MSMEs in Gujarat – An Overview Towards the State’s MSME Sector

August 28, 2023
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Gujarat is renowned for its vibrant culture, entrepreneurial spirit and strong work ethic. The state is a powerhouse within India’s economy, boasting a GDP that contributes 8.36% to the nation’s total. The Gujarat Budget 2023-24 presented by the Finance Minister of Gujarat, Mr. Kanubhai Desai, projected that the Gross State Domestic Product (GSDP) of Gujarat is poised to experience a 15.5% growth to Rs 25,62,975 crore in the current fiscal 2022-2023. Since 2011-12, the Indian economy has experienced an impressive average annual growth rate of 12.56%.

This demonstrate the state’s ability to compete in today’s globalized economy and to continue to provide India with its invaluable contributions. According to the state’s Principal Secretary of Economic Affairs, Smt. Mona Khandhar IAS, the Gujarat government had set an ambitious goal to more than double its Gross State Domestic Product (GSDP) to Rs 42 lakh crore, and further to Rs 83 lakh crore within 10 years.

Gujarat is a leader in India’s business and economic development. It is the only state in the country to have an operational International Financial Service Centre (IFSC) and has attracted numerous multinational corporations to set up operations in the state. One of the most attractive tourist destinations in the country, Gujarat has some beautiful beaches, wildlife sanctuaries, forts and temples.

The state is a major hub of industries, including textiles, pharmaceuticals, chemicals, automobiles and many more. It is also a major hub for diamond cutting and polishing, and home to the world’s largest diamond cutting and polishing centre. The state has also a strong infrastructure base, with the state government investing heavily in roads, ports, airports, and power plants. It is connected to the rest of India by a network of highways, railways, and ports, making it easily accessible to other parts of the country.

Gujarat has become an attractive investment destination for global investors as it offers a wealth of opportunities in the form of its strong infrastructure, skilled talent pool, and robust fiscal policies. Gujarat is well-positioned to become a hub of activity in the areas of manufacturing, financial services, and technology, and is committed to providing a conducive and enabling environment for businesses to operate, create wealth, and employ people. With the right investments and policies, Gujarat can become a major player in the global economy and a leader in economic development.

As the state embarks on a new era of growth, its governing institutions are tasked with creating and implementing policies that promote strategic development. These policies should focus on identifying and fostering lucrative markets, providing incentives and support to Micro, Small and Medium Enterprises (MSMEs), encouraging entrepreneurship, and promoting sustainable manufacturing processes and the Information Technology (IT) and Information Technology Enabled Services (ITES) industry. Through these efforts, the state can ensure that progress is sustainable and that businesses are better equipped to tackle the challenges of the modern world.

Overview of the MSMEs in Gujarat

The MSME sector has been rightfully recognised worldwide for its potential to drive equitable economic growth and development. MSMEs in Gujarat have taken on a central role in the local economy, providing employment to around 8 lakh people. Economic opportunities in fields ranging from engineering, textiles, chemicals, plastics, food processing, ceramics, and pharmaceuticals. By contributing to the development of backward and rural areas, MSMEs in Gujarat are helping to reduce regional imbalances and facilitate a more even distribution of national wealth and income.

MSMEs in Gujarat plays a crucial role in the state development and is a major contributor to the socio-economic growth of India. According to the data provided by the Union government in the ongoing session of the parliament, Gujarat is the fourth largest state in terms of MSMEs, after Maharashtra, Tamil Nadu, and Uttar Pradesh.

There are around 11.26 lakh registered MSMEs in Gujarat, accounting for 7.5% of the total 1.48 crore MSMEs registered nationally. This indicates the state’s strong entrepreneurial spirit and has helped to create a thriving business environment in Gujarat. The state is fast becoming a major Multi-Product MSME cluster, providing immense economic opportunities to the people of Gujarat.

MSMEs in Gujarat Serving 7 Major Industries

MSMEs in Gujarat is leading in terms of industrial activity, boasting a robust presence in a range of sectors, such as chemicals, dairy, pharmaceuticals, cement, ceramics, gems and jewellery, textiles and engineering. There are over 800 large industries and 453,339 MSMEs in Gujarat, making it one of the most significant economic contributors in the country. With its vast resources, Gujarat has carved a strong niche in the Indian industry and continues to be a driving force in developing the economy. A few major industries served by MSMEs in Gujarat are:

Automobiles:

Gujarat has emerged as a car manufacturing hub over the years with numerous manufacturers establishing shops in various parts of the state. According to the Union Ministry of Road Transport and Highways (MoRTH), car sales hit top gear in Gujarat in the financial 2022-23 financial year. It reached a record 3.81 lakh units sold. Passenger vehicle sales grew by 39% from 2.74 lakh units sold in 2021.22. 

