Economic Profile in KMA:

Transcription

1 Economic Profile in KMA: Introduction The importance of Economic Profile of a state or of a region in unfolding a vision for preparation of a perspective plan document can hardly be exaggerated. The obvious indicators for prosperity of a state or for that matter, of a country are the wealth of the nation. This wealth generates out of some broad economic sectors including primary, secondary and tertiary. All development programs need to be aimed at generation of income and employment opportunities and raising the standard of living of the residents depending on that economy. The main objective of this chapter is the study of economic profile of Kolkata Metropolitan Area (KMA) so as to be able to make an assessment of the infrastructural need in the different sectors of services within KMA. In the backdrop of the present scenario, one is eager to look at how KMA s economy is going to perform in the next twenty-five years in the light of performance of the state and the adjoining region. It may be revealed that the economy is potentially capable of performing better. The KMA obviously has a history as well as a future. The economic profile will refer to the past and the present performance to project the future economic profile of KMA, especially in broad economic sectors like manufacturing, construction, transport and communication, trades and commerce, real estate, services etc. I -32

2 The base on which one can benchmark the performance analysis are the recent available documents like the Statistical Abstract - both of West Bengal and India, Economic Census, NSSO, CSO, Economic Reviews etc. The economic preponderance of KMA in the non-agricultural economy of the state in terms of States Domestic Product (SDP) can be gauged from Table I below : Table-I State Domestic Product in West Bengal & KMA by major sectors Area/Item Year Primary Secondary Tertiary Total West Bengal KMA KMA's Share in West Bengal (%) Distribution of SDP in KMA by Sector (%) Source: Statistical Abstract, , BAE&S, GoWB I -33

3 Recent Trends in KMA Economy There have been signs of structural changes in the economy of KMA with the share of Primary sector falling and those of Secondary Tertiary sectors increasing. The Tertiary sector witnessed a phenomenal increase of SDP growth of 11.1 percent per annum between and (refer Table-II). This rate of growth was found to be even higher than that (9.5 percent per annum) for West Bengal. The corresponding rate of growth for KMA was 3.8 percent between and Another interesting revealation has been that both the Secondary and Tertiary sectors of KMA had exhibited remarkable growth in SDPs in the period between and , as against the rates of growth during to period. This phenomenon could be explained partly by the process of economic liberalization that had set in the entire country since the early nineteen nineties. Table-II Annual average growth rate of SDP for KMA & West Bengal by major sectors KMA West Bengal Sector Av Annual Growth (%) Av Annual Growth (%) to to to to Primary Secondary Tertiary Total Secondary Sector Manufacturing industries and construction activities constitute the core of secondary sector activities in a metropolitan area. The manufacturing industries within KMA have not only laid the foundation of economic strength of the state but also hold the key to a healthy economic future of the metropolis. The KMA s industrial profile is dominated by basic metal and alloy industries; metal products and parts; machinery and machine tools; rubber and plastic industries; jute textile; cotton textile; and leather and leather products, in terms of accounting for not only the number of registered working factories but also employment. However, the rate of growth in the number of registered working factories in the KMA-districts has fallen from 3.4 percent per annum in to period to 2.1 percent per annum in the years between and , indicating a higher rate of growth of industries outside KMA, vide Table-III. I -34

4 Table-III No. of Registered Factories and Employment: West Bengal & KMA Item Unit Emp Unit Emp Unit Emp KMA-districts West Bengal KMA as % of West Bengal Growth : KMA-Districts West Bengal Source: Statistical Abstract, , BAE&S, GoWB The Annual Survey of Industries data (Refer Table - IV) show that onwards there has been a significant increase in the quantum of Productive Capital 1 base of KMA-districts, registering a growth of about 35.5 percent per annum in the KMA-districts, as against a much lower rate of growth of 19.7 percent per annum for the state as a whole. Interestingly, the average annual growth in Productive Capital base of KMA-districts was far lower at 8.3 percent per annum between and Therefore, investment in manufacturing industries in KMA-districts has shown perceptible increase in recent years. This is also corroborated by the data supplied by Commerce & Industries Department, Government of West Bengal, showing that KMA-districts accounted for an investment of Rs.5591 crores in the large and medium industry projects implemented between 1991 and This constituted 25 percent of total investment of Rs.22,101 crores in West Bengal during the same period (Refer Table-VI). Further, the Net Value Added by factories in KMA-districts showed a substantial increase at about 31.5 percent per annum between and , shooting up from 10.5 percent per annum during and period, vide Table below. The State, however, experienced a much lower rate of growth in Net Value Added during the corresponding periods at 18.5 percent per annum and 7.8 percent per annum respectively. This implies that the value addition in manufacturing industries in KMA-districts in recent years has been significantly higher than the preceding years. Table - IV Growth of Productive Capital and Net Value Added for West Bengal & KMA-districts Area Productive Capital (Rs in thousand) Net Value Added (Rs in thousand) KMA West Bengal Represents summation of Fixed Capital and Working Capital including cash balances. I -35

