Gurugram: Haryana describes itself as one of India’s most industrialised states, and central government data shows it has the third-highest per capita income in India. It is home to the burgeoning industry hub of Gurugram, and the base for several industry giants.
However, the latest Reserve Bank of India (RBI) data shows that the bulk of the investment in the state doesn’t seem to be using funds raised from banks, which is the financing choice in several other industrialised states.
According to a RBI report, released this month as part of a bulletin, Haryana received just one percent of all bank-assisted projects in 2022-23, which places it among the bottom five nationally.
Bank-assisted projects are those started by companies using funds they have borrowed from banks. These are distinct from investments made by companies using other funds, such as debt raised from the bond market, or their own profits.
Bank-assisted or bank-sanctioned projects are a significant metric because they provide a perspective on activity in two key areas of the economy — banking and new project investments by non-government entities.
Haryana’s one percent share in India’s bank-assisted projects in 2022-23 marks a fall from 2021-22, when it attracted two percent of all projects.
The other states in the 2022-23 bottom five are West Bengal (also one percent of bank-assisted projects), Kerala (0.9 percent), Goa (0.8 percent) and Assam (0.7 percent).
At the other end of the line are Uttar Pradesh (16.2 percent), Gujarat (14 percent), Odisha (11.8 percent), Maharashtra (7.9 percent) and Karnataka (7.3 percent), which make up the top 5, together cornering 57 percent of all bank-assisted projects.
Haryana’s ministers, and economists who have studied the state’s economy, however, say that just looking at bank-sanctioned loans for investment might not be the correct metric to judge the state’s attractiveness for private capital.
Companies are investing in the state, they say, with the resultant assumption being that they are raising resources from other sources, such as the bond markets.
Reached for comment, Haryana Deputy Chief Minister Dushyant Chautala — who also holds the industries and commerce portfolio — said the state had attracted many industries in the past years, adding that he didn’t know the basis of the RBI report.
“Megaprojects have been set up by Maruti at Kharkhoda, Flipkart [opened a] warehouse at Manesar, ATL Technology [has started a] battery-making unit at Mewat, and JBM’s bus manufacturing unit [started] at Palwal in Haryana in the past four years,” Chautala told ThePrint.
“Recently, we have given approvals to Ultratech. These are all mega projects. Besides this, Haryana is among the top destinations for micro, small and medium enterprises (MSMEs).”
The Haryana government, he added, was constantly working towards providing better facilities to industry, and setting up industrial townships was one such step taken by the government. “Only recently, we decided to set up an industrial model township [IMT] at Mothuka village of Faridabad… This will attract many new industries in the region,” Chautala said.
N.K. Bishnoi, professor in economics at Guru Jambheshwar University of Science and Technology, Haryana, added, “Haryana is a small state, its population is just two percent of India, but its GDP [gross domestic product] is four percent that of India, which shows its economy is quite robust.”
According to data shared by the state government, Haryana’s gross state domestic product (GSDP) for 2023-24 (at current prices) is projected to be about Rs 11.2 lakh crore, which is a 13 percent growth over 2022-23.
Bishnoi added: “Secondly, the industrial pattern of Haryana is not very capital-intensive (not about power, steel, minerals, metals, aluminum, fertilizer…). Therefore, Haryana can produce much more with less capital. In fact, the problem of Haryana is not the amount of investment it attracts, but increasing concentration of industrial and services activities in the Gurgaon and Faridabad regions and stagnation in other industrial clusters.”
According to him, the state was performing particularly well in the sector of automobiles and automobile parts, engineering goods, readymade garments and footwear, as well as in the services sector, information technology, fintech and healthcare.
Talking about Haryana as an investment destination, some industry insiders told ThePrint that there has been a level of disenchantment of late. The reasons, they said, include land rates, “law-and-order concerns”, and government policies like the law that seeks to reserve 75 percent of private jobs paying below Rs 30,000/month for local youths.
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Factors impacting investment in Haryana
In 2021, the Haryana assembly passed the Haryana State Employment of Local Candidates Act, 2020, which makes it mandatory for all private companies operating in the state to provide 75 percent of jobs with salary below Rs 30,000/month to local candidates from the state. The Act was notified in January last year.
