Progressive Maharashtra 2013

Economics Division, CARE Ratings

February 2013

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3

Maharashtra has for long and rightly so, donned the title of being the commercial,

financial, industrial and entertainment capital of the country. The state continues to be

the single largest contributor to the country's economy both in terms of share in the

nation's GDP as well as its contribution to the central tax account. Maharashtra is thus

strategic to the growth of India's economy and in a way has been a barometer of the

state of industry in the country. Any change in the state's economy, positive or negative

has the potential to have a multifold impact on the nation as a whole.

The Maharashtra model has been an established one which has set a template for other

states to follow. The fact that it is broad based is significant as it takes along all the

sectors of the economy. This is manifested in the leading position occupied by the state

in several crops, industry and services which makes it a favorite destination for

employment and investment. This has also acted as a pull fact or for migration as well as

enterprise at both the informal and formal levels. Also given that Mumbai is the

country's financial centre means that Maharashtra has to necessarily be the fulcrum for

the development process of the economy.

However, despite being regarded as a land of limitless opportunities, there are some

issues that need to be addressed with urgency to ensure that the state retains its

undisputed leading position. In particular, the disparity in growth and development

across the regions and districts of the state should be addressed. While few pockets of

the state have seen growth that makes them a force to reckon with in the global arena, a

large number of them can be uplifted to the same level through appropriate policy

action. Herein also lays the potential to fuel the future growth of the state's economy

as focused attention helps not only to bridge the difference in prosperity but also

elevates the overall position of the state in the growth chart. Conducive policies coupled

with timely implementation would be the key to development of these regions. The

state government has already initiated several such steps and one can see some

acceleration in them in the coming years.

Second, given the competition that is building up across states in attracting

investments, we need to have concomitant growth in the infrastructure space. Such

investments require infrastructural support and speedy clearances to make them

viable. This is another area which needs to b e addressed to ensure that investment

continues to flow to this state. The state already holds Mumbai, which is the financial

centre for the entire nation and should be leveraged for this purpose. While it is natural

for investment to seek the best environment for opportunity and returns, Maharashtra

has to gear up to remain the preferred destination. In the face of stiff competition from

the likes of Gujarat, Tamil Nadu, Karnataka in attracting investments, Maharashtra will

necessarily have to provide an environment that gives it the cutting edge. Therefore,

policy focus is the need of the hour especially at a time when the overall economic

conditions in the country are not upbeat. The state government and industry should

come together to explore opportunities in the state so that resources flow in a time

Foreword

D R Dogra

MD & CEO

CARE Ratings

Rashesh Shah

Chairman & CEO

Edelweiss Group

4

bound and sustainable manner. Here, the concept of collaboration has to come in where the two segme nts work

together to take the state along.

Progressive Maharashtra is an excellent endeavour that brings together the doyens of industry, finance, academics and

administration to deliberate on the various issues and challenges confronting Maharashtra and to discuss ways of

arriving at solutions. It serves as a platform for voicing the needs and measures that need to be adopted to stimulate

and ensure sustainable growth in the state. With various governments of the state having historically been progressive

and proactive, ready to adopt viable approaches for the growth and development of the state, such a platform is widely

acknowledged as being most helpful for all the stakeholders.

This publication is a comprehensive overview of the state's economy, its various sectors and the is sues and constraints

faced by them along with probable solutions and suggestions to improve the state's econ omy. We believe that this

publication would help lead to the germination of new ideas for the state's economic growth and we remain

committed to assisting all stakeholders in this endeavour.

Rashesh Shah

Chairman & CEO Edelweiss Group

D R DograMD & CEO

CARE Ratings

5

Executive Summary

Maharashtra is undoubtedly one of the most important states of the country, being the largest state

economy of the nation. The state also enjoys the unique distinction of being the trade nucleus,

entertainment centre, financial focal point, industrial hub and investment destination of the country. It

is also blessed with nature’s bounty i.e. mineral resources, favorable climatic conditions and a diverse

topography. The state also leads in terms of overall infrastructure, has a well established and extensive

connectivity within the country and the rest of the world. It also has a large pool of skilled human

resource. All this has necessarily enabled Maharashtra to be in the forefront of industrial activity and the

service sector of India.

