity has emerged on top with lion's share of over 53 per cent and has over half of the total live investments attracted by MP. Manufacturing is the second most important sector and has attracted about 20 per cent live investments, followed by services and real estate with a share of over 12 per cent and seven per cent each.

With about 428 projects, MP has attracted over Rs two lakh crore of the total live investments worth over Rs 57 lakh crore announced by all government sources including both central and state governments. Besides, the state has attracted over 370 projects worth over Rs 3.8 lakh crore out of the total over 9,900 projects worth over Rs 83 lakh crore announced by domestic and foreign private sources.

There has been an increase of about six per cent in the value of live investments announced in the state, as MP had attracted about 856 investment projects worth over Rs 5.5 lakh crore as of December 2011 which had increased to over Rs 5.8 lakh crore with 816 investment projects.

The services sector which grew at a CAGR of about 9.5 per cent between 2004-05 and 2011-12 had registered the highest share of over 47 per cent in the gross state domestic product (GSDP) as of 2011-12 followed by industrial sector which grew at a CAGR of about 11 per cent and agriculture and allied activities which grew at a CAGR of over six per cent.

Considering that about 75 per cent of people in MP are directly dependent upon agriculture for their livelihood, the sector has recorded a better performance in MP as compared to that in India as the sector grew at a CAGR of 6.3 per cent thereby contributing about 23.6 per cent of the state GDP between 2005-12 as against about 3.6 per cent CAGR of agriculture contributing about 16 per cent share in GDP in Indian economy.

Manufacturing and construction have emerged as two most significant industrial activities as the manufacturing output increased by over 10 per cent while construction recorded a growth rate of over 12 per cent during the aforesaid period. Besides, trade, hotels and restaurant services with a share of about 12 per cent in the SDP has emerged as the largest activity in the state.

MP contributed about four per cent of India's gross domestic product (GDP), about 6.6 per cent of mining and quarrying, about 6.5 per cent of total agriculture and allied produce, four per cent of industrial produce and over three per cent of services turnover in 2011-12. Besides, MP's contribution to the Indian economy also perked up from 3.8 per cent in 2004-05 to 3.9 per cent in 2011-12.

The state has performed considerably well amid its other regional peers of Gujarat, Rajasthan and Uttar Pradesh (UP) as the gross state domestic product (GSDP) of MP grew at a compounded annual growth rate (CAGR) of about nine per cent between 2004-05 and 2011-12 and the state ranked second only to Gujarat where the GSDP grew at just over 10 per cent CAGR between the said period followed by Rajasthan (about eight per cent) and UP (seven per cent).

"Considering that MP has large quantities of mineral rich resources of coal, diamonds, copper and limestone, the state has been a well established raw material source in India and thus it faces the major challenge of transforming the state into a manufacturing hub," said Mr Rawat.

In its paper, ASSOCHAM has suggested the state to create dynamic institutional capacities to take leverage from its strengths thereby taking the growth process forward. Besides, the apex chamber has also suggested the need to focus on infrastructure development to reduce transaction costs of existing investors thereby making the state lucrative destination for new investments.

Special purpose vehicles with an independent agenda and responsibility must be set up thereby leveraging public resources to access private resources as this will help realizing the growth objectives.

Besides, the private sector must be engaged to create more dry ports at different development hubs as the state of MP requires extensive external infrastructure facilities of air cargo complex, dry ports and others.

ASSOCHAM has also suggested the MP government to develop a sea port on Gujarat coastline in partnership with the business community by providing a complete chain of logistics to the traders on a preferential basis to further develop MP as a lucrative business destination for both domestic and foreign investors.

The government should also focus on developing the agriculture sector by infusing more investments in irrigation and spreading awareness amid farmer community about the usage of latest technological advancements. "This can be done by strengthening the agriculture research and extension centres thereby helping the farmers in making use of latest available technologies."

A strategy must be prepared to use public resources exclusively for developing the primary sector while the development of secondary and tertiary sectors must be entrusted to the private sector and the state should restrict itself to the role of a regulator.

ASSOCHAM has suggested the state government to prepare urgently a strategy for development of agro-processing industry with farming, processing, packaging and distribution as its key parts. More so as the state is centrally located and can cater to the key national consumer markets.

Despite having vast natural resources of limestone, coal, soya, cotton, bauxite, iron ore, silica and others, MP has not been able to exploit its full potential to attract sunrise industries thereby leveraging its spatial and human resource advantages. ASSOCHAM has thus suggested to establish state of the art training centres to enable the state's human resource to suit and work in the dynamic corporate sector.

Considering that long-term finance needs of the small and medium enterprises (SMEs) are not met by risk-averse banks, ASSOCHAM has suggested that state level Development Finance Institutes like the erstwhile state industrial development corporations must be revived to boost the SMEs.

The state should also focus on developing industrial centres of Neemuch, Pitampur, Ratlam, Shahjapur and Devas as the state is one of the beneficiaries of the Delhi-Mumbai Industrial Corridor (DMIC).

Focus should also be made on improving the basic and technical literacy rates, more so the female literacy to leverage from development of services sector consisting of software, information processing, research and development to achieve higher growth and transform MP's image.

There is also a need to upgrade a large number of tourist destinations which have not been able to attract tourists in large numbers.

ASSOCHAM has also offered the state to conduct a detailed study and prepare a growth roadmap thereafter to promote investment climate in the state of MP.

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