Dun & Bradstreet Oriental Bank of Commerce

SME Cluster Series 2016: Vadodara

Published in India by Dun & Bradstreet Information Services India Pvt Ltd.
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Pawan Bindal

Research and Analysis Naina Acharya, Mihir Shah, Rohit Singh, Yogesh Jambhale, Christopher Dsouza,
Aakanksha Sawant, Rohit Pawar, Amol Lad
Sales Head

Jayesh Bahadur

Sales Team

Suhail Aboli, Asha Nair, Tanya Bedi, Apoorwa Tyagi, Nittin Maheshwari, Sunena Jain,
Sapna Mishra, Nehal Khosla, Aloka Chatterjea, Sindhu Ravi, Ajith Alex George,
Girish Menon, Sandeep Parakkal

Operations Team

Nadeem Kazi, Prem Kumar, Ankur Singh, Sumit Sakhrani, Rajesh Gupta, Parth Desai,
Parmeshwar More

Design Team

Mohan Chilvery, Tushar Awate, Aditya Salvi, Sonal Gangnaik, Shilpa Chandolikar

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Dun & Bradstreet Oriental Bank of Commerce SME Cluster Series 2016: Vadodara
ISBN 978-93-82060-94-9

Contents
Executive Summary............................................................................1
Research Methodology.......................................................................3
Overview of MSMEs in India..............................................................5
Vadodara Cluster Overview..............................................................13
Industry Overview
Chemicals................................................................................... 23
Engineering................................................................................. 29
Pharmaceuticals........................................................................... 35
Textiles........................................................................................41
Vadodara Cluster Insights................................................................. 45

Executive Summary
Dun & Bradstreet India, in association with Oriental Bank of Commerce,
reinforces its commitment towards the development of small & medium
enterprises (SMEs). As a sign of this commitment, we feel immense pride in
launching the cluster based report, Dun & Bradstreet Oriental Bank
of Commerce SME Cluster Series 2016: Vadodara.
To gain deeper insights about Vadodara cluster, Dun & Bradstreet conducted
a study of the small and medium enterprises (SMEs) from Vadodara. SMEs
from varied sectors such as engineering, textiles, chemicals, pharmaceutical
and information technology among others were a part of this study. The study
was aimed at finding the perspective of SMEs about the business environment
in Vadodara cluster including their growth prospects, guidelines for new
entrepreneurs and future challenges among others.
Key findings from our study are as under: More than 60% of respondents find it easy in terms of doing business in Vadodara
More than 50% of respondents were very optimistic about the growth of their business in the next 3
year
Some of the strategies to succeed for new entrepreneurs keeping in mind todays business environment
include o Focus on good and sound sales & marketing
o Maintain good quality products
o Timely supply of goods & services
Some of the major challenges for entrepreneurs doing business in Vadodara in the next 2-3 years
include o Availability of skilled labour with around 57% respondents indicating this as a major challenge
o Around 53% cited competition from multinational companies as another challenge
o Around 43% of the respondents found lack of infrastructure development in the city
More than 80% Vadodara-based SMEs agreed that Make in India campaign is beneficial for
them
Naina R Acharya
Deputy Leader - Operations
Economic Analysis Group
Dun & Bradstreet India

Research Methodology
Objective of the Report
The objective of SME Cluster Series 2016: Vadodara is to develop a one-point reference
document, which will bring to the fore the business perspective, financing requirements and preferences,
outlook on growth prospects and various other parameters for businesses operating in the Vadodara
cluster. The report aims to provide insights that will help enterprises take informed decisions.
Methodology
1. Desk Research
A detailed review of relevant literature for the Vadodara cluster was conducted at this stage.
2. Questionnaire Development
An in-depth desk research was conducted to develop a comprehensive questionnaire for the purpose
of primary survey with the objective to capture and analyze the trends and challenges of businesses
in the Vadodara cluster.
3. Survey
For the purpose of the survey, enterprises were selected from internal Dun & Bradstreet database
and other authentic sources such as cluster and/or sectoral associations.
4. Eligibility criteria
Companies with a total income of less than ` 1,000 mn were selected for the purpose of survey.
Companies involved exclusively in trading activities were excluded from this study.
5. Collation of Information
The data and information was collated from both, primary and secondary sources such as through
survey and authentic information as available in the public domain.
6. Analysis of data
The information collected was scrutinized and analyzed to explore the cluster dynamics.
7. Report Writing
The outcome of the project including the key analysis and results were written in the form of the
current report.