There are three areas that need to be covered extensively in the next stage of growth and development.

The first is reducing the disparity in growth and development across the regions and districts of the

state. Economic activity and investments are seen to be concentrated in certain belts viz. the Mumbai-

Pune-Thane belt over the years, making these regions economically more advanced and while this

region’s absorptive and industrious capacities are believed to have reached saturation points, the other

lesser developed regions are seen to be almost cut out from mainstream economic activity. For

Maharashtra to enhance its economic potential there is thus increased need to disperse the process of

economic development and its benefits across the length and breadth of the state.

Also, infrastructure has to keep pace with growing needs and which will strengthen the functioning,

productivity and efficiency across sectors, industries and establishments of the state. A more flexible

and alert administrative structure would help to incentivize businesses and new investments. This is

necessary considering that Maharashtra is also facing intense competition from proactive neighboring

states, which could pressure on the primacy of the state in the field of economic growth.

Here we present an overview of Maharashtra’s state economy, its various sectors and their prevailing

trend, the issues and challenges faced in these sectors along with a brief look at the government

measures initiated/undertaken and measures that need to be undertaken to boost growth in the

respective areas.

This publication has been divided into 8 broad sections/chapters. To start with we examine the economy

of the state i.e. its size and growth over the years, the sectoral composition and changes in these over

the years and the growth target for the coming future. We also look into the profile of the various

districts of the state in this section – population and their contribution to the state’s GDP.

Section 2 is dedicated to the state’s agriculture sector wherein we evaluate the state’s agricultural

profile, share in state economy along with growth over the years, the issues faced by this sector, the

potential for this sector and the measures required for achieving improved performance. We also have

looked at the agri-business and food processing industry of Maharashtra here – their problems and

government measures to promote the same. Thereafter, in Section 3 we have the Industrial scene in

Maharashtra wherein we look at the current state of the industrial sector here, the investments made in

the sector, the performance of the industries of the state, the state’s industrial policy and the issues,

challenges and solutions to industrial development in the state.

6

Section 4 examines the infrastructure of Maharashtra – the various physical (transportation, power,

irrigation, telecom) and social (education and health) infrastructure, in terms of availability and

shortfalls in these followed by issues pertaining to their development in order to overcome gaps in the

same. Given the growing need for development of infrastructure in the state which entails huge

investments we have also include infrastructure investments requirements and financing options in this

section. Section 5 throws light on the financial health of the state and its fiscal management over the

years. The fiscal deficit is within the FRBM norms set for the states. Also, given the relatively low level of

its debt stock, the pressure of debt-service is rather controlled for the state. Section 6 looks at monetary

environment and landscape of the state, highlighting key differentiating aspects of the state’s monetary

system.

We have identified sectors that have potential to boost the state’s economy in the future in Section 7.

The sectors listed out here include tourism, agri-business, textiles, infrastructure, education, healthcare

and telecom.

Lastly, Mumbai being the epicenter for Maharashtra in all aspects of its economy, we have dedicated a

separate section on the city in Section 8, which lists out its various advantages and challenges and the

various requirements that it has to fulfill for being an International Financial Centre.

7

Index Pg. No.

