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There are several factors that affect evolution of an industry in a region. Some of the major factors are:
The policy that a state government adopts towards a sector directly affects its attractiveness for further investment. For example, the State Government has given many concessions for the establishment of industries. This has prompted many industry players to establish their manufacturing facilities in the state.
Availability of natural resources: Certain industries like agro-based industries have a high dependence on the availability of natural resources. The availability of high quality limestone spurred the growth of the cement industry in the state.
Capability: Availability of good quality manpower is essential for industries to flourish. High literacy rates and good quality workforce are added assets for the state.
Based on an assessment of the above factors, some of the industries with potential for investment and growth in the state are illustrated below:
This is a qualitative assessment to highlight relative attractiveness of
different sectors.
A case by case analysis is necessary before investment is made.
Source: KPMG analysis
Key industries
Agro-basedAgriculture is the prime occupation of the people of Himachal Pradesh. Agriculture provides direct employment to about 65 % of the total workers. The climate, rainfall, availability of water, manpower are some of the most important factors for the huge growth in the agriculture sector. The area under fruits increased to 191,668 hectares during 2005-06. Apple is the most important fruit grown in Himachal Pradesh. It constitutes about 46 % of the total area under fruit crops and about 76 per cent of the total fruit production. Other important fruits include nuts, citrus fruits, dry fruits, mangoes and other sub-tropical fruits.
Source: www.indiastat.com
TourismTourism is one of the most important sectors in the state. The major
attractions include tribal areas, pilgrim centres, mountaineering and winter
sports.
The state has more than 2,000 temples attracting thousands of devotees from
all over the country.
Source: www.indiastat.com
The state ranks second in total tourism projects sanctioned during 2001-2004
in the country. The state ranks fifth in domestic tourist visits. It enjoyed a
14 per cent growth in tourist visits against the national average of 6 per cent
in 2001.
Source: www.indiastat.com
Mineral-Based
Minerals constitute a fundamental component of the state’s economic base. The state has considerable mineral resources including rock salt, limestone, gypsum, silica-sand and baryte. The high availability of quality limestone, a key raw material has made the cement industry flourish. Many domestic companies and MNCs have established their manufacturing facilities in the state.
The cement plants of ACC and Ambuja Cements have a total capacity of over 4 million tonnes with plans of future expansion. Jai Prakash Associates plans to set up a unit with an investment of USD 1 10 million. Besides these, there are many other mineral-based units like stone crushing, calcium carbonate units, hydrated lime units etc.
PharmaceuticalsPharmaceutical units set up in the state enjoy an income tax holiday for five years till 2007 and a concessional rate of income tax for the next five years. The cost of production is also considerably lower. It is becoming a hub for pharmaceuticals manufacturing, with over 300 pharmaceutical firms.
With a proactive policy of the Government, the state has managed to attract significant investment in the recent past. The investment, particularly from the pharmaceuticals sector has been impressive, clearly vindicating the special incentives policy pursued by the Government.
Ranbaxy, Torrent, Indoco Pharma, Nectar Life Sciences, Indo-Swift Pharma, Dr Reddy's Laboratories and Cipla are some of the pharmaceutical companies that have manufacturing facilities in the state. UniChem plans to invest over USD 8.7 million in its third formulation manufacturing facility. Indoco plans a formulation facility and Pulse Pharma plans its second plant for therapeutic nutrition in Baddi. Torrent, Zydus, and Cadila are also planning to set up formulation facilities in Baddi.
TextilesTextile industry in Himachal Pradesh is mainly focusing its attention on spinning yarns.
Companies such as Vardhman are also operating in in weaving and dyeing. The growth rate in the textile industry has grown at 12.78 % CAGR during 2002-2005. The handloom and carpet weaving industry have also developed as small-scale in the state. Some of the key players operating in the state are Birla Textile Mills, Winsome, Vardhman and Malwa Cotton.
Exports
Export contributed to a larger section of the growth of economy in the state of Himachal Pradesh. In 2004-05, the total exports from the registered industries was recorded to be at USD 409 million in the state. The state is a large exporter of textiles, with a strong traditional industry base, which contributes around 65 % to its total exports. The exports to be ranked is chemicals followed by machinery. Another major source of foreign exchange earnings for Himachal Pradesh is export of apples. The Agriculture Produce Export Development Authority has approved in principle to set up an agri-export zone for apples in Himachal Pradesh to help provide apple growers gain easier access to the international market, enabling them to get remunerative returns on a sustainable basis.
Source: CMIE Prowess Database; size of the circle is indicative
of the size of the exports Machinery
Investment*
The aggressive policy pursued by the State Government to attract investment has paid off. Several MNCs from various sectors have set up their facilities in the state. Spice Communications, India and TCL Mobiles, China have initiated the process of setting up a manufacturing facility for mobile handsets in the state. Besides catering to the domestic market the facility would also export to the Middle East and South African countries.
Source: Projects Today
The state enjoyed a good investment climate in the recent past. Many projects in the power sector are in the pipeline, constituting about 99 per cent of the total proposed projects in the state.
Factors influencing investment climate in Himachal Pradesh:
- Availability and ease of use of factor inputs such as land and labour;
- Availability of adequate physical and social infrastructure, such as power, telecom, urban infrastructure, water supply, hospitals, and educational institutions;
- Governance and regulatory framework in terms of rules and regulations governing entry, operation, and exit of firms, stability in regulation, integrity of public services, law and order and investment facilitation;
- Provision of incentives and access to credit.
MG Rover, UK has signed a joint venture to set up a manufacturing facility at
Baddi with an investment of US$ 45 million and production capacity of 24,000
units. Compact International plans to shift its cosmetic products manufacturing
facility from Noida to Baddi. FMCG majors such as Johnson and Johnson and
Hindustan Lever as well as other corporate majors like Titan are also in the
process of setting up manufacturing facilities in the state.
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