Think of MSME,
Think of Us

Tender Documents
Free of Cost

MSMEs
Advance
Intimations

Competency Certificate

60 years in the service

of MSMEs

Marketing
Support

Exemption of
Earnest Money

Single Point Registration for

Government Purchase
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Scheme under the Government Purchase
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National Small Industries Corporation

(A Mini Ratna Company)
(A Govt. of India Enterprise)
Okhla Industrial Estate, New Delhi
Tel: +91-11-26926275 Toll Free: 1800 -11-1955
email: infocall@nsic.co.in
visit : www.nsic.co.in www.msmeshopping .com www.msmemart.com
www.facebook.com/nsicltd
Or Contact nearest NSIC field office

Overview of
MSMEs in India

Overview of MSMEs in India

Overview of MSMEs in India

Micro, Small and Medium Enterprises (MSMEs) epitomise the growth engine of any economy, and play
a pivotal role in the overall industrial and economic development of a nation. They are the prime drivers
for employment generation and GDP growth, besides contributing to balanced regional development.
Further, MSMEs play an important role in economic diversification, social stability and in the development
of the private sector. Therefore, it is important to nurture the seeds of entrepreneurship to sustain overall
economic development.
As per World Bank estimates, MSMEs account for more than 80% of the total industrial enterprises in India.
The entrepreneurial spirit and innovative nature of MSMEs have been crucial in driving competitiveness
in the Indian economy. MSMEs and entrepreneurs play an important role for developing new paths to
enable an economy achieve more sustainable and inclusive growth.

Definition and Economic Contribution of SMEs to the Indian Economy

Over the past two decades, the MSME sector has emerged as the most vibrant and dynamic sector of
the Indian economy, with operations spanning across the manufacturing and services sectors. Apart
from creating large scale employment opportunities at comparatively lower capital cost than large
enterprises, MSMEs play a crucial role in reducing regional imbalances through industrialization of rural
and backward areas.
The Indian government passed the Micro, Small and Medium Enterprises Development (MSMED) Act,
2006, to address the policy issues affecting the SMEs and to extend the coverage and investment
ceiling of the sector. The Act also aims to facilitate development of the sector along with enhancing its
competitiveness. The MSMED Act, 2006, classifies enterprises broadly into: (i) Manufacturing enterprises
and (ii) Services enterprises. The Act further classifies these enterprises into micro, small and medium
enterprises based on their investment in plant and machinery (for manufacturing enterprises) or investment
in equipment (for services enterprises). The following is the present ceiling on investment for enterprises
to be classified as micro, small and medium enterprises:
Indias Definition of MSMEs
Classification
Micro
Small
Medium

Manufacturing Enterprises
Investment in Plant & Machinery

Services Enterprises
Investment in Equipment

Up to ` 2.5 mn

Up to ` 1 mn

(Up to $ 50,000)

(Up to $20,000)

Above ` 2.5 mn & up to ` 50 Mn

Above ` 1 mn & up to ` 20 mn

(Above $50,000 & up to $1 mn)

(Above $20,000 & up to $400,000)

Above ` 50 mn & up to ` 100 mn

Above ` 20 mn & up to ` 50 mn

(Above $1 mn & up to $2 mn

(Above $400,000 & up to $1 mn)

Source: Ministry of Micro, Small and Medium Enterprises

(Note: 1 US$ ` 50)

