India: Supporting Rajasthan’s Productive Clusters in the Delhi–Mumbai Industrial Corridor

Industry and trade / Industry and trade sector development

The revival of manufacturing is a key priority of the Government of India, as reflected in the recent Make in India initiative portraying the sector as the engine of long-term growth. Indian manufacturing has long stagnated at low levels, accounting for around 17.2% of gross domestic product (GDP) in FY2013 and 12.6% of employment in 2011/12. Government of India aims to transform the sector by increasing its GDP share to 25% and creating 100 million jobs by 2022.

Rajasthan is one of India's lagging states, with a per capita income of about $1,200 in FY2013, below the national average of $1,500. Similarly, the performance of manufacturing sector in the state has been weaker than at the country with a GDP share of around 10% in FY2013 and an annual growth rate of less than 2% since FY2012, below the national average of 6.2%. The sector employs 9% of Rajasthan's workforce, far below the national average of 12.6%. With a large number of young people entering the labor force every year and a low skills base, job creation has become a top priority of the Government of Rajasthan (the government).

The Make in India initiative and the associated Delhi Mumbai Industrial Corridor (DMIC) present major development opportunities for Rajasthan, especially with regard to job creation. The DMIC is India's most ambitious infrastructure program aimed at developing new industrial cities as smart cities. This is intended to expand India's manufacturing and services base and develop the corridor as a "Global Manufacturing and Trading Hub". The DMIC will significantly boost planned urbanization in the country, with manufacturing as the key driver.

Rajasthan is a major DMIC partner as 60% of its area falls within the project influence area and 39% of the dedicated freight corridor passes through the state. Rajasthan's prospects for industrial development are also good due to its proximity to the National Capital Region; abundance of land; and substantial resources of minerals, oil, and gas.

To supplement the envisioned infrastructure development, the government has implemented several initiatives since 2013 to improve the business environment and attract much-needed private sector investment in the manufacturing and services sectors. Consequently, Rajasthan was ranked sixth in a recent ease of doing business ranking of Indian states released by the Department of Industrial Policy and Promotion in September 2015. However, the government is aware that there is more to be done. Last-mile connectivity problems continue to reduce the impact of reforms. Also, it is crucial to continue strengthening of the regulatory environment and simplifying business processes, especially given increased interstate competition for investments.

Rajasthan can improve its domestic and international competitiveness by focusing on both existing and potential productive industry clusters. A productive industry cluster is a group of firms closely linked by common product markets, labor pools, similar technologies, supply chains, infrastructure, technical colleges, and/or other economic ties. This cluster concept goes beyond the traditional concept of a cluster as a horizontal network of firms operating in the same end-product market within the same industry group. Such a productive cluster development approach is important as the firms and organizations involved in clusters can synergize and leverage economic advantages from shared access to information and knowledge networks, supply and distribution chains, markets and marketing intelligence, competencies, infrastructure, low transaction and communication cost, and resources in a specific locality, thus leading to overall improved competitiveness and productivity of industry and state at large.

1. Two capacity development workshop on cluster development strategy for Executing Agency and Business Membership organization took place between September-December 2016.

2. Two capacity development workshops for sectors on Textiles and Agriculture respectively, took place in June 2017

3. A land pooling workshop was organized in August 2017.

4. Two workshops on skills development in the Aviation sector and final findings of the TA to be organized in the month of November and December 2017.

Cluster development plan for accelerated industrial development in Rajasthan completed

Capacity building on the design, development, and management of productive clusters and economic corridors implemented

1. Inception Report submitted in August 2016 mapping out the methodology of cluster identification, infrastructural gap analysis and regulatory and institutional assessments.

2. First Interim report with sector assessments, value chain analysis and identified clusters was submitted in November 2016

3. Second Interim report on Infrastructure Gap analysis was submitted in July 2017.

4. Third Interim report on Institutional Assessment was submitted in September 2017.

5. Approach Paper for Productive Cluster Development in Rajasthan was submitted in January 2018.

6. Additional infrastructural gap analysis report on Transport, Energy and Urban sector was submitted in August 2018.