5 Annual Growth (%) Annual Growth (%) to to to to KMA West Bengal Source: Annual Survey of Industries, CSO, GoI On the contrary, the labour-output ratios have experienced a declining trend during the decade of nineteen nineties in both the state as well as in KMA-districts. It should be interesting to note that the labour-output ratio for KMA-districts recorded a fall from as high as 0.79 in to 0.19 in , vide Table - V. Actually, this could be explained by increasing adoption of capital-intensive or labour-saving technologies in manufacturing processes. Table-V Labour Output Ratios Area Gross Output (Rs. Lacs) Workers/Labour (No.) Labour-Output Ratio KMA-districts West Bengal As far as the recent trend in large and medium industries is concerned, as discernible from the data on the number of units set up in KMA-districts between 1991 and 2002, vide Table VI, and also the attendant investments, it seems that certain types of industries have been attracted more to KMA than other areas in the state. More than 80 percent of units in Drugs & Pharmaceuticals, Electrical & Electronics, Engineering, Leather & Rubber, Metallurgical (without steel), Plastic, Software & Telecom and Textiles (jute, wool, silk, ready garments etc.) industries have been set up in the KMA-districts between 1991 and In terms of investment, however, the trend is not the same in that the KMA-districts have accounted for as high as 94 percent of investments in the state in Service Industries like Hotel, Hospital, Printing, Multi-media, despite the proportion of number of units being less than 80 percent. On the other hand, Plastic industry in the KMA-districts accounted for 27 percent only of the State s investment, in spite of recording as high as 80 percent of total number of units in the state. A Brief Review of Major Manufacturing Industries within KMA It should now be in order to have brief review of the major industries operating in KMA. Stagnation in the major traditional industries in KMA like jute, engineering, cotton and chemicals had been caused by a number of factors including the I -36

6 ownership structure of industries, the national policy of freight equalization for iron and steel, promotion of similar industries in other parts of the country to achieve regional balance etc. However, despite the fact that many of the big houses were making profit, no significant investment had been made by them on growth and development of industries over the years. Jute Textile industry is one of the traditional industries of KMA. KMA accounted for almost all the Jute manufacturing units in the state as well as in the country. The decline of this industry started after it was exposed to stiffest competition from synthetic substitutes developed in the west around The export demand for jute fell sharply, leading to disruption in functioning of the industry as a whole. Sometime later, the indigenous demand for jute products recorded substantial rise so as to more than compensate for the loss in export demand. But, the industry couldn t rise to the occasion because of the very structure of capital engaged in the industry. Table-VI No. of Large & Medium Industry units & Investment therein from 1991 to 2002 Industry West Bengal & KMA-districts Item West Bengal KMAdistricts Share of KMA in West Bengal (%) 1. Cement. Glass, Ceramics & Fly Ash Bricks No. of Unit Investment (Rs. Crore) Chemicals, Petrochemicals Industrial Gases etc. No. of Unit Drugs, Pharmaceuticals and toilet Goods. 4. Electrical and Electronics Investment (Rs. Crore) No. of Unit Investment (Rs. Crore) No. of Unit Investment (Rs. Crore) Engineering No. of Unit Investment (Rs. Crore) Food Products No. of Unit Investment (Rs. Crore) Hotel, Hospital, Service Sector, Multimedia etc. No. of Unit Investment (Rs. Crore) Leather & Rubber No. of Unit Investment (Rs. Crore) Metallurgical Products No. of Unit Investment (Rs. Crore) Paper Wood, Plywood and Board No. of Unit I -37