1. Maharashtra : the dynamic state 9-14

Demographic Structure & Overview of State Economy 9

Way forward : 12th

Plan Target 12

District Profile 12

2. Agriculture 15-26

State’s Agricultural Profile 15

Agriculture in GSDP 17

Agriculture and Employment 17

Issues in Agriculture 18

Agri Business 20

Food processing industry 20

Problems faced by agri business 21

Government measures so far 22

What needs to be done to boost agriculture? 24

Future action plan 25

3. Industry Scene in Maharashtra 27-46

Current state of affairs 28

Maharashtra State Industrial Policy 36

MSME Development in Maharashtra 38

Issues Challenges and Solutions to Industrial Development 39

Industrial Prospects – focus areas 43

4. Infrastructure 47-71

Maharashtra Infrastructure 47

Transportation – Roads, Railways, Seaports 49

Power 52

Irrigation 57

Telecom 62

Social Infrastructure – Education and Healthcare 64

Infrastructure Financing 67

5. Maharashtra Fiscal Overview 72-74

6. Monetary Scenario 75-80

7. Sectors with Potential for the future 81-86

8. Mumbai – the locus in Maharashtra 87-91

8

List of Exhibits

Exhibit 1.1 Economic Size and Growth 10

Exhibit 1.2 Sectoral Shift in composition of GSDP 11

Exhibit 1.3 Division wise population distribution 13

Exhibit 1.4 Division wise contribution to GSDP 13

Exhibit 2.1 Share of Agriculture in GSDP 17

Exhibit 2.2 Growth in Agriculture 17

Exhibit 2.3 Share of Workforce in Agriculture 17

Exhibit 2.4 Area under irrigation 18

Exhibit 3.1 Composition of industrial sector 29

Exhibit 3.2 Composition of new industrial investment 33

Exhibit 3.3 Composition of new industrial investment in manufacturing 33

Exhibit 3.4 Operational performance of industries 34

Exhibit 3.5 Regional distribution of MSME 38

Exhibit 4.1 Installed Capacity 53

Exhibit 4.2 Share of installed capacity from different sources 53

Exhibit 4.3 Power requirement & availability 54

Exhibit 4.4 Power supply shortage 54

Exhibit 4.5 Power supply position 55

Exhibit 4.6 Irrigation potential 58

Exhibit 4.7 Irrigation Utilization 59

Exhibit 4.8 Irrigation potential created 60

Exhibit 4.9 State wise tele density 63

Exhibit 6.1 Share of banking and insurance in GSDP 76

Exhibit 6.2 Distribution of offices of commercial banks – various states 77

Exhibit 6.3 State wise share of commercial banks offices 77

Exhibit 6.4 Distribution of offices of commercial banks – Maharashtra 78

Exhibit 6.5 State wise share of rural bank offices 79

Exhibit 6.6 State wise share of semi urban bank offices 79

Exhibit 6.7 State wise share of urban offices 79

Exhibit 6.8 State wise share of metropolitan offices 79

Exhibit 6.9 Share of deposits of commercial banks 80

Exhibit 6.10 Share of credit of commercial banks 80

List of Tables

9

Table 1.1 Sectoral composition of GSDP 11

Table 2.1 Production FY10 16

Table 2.2 Area, production & yield of food grains 16

Table 3.1 District level industrial profile 28

Table 3.2 Industrial growth 29

Table 3.3 Main industries snapshot 31

Table 3.4 New domestic investment 33

Table 3.5 State wise operational profile of industries 35

Table 3.6 MSME clusters 39

Table 3.7 Ease of doing business 42

Table 4.1 Maharashtra infrastructure at glance 48

Table 4.2 Road network in Maharashtra 49

Table 4.3 Rural connectivity 50

Table 4.4 Railways 51

Table 4.5 Electricity tariff 55

Table 4.6 Power loss 56

Table 4.7 Maharashtra – Irrigation at glance 58

Table 4.8 No of projects 59

Table 4.9 State wise no of telecom connections 62

Table 4.10 Details of VPT in leading states 63

Table 4.11 Education – Infrastructure 65

Table 4.12 Health indicators 66

Table 4.13 Sector wise project investment in infrastructure 68

Table 5.1 Government finances 72

Annexure

3.1(a)

District-level industrial profile 92

10

1. Maharashtra: the dynamic state

Maharashtra, often called the “financial and commercial capital of India”, is undoubtedly one of the

most important states of the country. The state is not only large in terms of land area but more crucially

also in terms of its contribution to the country as a whole.

With a gross state domestic product (GSDP) of Rs 805,031 crore as of FY12, Maharashtra is the largest

state economy in the country, accounting for more than 15% of India’s GDP. The state has registered a

robust annualised compound growth rate of nearly 8.0% in the last five years (FY08-12). It is also one of

the better performing states of the country in terms of per capita GSDP (Rs 70,885 as of FY12). The

average for the country is Rs 46,555 that may be broadly reflective of micro-level welfare.