Overview of MSMEs in India

The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2015, introduced in the Lok
Sabha on April 20, 2015, seeks to review the definition of MSMEs, as follows:Proposed Amendment to Definition of MSMEs
Classification

Manufacturing Enterprises
Investment in Plant & Machinery

Services Enterprises
Investment in Equipment

Micro

Up to ` 5 mn

Up to ` 2 mn

Small

Above ` 5 mn & up to ` 100 mn

Above ` 2 mn & up to ` 50 mn

Medium

Above ` 50 mn & up to ` 300 mn

Above ` 50 mn & up to ` 150 mn

Source: Ministry of Micro, Small and Medium Enterprises

Significance of MSME Sector in Indian Economy

MSMEs contributed around 37.5% of Indias overall GDP (manufacturing + services) in FY13. Of this,
around 7% was contributed by the manufacturing sector. The chart below highlights the seven year trend
in share in GDP:Share of Manufacturing & Services GDP (%)

Source: Ministry of Micro, Small and Medium Enterprises

MSMEs accounted for around 37% of the overall manufacturing output in FY13, and contributed to more
than 7% of the total manufacturing GDP of the country. In terms of value, the gross output of MSMEs
stood at ` 18,099.8 bn (at 2004-05 prices) in FY13, registering a CAGR of 7.1% since FY07. Although
the gross value of output of manufacturing MSME units reflects consistent growth, their share in GDP has
shrunk from 7.73% in FY07 to 7.04% in FY13.

Overview of MSMEs in India

Contribution of Manufacturing Output of MSME in GDP (%)

Year

Gross Value
of Output
of MSME
Manufacturing
Sector (` mn)

FY07
FY08

Share of MSME sector in total GDP (%)

Share of MSME
Manufacturing
output in total
Manufacturing
Output (%)

Manufacturing
Sector MSME

Services
Sector MSME

Total

11,988.2

7.7

27.4

35.1

42.0

13,227.8

7.8

27.6

35.4

41.9

FY09

13,755.9

7.5

28.6

36.1

40.8

FY10

14,883.5

7.5

28.6

36.1

39.6

FY11

16,536.2

7.4

29.3

36.7

38.5

FY12

17,885.8

7.3

30.7

37.9

37.5

FY13

18,099.8

7.0

30.5

37.5

37.2

Source: MSME Annual Report 2014-15

As per provisional numbers from the Ministry of MSME, there were nearly 49 mn working MSME
enterprises as at the end of FY14. During FY14, the number of MSMEs rose by about 9% y-o-y, which
is the fastest increase in the last seven years. This proves that the MSME sector is emerging as one the
most dynamic and pervasive sectors of the economy.
Total No. of Working Enterprises

Source: Ministry of Micro, Small and Medium Enterprises

The growth in MSME units in the country clearly outlines the growing interest in this sector. Over the
years, MSME has shown consistent growth in terms of number of Entrepreneur Memorandum Part-II
(EM-II) filed. In 2007-08, the District Industries Centers (DIC) across the country registered 172,703 new
MSMEs; this number more than doubled to 362,991 MSMEs during 2013-14. This translates into a
CAGR of 13.2% during the period.

Overview of MSMEs in India

Number of EM-II filed by the MSME

Source: Ministry of Micro, Small and Medium Enterprises

Employment and Fixed Investments

Historically, MSMEs have been a significant source of employment in India. MSMEs offered employment
to 111.4 mn people in 2013-14, as compared to 80.5 mn in 2006-07. In 2013-14, employment in
the MSME sector grew by 5% as compared to a year ago. Likewise, the fixed investments in the sector
jumped from ` 8,685.4 bn in 2006-07 to ` 13,637 bn by 2013-14, which translates into a CAGR of
nearly 7% over a seven year period.
Productivity in MSMEs

Source: Ministry of Micro, Small and Medium Enterprises

10

Overview of MSMEs in India

Access to Credit
According to RBI, the total outstanding credit to the Micro & Small Enterprises (MSE) sector rose to
` 8,003.4 bn in 2014-15 from ` 3,735.3 bn in 2009-10. This translates into a handsome CAGR of
16.5% over the six year period.
Outstanding bank credit to MSE