7 Industry Item West Bengal KMAdistricts Share of KMA in West Bengal (%) Investment (Rs. Crore) Plastic Goods No. of Unit Investment (Rs. Crore) Software & Telecom No. of Unit Investment (Rs. Crore) Steel Ingots, Alloys, Sponge Iron, Steel Products No. of Unit Investment (Rs. Crore) Textile (wool, silk, knitted goods, jute, ready garments, yarn) No. of Unit Investment (Rs. Crore) Miscellaneous No. of Unit Investment (Rs. Crore) Total No. of Unit Investment (Rs. Crore) Source: Annual Report, , Commerce & Industries Department, GoWB Instead of registering increase in production to match with increasing demand, the same had stagnated. The total production of jute goods declined form 1084 thousand tonnes in 1960 to 954 thousand tones in 1970 and then marginally increased only to 1115 thousand tonnes in However, a reckonable increase in the trend of production can be observed thereafter, owing to a variety of measures I -38

8 taken especially with a focus on diversifying the manufactured jute products to cater to changing demands in both domestic and export markets. The total production in 1995 was 1435 thousand tones and has been hovering around 1400 thousand tones since then. The stagnation in jute industries during the decades of nineteen seventies and nineteen eighties could also be noticed in terms of number of units and average daily employment. As per the available data from IJMA, the total number of units declined from as many as 96 in 1960 to 70 in 1971 and further to 51 in However, the number of units began to rise thereafter and there are as many as 59 units now. Interestingly, the average daily employment is found to exhibit a declining trend excepting showing an increase from 198 thousand in 1960 to 239 thousand in 1965 and then gradually declining to 174 thousand in 1995 and further declining to 128 thousand in Thus the trend of increasing production in recent years coupled with declining employment can be partly explained by adoption of modern technology in jute industry. The higher capacity utilization and modernization of jute industry is need of the hour to keep pace with ensuing rising internal and external demand resulting from enforcement of the Jute Packaging Materials Act, 1987, mandating compulsory use of jute in packing of commodities. In recent years diversification of jute industries is also noticed. A number of recent studies have revealed that the jute-diversified industries hold a great promise in the KMA districts. New investments in jute sector are being noticed after many years and a large number of diversified jute product units have already been set up in the state and many more are in the pipeline. The Champdani Industries Limited has been able to develop very fine fibre from jute blended with other fibres for production of high quality light count yarns. Engineering industry such as casting, forging, metallic articles, machinery, generators, transformers, electric motors, ships and vessels and related accessories, railway wagons and coaches and accessories thereof had been among the dominant traditional industries in KMA in terms of contributing substantially to state domestic product and also providing considerable employment. More than 3 lakh persons are employed in this industry in the state. The metal-based foundry industry and a large number of small engineering units in Howrah has been the oldest and heritage industry of India. This industry manufactures a wide range of products and serves the requirement of automobile industries, railways, agriculture, mining, various parts and components of jute, cotton, cement, rolling mills etc. and it is highly labour intensive in nature. This industry has been passing through severe crisis due to a I -39