Maharashtra is a front-runner in industrial activity and the service sector space in the country. The state

accounts for 17.7% of the country’s industrial output and 16.2% of its services sector output.

Undoubtedly, Maharashtra is hence, the largest contributor to the central pool of taxes. It accounts for

more than 60% of corporate tax collection in the country, directly contributing to augmenting the

revenue base of the central government as well.

The state additionally, has considerable mineral resources, has suitable geographical and climatic

conditions for development of agriculture, is extensively connected within the country and with the rest

of the world (be it in terms of physical infrastructure of rails, road and air or in terms of

telecommunications) and is backed by large skilled human resource pool ideal for the development of

knowledge-based services industries.

Maharashtra enjoys a unique position of being a trade nucleus, entertainment centre, financial focal

point, industrial hub and investment destination of the country. Despite these advantages, however, the

state is slowly seen to lose its prime slot consequent on weakening internal set-up and competition from

other proactive states of the country. With all the dynamism that lies within the state of Maharashtra,

all the state needs is a revival push to change its economic landscape and through its contribution, of

the country at large.

This publication examines the opportunities that lie ahead of the state of Maharashtra, whilst examining

new approaches and thrust areas that may provide the essential boost for the state to move onto a

higher sustainable growth trajectory.

Demographic Structure

The state of Maharashtra is located on the west coast of the Indian Territory. Spread over an expanse of

about 307,731 square km, Maharashtra is the third largest state in the country (in terms of area),

accounting for more than 9% of India’s total land area.

In terms of population, the state is the second most populated in the country after Uttar Pradesh. Mid-

year population (July 1, 2012) estimates suggest that Maharashtra was home to 115 million persons. The

urban-rural composition of the state is in the 45:55 ratio. The state has registered a birth rate of about

18 persons per 1000; although lower than the national level (of about 22 per 1000), the same remains

high. Literacy rate in the state stands at a high level of 82.9%, well above the all-India level of 74.0%,

11

however considerably less when compared with the state of Kerala that has the highest literacy rate of

99.39% in the country. This characteristic of the population of Maharashtra is backed by a large base of

skilled and industrial labour.

Overview of State Economy

Maharashtra is one of the largest and strongest growing state economies in the country. The state has

clocked an encouraging compound annualised growth of 7.9% over the last 5 years (FY08-FY12), higher

than even the national average of 7.5% during the same period.

Exhibit 1.1 provides a comparative picture of economy size (measured by gross state domestic product

(GSDP)) and growth in some major states of the country and India as a whole.

States such as Gujarat and Tamil

Nadu are relatively smaller in

size, but have grown at much

higher rates of 9.6% and 8.1%

during this period. With a GSDP

of Rs 805,031 crore (Rs 1,448,453

crore in current prices) in FY12,

the state grew by 8.5% during

the year over FY11 (higher than

its CAGR of 7.9% during the

period FY08-12).

Exhibit 1.1: Economic Size and Growth (FY08-12)

*Date till FY11; Source: CMIE

Sectorally speaking, industry and services sector together are the major contributors to GSDP of the

state. Industrial output accounted for 31.0% of GSDP, with industry in the state touching growth of 9.1%

during FY12. The services sector on the other hand, has 61.7% share in Maharashtra’s GSDP, growing at

a rate of 10.1% in FY12. The agricultural sector in the state has however, not recorded extraordinary

performance on similar lines as industry and services. Share of agriculture and allied activities in GSDP,

has consistently been declining over the years, remaining small at 7.4% in FY12. It is not just a

contraction of share in total output, but also considerable fluctuation and indeed contraction in growth

rate of this sector that is a concern for the state, given the dependence of a large segment of its

population on this sector. Growth in primary activities stood at a negative 5.1% in FY12 (over a high base

of 15.6% in the previous year). Looking at the fluctuations in growth in the sector one would hence,

conjecture that productive activity in this sector is heavily influenced by extraneous factors, in this case

the monsoons.