Source: RBI

Additionally, the share of MSE lending in the overall priority sector lending of scheduled commercial
banks (SCBs) has increased from 34.2% in March 2010 to around 40% in March 2015.
Y-o-Y Share of MSE lending in total priority lending

Source: RBI

Overview of MSMEs in India

In spite of banking regulators and banks constantly striving to make the financial system more and more
MSME-friendly, lack of adequate working capital continues to hinder the growth of MSMEs. In the MSME
context, finance includes equity capital, loans for fixed asset investment and working capital for meeting
cash flow requirements. The weak credit profile of MSMEs restricts large-scale lending to the sector by
banks and other financial institutions. Several regulatory & institutional initiatives have been taken to
promote availability of finance to MSMEs thereby breaking the viscous circle of MSME financing.
Easing access to finance for the MSME sector is crucial for increasing employment, growth in exports
and development of a manufacturing base, as envisaged in the Governments Make in India initiative.
The Ministry of MSME is also implementing a host of schemes to address MSME issues related to credit,
infrastructure development and technology upgradation, among others. Some of these schemes are
the Credit Guarantee Scheme, Credit Linked Capital Subsidy Scheme, Performance and Credit Rating
Scheme, Cluster Development Programme, National Manufacturing Competitiveness Programme and
Prime Ministers Employment Generation Programme.

The Way Ahead

MSMEs across all major developed and developing economies have thrived on government support
and an efficient MSME framework. MSMEs undoubtedly play a crucial role in any countrys economic
growth. Hence it is imperative to support MSME growth by developing institutional infrastructure for
advocacy, technical research, refinancing platforms and easy access to services. India too has a wellestablished MSME framework with institutions like the SIDBI, ECGC and Exim Bank offering direct and
indirect support to MSMEs. It is, however, crucial to further enhance the scope of these vital institutions
in order to strengthen MSMEs and multiply their impact on the economy.

11

Marketing
Support

Raw Material
Distribution Scheme
NSIC has signed agreements / MoUs with the major
/^Wt
Coal and Polymer products etc.). These arrangements
D^D

D^D
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National Small Industries Corporation

(A Mini Ratna Company)

(A Govt. of India Enterprise)
Okhla Industrial Estate, New Delhi
Tel: +91-11-26926275 Toll Free: 1800 -11-1955
email: infocall@nsic.co.in
visit : www.nsic.co.in www.msmeshopping .com www.msmemart.com
www.facebook.com/nsicltd
Or Contact nearest NSIC field office

Vadodara
Cluster Overview

14

Vadodara Cluster Overview

Vadodara Cluster Overview

Vadodara, also known as Baroda, is the third largest city in the state of Gujarat, after Ahmedabad and
Surat. The city is spread over an area of 7,794 sq km. It is the administrative headquarters of Vadodara
District located on the banks of the Vishwamitri river, southeast of Ahmedabad. There are 12 tehsils
in the district namely Vadodara, Padra, Karjan, Savli, Waghodiya, Dabhoi, Sinor, Sankheda, Chhota
Udepur, Naswadi, Kwant and Pavi Jetpur.
The city houses Lakshmi Vilas Palace belonging to the Royal Gaekwad Dynasty of the Marathas. It is
also the home of the Maharaja Sayajirao University of Baroda, which is the largest university in Gujarat.
Major industries in Vadodara include petrochemicals, engineering, chemicals, pharmaceuticals, plastics
and Forex.
As per Census 2011, Vadodara had population of around 4.2 million of which male and female
were 2.2 million and 2 million respectively. The city recorded an increase of 14.4% in the population
compared to population as per 2001. The density of population also increased from 482 persons per
sq km in 2001 to 552 persons per sq km in 2011. The aggregate literacy rate of Vadodara stood at
78.9% with male literacy rate of 85.4% and female literacy rate of 72%.
Population: Distribution and density
Population 2001 (in 000)