9 number of reasons, important among them being decentralization of procurement by Indian Railways, shortage of inputs like coal, lack of technological upgradation and diversification and freight equalization policy of the Government of India. Although the number of units is seen to be rising in recent years, the need for modernization of this industry to render itself more competitive cannot be overestimated. West Bengal was the leader in production of both Chemicals and Drugs & Pharmaceuticals. Till the 1950s, drugs & pharmaceuticals industry claimed nearly 70 percent of total pharmaceutical production in India. But it slowly lost its leadership to other states in the western part of the country. Notably, close to cent percent of the drugs & pharmaceuticals units and employment therein were located in KMA. While the national industrial licensing policy was largely responsible for the decline of Chemical and drugs & pharmaceuticals industries in West Bengal, the process of globalization and WTO related agreements have aggravated the situation for the industries in general. Nevertheless, the increasing popularity of herbal drugs provides a great opportunity for drugs & pharmaceuticals industry in the State and also in KMA. The recently established Haldia Petrochemicals Complex a little south of KMA has opened up opportunity for both chemical and drugs & pharmaceuticals industries within KMA. In order to regain its lead role, the chemical and pharmaceutical industries must modernize and upgrade technologies to be globally competitive. HPL Downstream industries The setting up of Haldia Petrochemicals Ltd. in Medinipur district has been one of the gigantic steps towards industrialization in West Bengal. As fallout of the same, a large number of downstream industries are coming up in and around KMA. As many as 483 units in a total of 537 units in the state have been set up in the KMA-districts between 1998 and Further, direct employment to the tune of 10,591 has been generated in the KMA-districts as against 13,171 in the state as a whole. Interestingly, the KMA-districts account for nearly 90 percent of total HPL Downstream units and 80 percent of employment therein in West Bengal. IT and ITES The knowledge based IT and ITES industries have witnessed year on year higher growth in terms of both annual turnover and exports. West Bengal registered a steady growth in the IT sector during recent years dominated by export performance. West Bengal has registered a remarkable 115 percent compound annual growth rate in the IT sector in the period 1996 to The rates of annual growth of exports had been 90 percent, 96 percent, 71 percent, 40 percent and 54 percent during , , , and (upto December 2003) respectively. The declining rates of growth has to be looked at in the context of increasing absolute magnitude of exports rising from Rs.350 crore in to Rs.1200 crore during and further to Rs.1600 crore in The software exports accounted for a bulk of this growth. The state government attaches high priority to growth of IT & ITES industries in the State and had announced in January I -40

10 2001 the Information Technology Policy WEBEL is the facilitator for development of Information Technology (IT) and IT Enabled Services (ITES) in the state, besides being the nodal agency for development of electronic industries. WEBEL has already distributed 177 acres of land for IT and ITES industries in and around sector V at Salt Lake. For setting up of ITES infrastructure, WEBEL has signed a MoU with HIDCO for 200 acres of land at New Township of Rajarhat for development of IT and related industries. The space requirement of built space and consequently the requirement of land for IT and ITES industries are small. Therefore, vertical integration of these industries is possible within an industrial complex. The KMA has an abundant supply of skilled persons to suit these industries and also provides lowest cost of operation, cheapest power, lowest attrition, and lowest cost of living. Sector-V at Salt Lake within KMA is the fastest growing software technology park in the country to-day, registering a compound annual growth rate of 119 percent during Currently, there are 185 IT companies in Sector-V of Salt Lake employing more than 15,000 IT professionals. With virtual saturation of Salt Lake Sector V, a new IT Hub near Eastern Metropolitan Bye Pass, called The Sunrise City, has been conceived by KMDA over an area of 40 acres. Construction Industry constitutes the second major activity in the secondary sector. It is observed from the SDP generated in this sector in KMA-districts between and registered an annual average rate of growth of around 6.3 percent. A major part of the construction activities in KMA is accounted for by real estate and infrastructure development activities. Real estate activities have witnessed a significant jump in recent years within KMA. The year and deserve special mention when this industry experienced a boom with the Construction-SDP showing an annual growth of 7.8 percent and 9.5 percent. I -41

11 The growth of registered Small Scale Industry (SSI) units has been observed to be higher in KMA-districts than in the State during recent years. Upto , total number of registered SSI units in KMA is reported to be 5848 with employment of 32,552. The major small-scale units in KMA are noticed to be metalbased engineering, leather, chemicals and food based industries. Curiously, more than 90 percent of Haldia Downstream Industry units that were set up between 1998 and 2003 in the KMA-districts belonged to SSI category. The problems so far faced by these industries have been inadequate supply of raw materials, absence of application of modern technology and lack of institutional financing facility. The decline in SSI units in Haora district can be attributed to closure and sickness of small-scale engineering units in Haora caused by a variety of factors including absence of technological upgradation. Thus, majority of the small-scale industries need to be encouraged to focus on technological advancement, R & D efforts, quality control, and market development including export possibilities. Tertiary Sector It appears from Table-VII that the SDP growth in tertiary sector in KMA has been remarkable shooting up from 3.8 percent per annum during to period to 11.1 percent in the to period, as against the corresponding. This phenomenon can be partly explained by overpowering entry and expansion of banking, insurance and real estate activity into the economy in the latter period as a fallout of the various reforms carried out in the economy in the wake of economic liberalization. I -42