7.47.9 8.1

7.3

9.6

6.3

0

2

4

6

8

10

12

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

(%)

Rs

cro

re

GSDP CAGR

12

Table 1.1: Sectoral Composition of GSDP (Rs crore)

FY08 FY09 FY10 FY11 FY12

Agriculture & allied 63,642 53,808 54,250 62,709 59,501

Share in GSDP (%) 10.7 8.8 8.1 8.5 7.4

Growth rate (%) 13.8 -15.5 0.8 15.6 -5.1

Industry 189,333 187,322 205,980 228,290 249,168

Share in GSDP (%) 31.8 30.7 30.9 30.8 31.0

Growth rate (%) 11.7 -1.1 10.0 10.8 9.1

Services 341,857 369,062 405,894 450,695 496,363

Share in GSDP (%) 57.5 60.5 60.9 60.8 61.7

Growth rate (%) 10.5 8.0 10.0 11.0 10.1

GSDP (constant

prices) 594,832 610,191 666,123 741,694 805,031

Growth rate (%) 11.3 2.6 9.2 11.3 8.5

*Source: CMIE

The shift in sectoral composition of GSDP for Maharashtra becomes more perceptible in Exhibit 1.2.

There has been a clear movement of economic activity away from agriculture and allied activities and

towards industry and the services sector. Share of agriculture in GSDP stood at 10.8% in 2004-05, which

has consistently declined to 7.4% as of 2011-12. Production in the agricultural sector is greatly limited by

low coverage of irrigation and higher dependence on monsoons in the state. Commensurately, share of

industry has increased to 61.7% in 2011-12 (from 59.6% in 2004-05) and share of services has increased

to 31.0% in 2011-12 (from 29.6% in 2004-05).

Exhibit 1.2: Sectoral Shift in Composition of GSDP

*Source: CMIE

10.8%

29.6%

59.6%

2004-05

Agriculture & allied

Industry

Services

7.4%

31.0%

61.7%

2011-12

13

Way Forward: 12th

Plan Targets of Maharashtra

The targets set by the state for the 12th

plan period (2012-17) are largely in line with the existing

direction of growth of the state, but requires considerable effort at consolidating growth in the various

sectors. Overall growth for the state during the 12th

plan period has been set at 10.5%, higher than the

current growth rate of 8.5%. This pace of growth is expected to be supported by considerably higher

growth 4% in the agricultural sector, coupled with 11% growth in industry and services sector each.

The greatest challenge in this regard would be the revival of the agriculture sector. Growth in this

segment contracted in FY12 and indeed continues to be a gamble of monsoons, given that more than

80% of agricultural land in the state is rain-fed. Uncertain, delayed and uneven spread of monsoons is

bound to negatively impact agricultural output. In this regard, the state plans to initiate the “Dryland

Farming Mission”, with additional 100 lakh hectares expected to be brought under the ambit of

protective irrigation in the state. The state may also develop agro-based industries in order to add and

enhance value along the production chain. Existing output may hence be better utilised, thereby

promoting growth in the primary sector of the state.

The state has immense potential to push industrial growth to the target 11.0% during this period. The

said target is hence achievable, however it requires concerted efforts to attract and retain industrial

investments in the state. Provision of adequate infrastructural facilities would prove to be a critical input

to overall industrial growth and development. Increased operations in dedicated industrial

zones/clusters and the Delhi Mumbai Industrial Corridor, thereby greatly enhance prospects for the

state of Maharashtra.

Growth in the services sector is already in double-digits. The state being a major trade hub and financial

centre, a target growth of 11% is easily attainable. Indeed, agricultural and industrial activity is bound to

increase demand for derived services as well, that would boost growth in the tertiary sector of the state.

Along with banking continuing to remain a major service, sectors such as tourism, healthcare and

education are expected to be potential thrust areas.