Population 2011 (in 000)

Density persons (per sq km)

Male

Female

Total

Male

Female

Total

2001

2011

1,897

1,745

3,642

2154

2,011

4165

482

552

Source: Census of India 2011

Infrastructure
The city is well connected with the other major cities of the country through rail, road and air
infrastructure.
Road
Vadodara is well connected to all major locations, such as Delhi and Mumbai through Delhi-Mumbai
industrial Corridor and National Highway 8. NH 8 also connects Vadodara major industrial centers of
Gujarat namely Ahmedabad, Rajkot, Ankleshwar and Surat. State highway 6 connects the district with
Ahmedabad, Surat, and Rajkot and other districts. Indias first national expressway located in Gujarat
also connects Vadodara to Ahmedabad.

Vadodara Cluster Overview

15

Road infrastructure
Type of Roads
National Highways
State Highways
Main District Highway
Other district & Rural Roads
Rural road/ Agriculture Marketing Board Roads

Kms
95
1,138
850
2,009
880

Rail
Vadodara is well connected with all major locations such as Delhi and Mumbai, as well as other districts
of the State through a broad gauge railway line. The district has 476 Km of railway line.
Air
Vadodara city has a domestic airport at Harni, which is well connected with four metro cities viz. Delhi,
Mumbai, Chennai and Bengaluru.

Economy and industry profile

Vadodara has a plethora of opportunities. Some favourable factors in the region for
industrialisation are as follows:
i. Vadodara is located in Gujarat, a state that has been a frontrunner in industrialisation in the
country
ii. It is a key strategic destination for industrialisation since the Delhi-Mumbai industrial corridor passes
through the city
iii. The district has huge reserves of dolomite and fluorspar and hence, offers tremendous growth
potential for processing industries
iv. Vadodara is one of the foremost education hubs in India and has potential to attract various
knowledge-specific industries.
Major crops cultivated in the district are rice, wheat, sorghum, yellow peas, grams, oil seeds, groundnut,
tobacco, cotton and sugar cane. Manufacturing plants of several private industry players, as well as
Public Sector Units are located in the district.
Mineral reserves in the district include dolomite, fluoride, black trap, quartz, fluorspar, agate, gravel,
marble, graphite, manganese ore and granite. The district has 720 MMT reserves of dolomite and 11.6
MMT reserves of fluorspar. The district accounts for as much as 98 % of the total production of dolomite
in Gujarat.

16

Vadodara Cluster Overview

Trend of Industrial units in Vadodara

There were 396 industrial units registered in Vadodara in 1985 and by 2011, the number crossed the
18,000 mark.
Industrial Estates

There are fifteen industrial areas presently operating in the district including Sankheda, Pavi Jetpur,
Dabhoi, Ranoli, Limda, Por Ramangamdi, Nadesari, Vaghodia, Makarpura, PCC, Savli, ManjusarAlindra & Jhumkal, Alindra (Expansion), Pilol Expansion and Pilol (Bombadier) Expansion. Industrial
estates in Vadodara span across 3,215.15 hectares of land. Salvi Industrial Estate and PCC are the two
major industrial estates as they account for more than 35% of the total area.

Industrial area

Land acquired
(hectares)

Land
developed
(hectares)

No. of plots

No. of units in
production

Makarpura

355.08

248.55

2,370

2,346

Nandesari

271.68

190.18

510

504

P.C.C.