12 The Banking & Insurance and Transport sub-sectors in KMA-districts have shown considerable increase in SDP Growth in recent years, vide Table below. The simple average annual rate of growth of SDP for Banking & Insurance increases from 15.5 percent between and to 24.1 percent between and and the corresponding figures for Transport & Communications have been 7.9 percent and 10.7 percent. The Real Estate sub-sector has been growing at a fast rate showing an average annual increase of around 12.5 percent between and However, for Trades and Commerce sub-sector, which accounts for a considerable proportion of the tertiary sector SDP, has recorded a slower rate of annual growth of SDP - falling from 10.9 percent between and to 9 percent between and It should be noted that a major share of this sub-sector activity is accounted for by Wholesale Trade. Table-VII Rate of growth of SDP - Tertiary Sector KMA-district Item SDP Trades & Commerce Total Banking & Insurance Real Estate etc Transport etc to to Annualised Growth (%) Trades & Commerce Banking & Insurance Real Estate etc Transport etc Source: Statistical Abstract, ,BAE&S, GoWB Some of the major wholesale markets of West Bengal are located in KMA. The intra-state and inter-state inflow of goods into the metropolitan core of the city of Kolkata in most cases end up in wholesale markets located in the city of Kolkata. These markets deal with about thirty major commodities and the existing transport infrastructure like the National Highways, Railways terminals, Airports and Kolkata Port are being used for movement of these goods. The important among the wholesale markets in Kolkata are Burrabazar (for fruits, onions, sugar, flower, pulses, mustard oil and spices), Sealdah (for eggs, vegetables and paper) Shyambazar (for pulses, timber, coal), Cossipore (for cement), Shobhabazar (for hosiery), Jagannathghat (for flower), Bandhaghat (for cotton and timber). The average daily total number of trucks entering and leaving KMA is about 31,000, as revealed by the Transport Survey carried out by KMDA in The corresponding goods load carried by these trucks per day is about 3100 tonnes. The Kolkata dock system, which consists of Kidderpore dock, Netaji Subhas Dock and Petroleum wharves at Budge Budge, handled a total cargo of million tonnes in the year The total goods traffic handled annually by Eastern Railway increased from 4.55 million tonnes in to 7.04 million tonnes in and the same increased from 1.84 million tonnes in to 2.23 million tonnes in I -43

13 The role of the banking system in KMA is crucial to facilitating economic growth in the different sub-sectors. The large-scale entry into and expansion of banking and insurance sector due to globalization has contributed to substantial growth of tertiary sector activity. The banking sector has witnessed a number of major operational reforms. The nationalized banks now have to compete with private banks through a process of operational restructuring and use of modern methods. There has been a steady growth in banking activities after The number of scheduled commercial bank offices in the KMA districts rose form 1,109 in 1993 to 1,231 in 1996 and further to 1,332 in The deposit mobilized by these banks also registered a steady growth of 7.2 percent per annum between 1993 and 1996 and moving up to 16.3 percent per annum between 1996 and The advances by the scheduled commercial banks has maintained a steady growth of around 11 percent per annum between 1993 and 2001 in the KMA-districts showing vibrancy of the KMA economy. Interestingly, the trends as observed for KMA-districts closely conform to those observed for Urban West Bengal. I -44

14 Financial Profile in KMA Both Revenue Receipt and Revenue Expenditure have registered increase in recent years and the overall revenue accounts indicate a position of revenue surplus for most of the KMA-ULBs. However, this is the position excluding the Kolkata and Howrah Municipal Corporation scenarios. Nevertheless, there is not much room for complacency, as the receivables and payables do not get totally reflected in the present system of municipal accounting. The salaries and wages component in municipal revenue account yet constitutes around two-thirds of total municipal revenue expenditure per annum, despite the declining trend observed during the last few years. (Rs. Lacs) Year Total Revenue Receipt Total Revenue Expenditure Revenue Surplus / Deficit (-) Capital Receipt in the form of capital grants and capital expenditure account for the last five years indicate that the ULB s had been deficit implying that the deficiency in infrastructure compelled the ULBs, to spent more that what they receipt. However, the practice of single entry cash based system of accounting does not always enable proper distinction between capital and revenue heads a summary account of the capital account is presented below : (Rs. Lacs) Year Total Capital Receipt Total Capital Expenditure Capital Surplus / Deficit (-) The ULB-wise details of revenue and capital accounts are furnished in the following Table. I -45