Sanand is a vibrant city located in the Ahmedabad district of Gujarat, earning the moniker of “the automobile hub of Gujarat”. Home to several renowned automobile giants, Sanand has become a highly sought-after entrepreneurial destination in India. With a booming automobile industry, the city has seen a surge of investments from established and emerging players, transforming it into a major economic hub in the region.

Pharmaceuticals:

Gujarat has been a hub for pharmaceutical manufacturing and exports for many years, providing employment to over 52,000 individuals across its 3,300 pharmaceutical manufacturing units. According to the Industrial Extension Bureau (iNDEXTb), Gujarat accounts for one-third of India’s pharma market with 130 USFDA-approved units and 628 WHO GMP manufacturing units.

In addition to this, Gujarat’s pharmaceutical sector is also notable for its innovation and has expanded its business horizons to include the production of generics, Research and Development (R&D), Contract Research and Manufacturing Organizations (CRAMS), bulk drug productions, and New Chemical Entities (NCE). This has enabled Gujarat’s pharmaceutical companies to adopt efficient and effective business models, positioning them well to take advantage of the promising opportunities that lie ahead.

Dr. Hemant G Koshia, the commissioner of the Food and Drug Control Administration (FDCA), stated that there are numerous small businesses developed novel drug delivery systems. Currently the state has around 3,533 drug manufacturing units. Seeing the potential of the region, registrations of pharma companies have been steadily increasing each year. According to a report from Times of India, the last three year saw several pharma manufacturers set up in Gujarat. The state has issued a total of 747 manufacturing licenses from April 2020-2022, and many of these companies have already established plants. 

This influx of investment is expected to bring in around Rs 7,500 crore to the state, which will further bolster the pharmaceutical sector’s growth. This increase in pharma companies is predicted to scale up pharma sales volume to around 40% of the country’s total pharmaceutical business, showcasing Gujarat’s remarkable appeal in the sector. Gujarat’s pharmaceutical manufacturing industry was instrumental in driving a 30-35% increase in India’s pharma sector turnover and a 28% rise in India’s pharma exports during 2018-19. The export of drug formulations from Gujarat increased to US$ 2,824.55 million in FY22, making it one of the most important states in India for pharmaceutical production.

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Tourism:

MSMEs in Gujarat engaged in tourism industry has been steadily growing and making a substantial contribution to the state’s economy. Gujarat is the tenth most popular state in the country for tourists with annual footfall of 18.9 million tourists. Located in western India, the state offers a range of stunning landscapes, from the white sands of the Great Rann of Kutch to the misty hills of Saputara.

In addition, Gujarat is steeped in history and culture, making it a popular destination for tourists to explore and enjoy. It is also the one and only place to view pure Asiatic lions in the world. Other top most sought after destinations in Gujarat are ir National Park, Somnath Temple, Statue of Unity, etc.

As the tourism industry continues to grow in Gujarat, it has become an increasingly vital contributor to the state’s economy. According to Statista, the tourism sector’s contribution to the GDP of Gujarat was estimated to be 10.2% in 2022, up from 8.2% in 2021. To further spur the industry’s growth, the government has implemented various measures to attract more tourists, create jobs and stimulate the economy.

These initiatives have proven effective, as evidenced by the significant increase in the number of foreign tourists visiting Gujarat, which grew from 76 in 2021 to 389 in 2022, according to a report from Gujarat Headline. These figures demonstrate the potential of the Gujarat tourism sector, and further initiatives to promote it are likely to bring even greater rewards.

Textiles:

With its rich cultural heritage, Gujarat has been able to successfully maintain and develop one of India’s most prolific textile industries, which is estimated to account for over 3% of the country’s GDP. Gujarat is renowned for its commitment to preserving its history and culture. It is also the largest cotton producer in India, with Amreli district taking the lead. The MSMEs in Gujarat in textile industry is a major source of employment for the state, with approximately 90 lakh people employed in the sector. Of these, around 45-50 lakh are women, with 80% of them working in the garment sector.

According to Dr Chandan Chatterjee, the director of the Centre for Entrepreneurship Development, Gujarat, there are an estimated 10,000 women actively engaged in stitching garments in and around Ahmedabad. This remarkable workforce is the cornerstone of MSMEs in Gujarat’s success in the textile industry.

MSMEs in Gujarat constitute a major chunk of the textile industry in the state. The sector has experienced significant growth in the past few years, and the number of MSMEs in Gujarat has increased significantly. These MSMEs in Gujarat are engaged in the manufacturing of a variety of products ranging from cotton, man-made fibre, synthetic fabric, woven fabric, etc.

According to a report from iNDEXTb, Gujarat accounted for 37% of cotton production and 60% of cotton exports in 2022. Gujarat is also known as the ‘Denim Capital of India’ as the state is the largest manufacturer and exporter of denim in the country and the third largest in the world. The state contributes 65 to 70% to India’s denim production. 