666.16

466.31

370

370

Vaghodiya

314.91

220.43

924

872

Limda

53.10

37.17

Ranoli

41.22

28.85

255

251

134.44

94.11

562

537

Por Raman-Gamdi
Dabhoi

10.92

7.64

77

73

Sankheda

00.81

00.57

14

11

Pavi Jetpur

00.95

00.67

13

10

Savli

544.29

814

492

Manjusar-Alindra & Jhumkal

536.69

377.07

Pilol Expansion

73.52

51.46

Alindra (Expansion)

208.9

146.23

2.48

1.73

Pilol (Bombadier) Expansion

Source: Brief Industrial Profile of Vadodara District

Government of Gujarat has been encouraging promotion of Special Economic Zones (SEZs) which
are considered as growth engines that can boost manufacturing, augment exports and generate
employment. Government of Gujarat has enacted the Gujarat SEZ Act, 2004, the SEZ Rules, 2005
and SEZ Regulations and SEZs amendment Act, 2007. Under the Act, assistance is provided to both the
developer and co-developer of SEZ for development of infrastructure facilities and providing services.
Tax concessions are also provided to the units coming up in the SEZ. As on Feb 2016, Vadodara had
three SEZs have been formally approved by Board of Approvals after coming into force of SEZ Rules.

Vadodara Cluster Overview

17

SEZs in Vadodara
Description/SEZ

Aspen SEZ

L&T SEZ

Biotech Savli SEZ

Name of developer

Aspen Infrastructures Ltd

Larsen & Toubro Ltd

Gujarat Industrial
Development Corporation

Location

Waghodia

Ankhol

Savli

Area (hectares)

115.64

10

15.81

Type of SEZ

Hightech engineering
products and related
services

IT/ ITES

Biotechnology

Source: SEZIndia

MSME Profile
The industrial clusters in Vadodara district include chemicals & fertilizers, pharmaceuticals, biotechnology,
cotton textiles, machine tools, glass, engineering, tobacco, fisheries and dairy. The district has many
reputed organizations which are engaged in the production of variety of goods like textile, chemicals,
rubber & its products, food products, metal works, equipments, leather & leather products, tobacco,
ceramics & cement etc. There are over 18,000 small scale industries operating in Vadodara district.
Details on existing Micro and Small Enterprises and artisan units in Vadodara:
No. of Units

Investment (` mn)

Employment

Agro Based

Type of Industry

1,055

220.45

3,611

Cotton Textile

1,925

164.17

5,184

601

33.20

2,659

Paper & paper products

770

367.70

4,901

Leather Based

173

9.79

503

Rubber, Plastic & Petro products

1,153

575.84

11,936

Chemical & chemical based

1,411

1226.89

12,749

885

307.64

14,319

Metal based (steel fabrication)

2,173

817.64

14,958

Engineering units

1,481

1013.23

10,446

861

234.24

7,393

5,718

489.51

12,495

Wood / wooden based furniture

Mineral based

Electrical machinery & transport equipment

Repairing & Servicing & Others
Source: DIC, Vadodara

18

Vadodara Cluster Overview

Investment profile of MSMEs (in FY14)

Classification

Units

Investment (` bn)

Employment

Micro

2,389

5.44

24,839

Small

228

3.30

5,287

22

2.06

2,172

2,639

10.80

32,298

Medium
Total

Source: Industries Commissionerate, Govt of Gujarat

Outlook of MSMEs in the district

The Government of Gujarat has introduced several schemes to create a conducive industrial environment
for MSMEs in the state. These include market development assistance, assistance for labour intensive
industries, assistance for R&D activities, assistance for industrial infrastructure, financial assistance to
logistics parks, financial assistance to plastic industry, assistance to start ups/ innovation and assistance
for common environment infrastructure amongst others
Moreover, the Government has also taken initiatives to encourage MSMEs to undertake environment
protection measures. Assistance for environment management projects and encouraging green practice
and offering environmental audit to MSMEs are the two schemes provided by the Government of
Gujarat.
Potential for new MSMEs in Vadodara

Cotton ginning, cleaning and baling

Salt mining, quarrying, screening etc.
Rice, flour and dal milling
Weaving, manufacture of silk and silk mixture
fabrics
Manufacture of inorganic acids
Manufacture of urea and other organic
fertilizers
Off shore extraction of petroleum
Manufacture of explosive, ammunition and
fire works