Maharashtra: District Profile

The state of Maharashtra is administratively divided into 6 divisions covering 35 districts. These 6

divisions are – Konkan (Mumbai, Mumbai Suburban, Thane, Raigad, Ratnagiri and Sindhudurg), Pune

(Pune, Satara, Sangli, Solapur, and Kolhapur), Nashik (Nashik, Dhule, Jalgaon, Ahmednagar, and

Nandurbar), Aurangabad (Aurangabad, Jalna, Latur/Lattalur, Nanded, Osmanabad, Parbhani, Hingoli,

and Beed), Amravati (Amravati, Akola, Washim, Buldhana and Yavatmal) and Nagpur (Nagpur,

Chandrapur, Wardha, Bhandara, Gondia, and Gadchiroli).All the 35 districts have diverse demographic

and economic profiles. Select districts, namely Mumbai, Thane, Pune, Nagpur and Nashik have

historically been centres of concentration and have thus seen higher levels of growth and development.

Here we provide a broad profile of the districts of the state, based on population and economic growth.

14

Population

As per the 2011 census, the state of

Maharashtra registered a population of 112

million, with a compound annualised growth

rate of 1.5% over the previous census of 2001.

The Konkan division is the most populated

region of the state, being home to 25.5% of

the state’s population. The Pune division is the

next populated (20.9%), followed by

Aurangabad division (16.7%), Nashik division

(16.5%), Nagpur division (10.4%) and Amravati

division (10.0%).Going by districts, Thane is the

most populated, accounting for 9.8% of the

state’s population, followed by Pune (8.4%),

Mumbai suburbs (8.3%), Nashik (5.4%) and

Nagpur (4.1%).

Exhibit 1.3: Division-wise population distribution (as of 2011)

*Source: Census 2011

GSDP and Income

The highest contribution, of nearly 41.0%,

towards the state’s GSDP coming from the

Konkan Division (Mumbai City & Suburbs,

Thane, Raigad, Ratnagiri and Sindhudurg).

Within the Konkan division itself, there is

considerable disparity in contribution to

economic output. The Mumbai region alone

(city + suburbs) accounts for about 56.0% of

Konkan Division GDP. The Mumbai region

along with Thane together has a share of

nearly 89.0%.

Exhibit 1.4: Division-wise contribution to Maharashtra’s

GSDP (as of 2011)

*Source: Economic Survey, 2011-12

Konkan

Div

(25.5%)

Nashik Div

(16.5%)

Pune Div

(20.9%)

Aurangab

ad Div

(16.7%)

Amravati

Div

(10.0%)

Nagpur

Div

(10.4%)

Konkan

Div

(40.7%)

Nashik Div

(12.5%)

Pune Div

(22.1%)

Aurangab

ad Div

(9.6%)

Amravati

Div (5.9%)

Nagpur

Div (9.2%)

15

Going by districts, there appears to be more perceptible demarcations in terms of economic growth. The

Mumbai-Thane-Pune belt of the state has historically been the most industrialised and most developed

region of the state. Aggregate gross district domestic product (GDDP) of these three districts together

stood at Rs 427,800 crore in FY11 (constant terms) i.e. 47.7% of Maharashtra’s GSDP. The Nashik and

Nagpur districts are the next most developed/industrialised regions. The five districts put together

account for 57.7% of the state’s output.

Given the population profile and GDDP of the various districts of the state, income disparities are rather

inevitable to notice. The Mumbai region (City + Suburbs) is the richest region of the state, registering a

per capita income of Rs 141,138, followed by Thane (Rs 125,562), Pune (Rs 121,033), Nashik (Rs 54,512)

and Nagpur (Rs 51,336). It may be noted that within these affluent regions as well, the Mumbai-Thane-

Pune belt is considerably better off when compared with the other two regions of Nashik and Nagpur.

The concentration of economic activity and capital investments in the belt over the years has made this

zone, economically more advanced. However, while the developed and affluent Mumbai-Thane-Pune

belt has now reached near saturation point with regard to its absorptive and industrious capacities;

other less developed regions of the state have been rather cut off from concerted mainstream

development efforts. In order for Maharashtra, to revive and enhance its productive potential, there is

increased need to disperse the process of economic development and its benefits across the length and

breadth of the state.