Moreover, the state is responsible for 50% of India’s man-made fibre production and is the largest producer of synthetic fabric in the country. There are 4.5 million established spindles and 90% of weaving machinery manufacturers in Gujarat, amounting to 30% of the woven fabric production in the state. Furthermore, there are currently three operational apparel parks in Gujarat.

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Gem and Jewellery

Gujarat is one of the most important states in India when it comes to the Gem and Jewellery industry. The state is home to some of the oldest jewellery houses in India and is known for its intricate and detailed craftsmanship. Gujarat is also known for its brilliant diamonds and precious stones, which are mined in the state itself. The industrial hubs of Surat and Ahmedabad are the main centres of the Gem and Jewellery industry in Gujarat. The state also has several small-scale jewellery units and workshops which are engaged in the production of traditional and modern jewellery. 

A report from Indian Brand Equity Foundation (IBEF) states that, the gems and jewellery industry of India is a major contributor to the country’s Gross Domestic Product, accounting for 7% of India’s total economic output. This sector is responsible for providing employment to more than 5 million of skilled and semi-skilled workers across the country and is estimated to generate 10-12% of India’s total merchandise exports.

Surat, in Gujarat, is a major hub for diamond manufacturing and is known as the diamond cutting and polishing capital of the world. Approximately 90% of the world’s diamonds are cut and polished in Surat, with around half of the 10,000 diamond processing units in Gujarat making use of laser-cutting machines. This has firmly established India as a global leader in diamond manufacturing.

During 2021-22, the gems and jewellery exports played an instrumental role in growing India’s overall exports to US$ 419 billion with a growth of 44% from 2020-21. Exports of gems and jewellery for the period of April 2022 to February 2023 experienced a 5% growth from the previous year, rising from Rs 26,4995 crore to Rs 2,78960 crore, according to a report from Times of India.

Chemicals:

Gujarat is at the forefront of India’s chemical industry, boasting over 11,000 chemical units in operation. Susanta Kumar Purohit, joint secretary of the Department of Chemicals and Petrochemicals, noted that Gujarat accounts for more than half of the major chemicals produced in the country. In 2019, the Indian chemical industry was estimated to be worth USD 178 billion and is projected to grow to USD 304 billion by 2025 at a rate of 9.3%, with an expected investment of Rs 8 lakh crore.

Gujarat is a major hub for the manufacturing fertilizers, pharmaceuticals, dyes, and pigments. There are numerous MSMEs in Gujarat working in this industry. The state is also home to numerous research and development centers and research institutes dedicated to the advancement of chemical technology. The Gujarat government has also implemented several initiatives to promote the development of the chemical industry in the state, such as providing incentives for new investments, improving the infrastructure and providing access to skilled labor.

Agriculture:

Gujarat enjoys an abundance of natural resources, ranging from various types of soil and climates to a plethora of cropping patterns. The agricultural economy of the state is highly productive, with 50% of the total available land is dedicated for agriculture. Gujarat is the largest producer of cotton, cumin, sesame, and groundnuts in India. Grain crops such as wheat, maize, rice, jawar, tur, bajra, and gram are also widely produced in the state. 

Ajay Dalal, a member of the CAI crop committee, reported that Gujarat cotton sowing has seen a remarkable increase from 22 lakh hectares in 2021 to 25 lakh hectares in 2022, which is expected to result in an increase in yield. He believes that Gujarat’s crop production will be much higher this year, with an estimated 93.50 lakh bales, a 17 lakh bale increase from 2021. 

Gujarat is home to 66,02,700 families, of which 40,36,900 are employed in agriculture. This accounts for a staggering 61.10% of households in the state. To gain further insight into the agricultural landscape of Gujarat, Vidyapith Rajendra Khimani, a renowned Agriculture scientist and former Vice-Chancellor of Gujarat, has highlighted the growing trend of cash crop farming in Gujarat, particularly in tribal areas. Traditionally, farmers grew crops for their own consumption, but now many have shifted to market-oriented farming in order to generate greater income. 

Market-oriented farming is a process of decision-making that includes planning, implementation and monitoring the farm as a business. By taking this approach to agriculture, several MSMEs in Gujarat are opening up a range of opportunities for themselves and their families, allowing them to better meet the needs of the market and gain financial stability. Gujarat’s rural economy is also greatly bolstered by animal husbandry and dairying, which are responsible for the state’s booming dairy farming, milk production, and other related activities. It is no surprise, then, that Gujarat is one of India’s most prominent milk processors.

