Maharashtra votes 2024: Why is the state losing big projects to Gujarat?

Bhiwandi, about two hours away by road from Mumbai city, has long been known as the power loom hub that came into its own after the textile mills in Mumbai began shuttering down in the early 1980s. Dusty, grimy and ill-equipped with basic infrastructure, Bhiwandi still attracted investments in loom and workers who brought their craftsmanship from near and far, making it India’s largest centre for yarn, according to an independent survey in 2014. The past decade has been a mixed one for Bhiwandi, exemplifying the story of several towns driven by small and medium enterprises.
From the high of nearly 14 lakh looms in 2007-08, whose sounds reverberated through the town, Bhiwandi’s looms shrunk to barely six lakhs by the time demonetisation and the pandemic had ripped through it. They still employ lakhs of loom workers though at pitiable salaries of around ₹20,000 a month. But Bhiwandi saw a boom too. Large tracts of land, especially on its outskirts, were amalgamated and massive godowns constructed to make it a hub of warehouses – gigantic ones that global giants like Amazon and others have been using. Logistics sector followed as did e-commerce set-ups.
Bhiwandi looks a town transformed by the new industries but its old problems – lack of infrastructure, poor connectivity to Mumbai – persist. The warehousing and other industries had more to do with local enterprise of the town’s second-generation loom owners than with government attention and plans. Contrast this with the lavish attention paid to land acquisition along the Delhi-Mumbai Industrial Corridor – Samruddhi Marg – where state governments have been closely facilitating the development of industrial zones with attractive incentives for first-movers or have chased mega projects with a global footprint that make headlines. The medium and small industries somehow survive.
While manufacturing chugs along, with or without government support, the services sector has been on a roll especially in the large cities Mumbai and Pune with little to no infrastructure support – even basic motorable roads – from the government. Its contribution to the state GDP has been 60-62 percent, according to the state budget 2022-23, and there’s no sign that services comprising IT-enabled work, media and entertainment, health and education support systems, trade and port services, financial services, and banking and insurance will slow down. Comparatively, in 2020-2021, manufacturing and agriculture contributed 24 percent and 14-16 percent respectively. Of the state’s total GDP (2023-2024) of around ₹38.79 lakh crore, Mumbai region alone contributes around 20 percent. This, in US dollar terms, is around $130 which projected to be $300 by 2030 to meet the target of $5 trillion economy in India.
There is, however, a disturbing chasm between such aspirations and reality. Whether Maharashtra – and within it cities like Mumbai, Thane, Pune, Nashik, Nagpur – will continue to attract investment or not depends on the state government’s approach and action. Like the Vibrant Gujarat summit popularised by Narendra Modi as chief minister of the state, Maharashtra has had Magnetic Maharashtra but it has been a modest success with little clarity on how many MOUs have fructified.
So far, Maharashtra has ridden on its old reputation as the preferred address for Foreign Direct Investment and location of industries and services. The state, especially the Mumbai-Pune-Nashik-Thane belt, was seen as the natural home of capital investment. However, it would be foolhardy to sit on past laurels and expect that the pre-eminence will not be challenged by other states and cities. Gujarat, Tamil Nadu, and Karnataka are at its heels.
Instead of competing hard, the Eknath Shinde-led government allowed, within four months of taking oath in 2022, four major projects to slip out of the state. Coincidentally, all preferred Gujarat. These include the Tata Airbus manufacturing plant and Vedanta-Foxconn plant besides two others, totalling a staggering ₹1.80 lakh crore investment and lakhs of jobs. Therefore, the state’s identification of “thrust sectors” such as electric vehicle manufacturing, AI-driven industries, integrated data centre parks, agri and food processing units, has been met with scepticism.
Without a plan and aggressive canvassing, even Mumbai’s status as the commercial and financial capital of India may come under a shadow. Already, the finance sector has shown a preference, natural or politically nudged, towards the Gujarat International Finance Tec-City, or GIFT City, near Ahmedabad with eight of the 10 biggest Indian asset managers by assets having relocated their business there or set up new funds in GIFT City, according to a recent Reuters report. With the GIFT City assiduously promoted by the Modi-led union government as a gateway for global capital and financial services, and Mumbai’s status as a diamond trading centre challenged by the 800-hectare Surat’s Diamond Research and Mercantile City, Mumbai needs to pull up its socks. The city still has nearly 59,500 individuals with net worth of each exceeding $1 million $1 million, making it one of the most affluent cities in the world, but this does not guarantee investment.
Maharashtra’s share of India’s invested capital was 14.5 percent in 2013-14 which fell to 12 percent five years later. The Economic Survey of Maharashtra 2022-23 showed that the state lagged behind Gujarat and Karnataka by miles with investments worth ₹35,870 crore while Gujarat got ₹98,159 crore by November 2022 and Karnataka saw investment of ₹ 68,931 crore. In 2021, Maharashtra had outclassed both the states by thousands of crores – ₹2.77 lakh crore against less than a lakh crore in Gujarat and around ₹61,000 crore in Karnataka. Maharashtra was led by different governments – Uddhav Thackeray’s and Shinde’s – in 2021 and 2022. However, the state continues to lead in FDI with nearly 28.5 percent of all FDI inflows between April 2000 and September 2022.
Decades after liberalisation, Mumbai-Thane-Pune-Nashik belt are the most vibrant economically; the first three account for 45 percent of the state’s GDP. The state has preferred to put these well-endowed cities on auto-pilot and paid scarce attention to smaller cities, which continues regional and urban imbalances. There could have been at least four new cities – not sterile townships constructed by real estate barons but organic cities around industries and services.
The industry story is not complete without taking note of the decline of trade union and labour movements across the state, especially in cities with major manufacturing units. This has had direct and indirect impact on political discourse, polarisation and, eventually, on electoral outcomes given the countervailing force of the Left-dominated unions has declined. It is also not complete without acknowledging that the MSMEs are the industrial backbone with nearly 4 million units employing 10 million people, Bhiwandi being one of them.
Smruti Koppikar is a Mumbai-based independent journalist, essayist and city chronicler. This article is part of an 8-segment series about issues that are crucial to Maharashtra’s development.