However, the Punjab and Haryana High Court stayed the operation of the Act in February 2022, after it was challenged by industry bodies.
The Supreme Court vacated the stay the same month, but asked the government to refrain from taking any coercive steps till the HC decided the case.
Rakesh Chhabra, president of the Rai Industry Association in the Sonipat district of Haryana, said this law, as well as “surging real estate rates in the state”, serve as “deterrents” for investors in Haryana.
“In the newly-developed industrial model township (IMT) at Kharkhoda in Sonipat, land prices have touched Rs 40,000 per square metre, which means Rs 16 crore per acre. The land rates in Gurugram are Rs 1.5 lakh per square metre, which is Rs 60 crore per acre,” he added. “Mega industries need 50 to 100 acres or even more land to set up their plants. Investing Rs 1,500 crore to Rs 6,000 crore on land alone makes it an option very few can think of going for.”
According to him, land rates are cheaper in Gujarat, and, in Uttar Pradesh, land was available for Rs 7 to 8 crore per acre in places like Meerut — which is close to Delhi as well.
Chhabra also cited the law-and-order situation in the state as an issue.
“Even if other factors like land cost were equal, states with better law and order will attract more industry,” he said.
In the past, he said, Uttar Pradesh was not favoured by investors owing to its “poor law-and-order situation, extortion, and organised crime”.
“However, the law-and-order situation in UP has improved over the past years and the industry feels safe to invest money there,” said Chhabra.
Haryana, he said, had “witnessed three big law-and-order issues” in the recent past — the 2016 Jat agitation for reservation and the violence associated with it, the 2020-21 farmers’ protest that created obstructions on the Delhi-Haryana border for months, and the communal violence that erupted last month in Nuh that singed Gurugram and some other parts of Palwal and Faridabad. These, Chhabra added, had “impacted Haryana’s image adversely as an investors’ destination”.
Talking about the Haryana government law on reserving jobs for local youths, he said it “is a big worry for the industry, because local people are difficult to handle and they normally create a nuisance”.
Chhabra’s concerns were echoed by Subhash Jagga, president of the Bahadurgarh Footwear Manufacturers Association and president of Bahadurgarh Chamber of Commerce and Industry.
“Haryana developed an IMT at Rohtak, but there were no takers for the plots because the industry was not ready to risk its money after the February 2016 violence and rioting during the Jat agitation,” said Jagga.
He added: “The government approached us and we convinced some of our members to buy plots there for expansion-related activities. However, once 150 to 200 plots were sold in auctions at a reserve price of Rs 12,600 per square metre, the government increased the reserve price by 50 percent to Rs 18,800. A reasonable increase of 10 percent is justified but with this hike, the industry is uninterested in putting its money there.”
He also cited the relatively higher labour costs and lack of local labour as factors that discourage industry.
According to industry estimates, the average rate for unskilled labour in Haryana is approximately Rs 10,532 per month, as compared to Rs 10,089 in Uttar Pradesh.
Talking about the job-reservation law, he said it made new investors think twice before investing their money in Haryana.
“Firstly, the local people are not willing to work in factories. Even when they come, they vitiate the work atmosphere by indulging in politics,” alleged Jagga.
Rajiv Chawla, chairman of the Integrated Association of Micro Small & Medium Enterprises of India (IamSMEofIndia), said land cost was among the biggest deterrents, along with the environment-related restrictions in NCR.
“There is nothing wrong with the policies of the government. I have studied the policies of all the states and found the policies of Haryana among the best. [However] Land cost is one of the biggest drawbacks. Ban on gensets due to environmental norms in the NCR is also a big disadvantage for the industry,” said Chawla, who runs an auto components business in Faridabad.
‘Several new projects have come to the state’
Deputy CM Chautala agreed that land rates in Haryana were higher than in some states. However, he refuted the claim that the state’s law-and-order situation was in any way responsible for fewer projects coming to the state.
“Even after the Jat and farmers’ agitations, several new projects have come to the state,” he said.
Chautala added that one couldn’t “evaluate the growth of a state’s economy only by the setting up of bigger projects”.
“Haryana has its own strengths, as it is home to [many] IT sector, BPO [business process outsourcing], automotive and fashion companies. Many new MSME projects have come to Haryana in the past four years,” he said.
(Edited by Poulomi Banerjee)
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