Exports in Gujarat

Gujarat is one of the leading industrial states in India that has been at the forefront of economic development and nation-building. According to another report from the IBEF), Gujarat contributes a quarter of India’s total exports. The industrial economy of the state is dominated by 13 major industry groups, which comprise 82.05% of its factories, 95.85% of its fixed capital investments, 90.09% of its total value of output, and 93.21% of its value addition. In FY 2022-23 (until August 2022), the state recorded total exports of US$65,248.53 million. Moreover, at current prices, there has been a remarkable 13.3% YoY growth in Gujarat’s Gross State Domestic Product (GSDP).

Gujarat also has a number of oil refineries and petrochemical plants that produce a variety of products for the domestic market. The exports of petroleum products saw a significant increase in the state, reaching US$ 36,842.98 million in FY22. Gujarat state not only produces and refines crude oil and natural gas, but also imports petroleum products from other states and countries.

How ‘Aatmanirbhar Gujarat’ Scheme Encourages MSMEs in Gujarat to Fulfil their Entrepreneurial Dream?

The Gujarat Government launched the ‘Aatmanirbhar Gujarat’ scheme, under the leadership of the state’s Chief Minister (CM) Bhupendra Patel. This scheme is aimed at providing assistance and various incentives to industries to propel the manufacturing sector forward. These efforts demonstrate Gujarat’s commitment to Prime Minister Narendra Modi’s call of ‘Aatmanirbhar Bharat’, as the state is a renowned hub for Indian entrepreneurs and industry. 

To support MSMEs in Gujarat, the scheme offers a range of incentives, including a capital subsidy of up to Rs 35 lakh for micro Industries, an interest subsidy of up to Rs 35 lakh per annum for up to 7 years, an Employees’ Provident Fund (EPF) reimbursement for 10 years and additional incentives for women entrepreneurs, young entrepreneurs, startups and differently-abled entrepreneurs. This scheme was launched on 5th October 2022 and will be in effect for 5 years.

Conclusion

Gujarat is a vibrant and progressive state with a thriving economy. Located on India’s western coast, it boasts the longest coastline of any state in the country, spanning 1,600 km. Gujarat shares a border with the states of Rajasthan, Maharashtra and Madhya Pradesh as well as the Union Territories of Daman and Diu and Dadra and Nagar Haveli.

It is also bordered by the Arabian Sea to the west and southwest. With 42 ports, 18 domestic airports, and one international airport, it is easy to see why Gujarat has become a hub of industrial activity. There are 106 product clusters and 60 notified special economic zones (SEZs) that have attracted investments in petrochemicals, chemicals, drugs and pharmaceuticals, minerals, ceramics, dairy, gems and jewellery, textiles, auto and engineering, IT, power and ports.

Gujarat is renowned for its vast production of cotton, cumin, castor, denim, processed diamonds, sponge iron, and wall clocks. Not only that, but the state also has a strong export industry in chemicals, textiles, processed foods, and agricultural and allied products owing to its strategic location. Moreover, Gujarat is quickly becoming a hub of manufacturing activity and has attracted numerous global healthcare companies that are keen to invest.

As a result, the state is rapidly establishing itself as India’s manufacturing capital. Apart from these, the state has also put a considerable emphasis on developing small and medium enterprises through policy initiatives that offer interest subsidies, venture capital assistance and quality certification. This gives many MSMEs in Gujarat the confidence to come forward with new initiatives to empower the economy. 

MSMEs in Gujarat are a key pillar of the state’s economy, providing employment opportunities for both unskilled and skilled workers while contributing significantly to the country’s overall economic growth. The government of Gujarat is committed to improving the standard of living and prosperity among the people in the state by creating a business-friendly environment that encourages the ease of doing business and incentivizes entrepreneurship among young people.

To this end, MSME Gujarat has implemented policies that foster innovation and promote opportunities for start-ups, creating a vibrant and dynamic business atmosphere that has made Gujarat an attractive business destination. 

Every year more MSMEs begin their entrepreneurial journey or formalise their existing firm to get more benefits. Despite all the growth and best inputs small businesses put on the plate, there is a need for increased efforts and tech disruptions to improve capital access, in the sector to bridge the credit gap. To help MSMEs get better capital access, numerous NBFCs like Kinara Capital are offering Collateral-free Business Loans.

Kinara Capital is dedicated to helping entrepreneurs achieve financial inclusion by offering MSME Loans through a multi-channel approach. Whether it’s online or in-person, Kinara makes sure to provide the best support to entrepreneurs throughout the loan application process. 

Small businesses can easily apply for collateral-free business loans online through myKinara digital app and with the help of Kinara’s 133 branches operating in 4500+ pin codes. To make sure its customers get the best outcome, Kinara is continuously expanding its footprint and refining its technologies. If you need any assistance to apply for Kinara’s Business Loans, give a missed call at 080-68264454 to speak to our customer support team for more information.

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