Source: Brief Industrial Profile of Vadodara District

Manufacture of biscuits, cakes and pastries

Manufacture of wooden industrial goods
Engraving, etching and block making etc.
Manufacture of paints, varnishes, enamels or
lacquers
Manufacture of homoeopathic or biochemical
pharmaceutical preparations

Vadodara Cluster Overview

19

Industry Overview
Chemicals
Engineering
Pharmaceuticals
Textiles

Chemicals

24

Chemicals

Chemicals
The chemical industry is considered as the backbone of the industrial and agricultural development in the
country and is accountable for the growth of several downstream sectors such as textiles, papers, paints,
soaps, detergents and pharmaceuticals among others.
A strong chemical sector facilitates several economic and strategic benefits for the country. As on FY13,
the size of the Indian chemical industry was estimated at around ` 7,829.49 bn in terms of value of its
output. According to the estimates of Central Statistics Office (CSO), the chemical and chemical products
sector accounted for 2.51% of Indias GDP (at 2004-05 prices) in FY13, compared with 2.53% in FY12.
During the same period, its share in the manufacturing GDP (at 2004-05 prices) grew from 15.55% in
FY12 to almost 16% in FY13.

Composition of the Chemical Industry

The chemical industry comprises of all types of large and small scale manufacturing units. It is highly
diversified and comprises of more than 80,000 commercial products. Broadly, the sector categorises
major chemicals into five categories namely alkali chemicals, inorganic chemicals, organic chemicals,
pesticides, and dyes & dyestuffs.
Alkali Chemicals

Soda Ash, Caustic Soda, Liquid Chlorine

Inorganic Chemicals

Aluminium Fluoride, Calcium Carbide, Carbon Black, Potassium Chlorate, Sodium

Chlorate, Titanium Dioxide, Red Phosphorous

Organic Chemicals

Acetic Acid, Acetic Anhydride, Acetone, Phenol, Methanol, Formaldehyde,

Nitrobenzene, Citric Acid, Maleic Anhydride, Pentaerythritol, Aniline, Chloro
Methanes, ONCB, PNCB, MEK, Acetaldehyde, Ethanolamines, Ethyl Acetate,
Ortho- Nitro Toluene, isobutylebenzene, Methanol

Pesticides and Insecticides

D.D.T., Malathion, Parathion(Methyl), Dimethoate, D.D.V.P.,Quinalphos,

Monocrotophos, Phosphamidon, Phorate, Ethion, Endosulphan, Fenvalerate,
Cypermethrin, Anilophos, Acephate, Chlorpyriphos, Phosalone, Metasystox,
Abate, Fenthion, Triazophos, Lindane, Temephos, Deltamethrin, Alphamethrin,
Profenofos Technical, Pretilachlor Technical, Lambda Cyhalothrin, Phenthoate,
Permethrin Tech, Imidacaloprid Tech, Captan & Captafol, Ziram(Thio Barbamate),
Carbendzim(Bavistin), Calixin, Mancozab among others.

Dyes and Pigments

Azo Dyes, Acid Direct Dyes(other than Azo), Basic Dyes, Disperse dyes, Fast
Colour Bases, Ingrain Dyes, Oil Soluble (Solvent Dyes), Optical Whitening Agents,
Organic Pigments, Pigment Emulsion, Reactive Dyes, Sulphur Dyes (Sulphur Black),
Vat Dyes, Solubilised Vat dyes, Food Colours, Napthols, Other Dyes.

Source: Department of Chemicals and Petrochemicals, Ministry of Chemicals & Fertilizers, GoI

Chemicals

25

Production Trends of Major Chemicals

The production of major chemicals in FY14 was 9,627 thousand MT, as compared to 9,440 thousand
MT in the previous year implying a growth of 2%. Among major chemicals, alkali chemicals had the
highest share in total chemical production in India. During FY14, alkali chemicals production was
6,481 thousand MT, and accounted for more than 65% of the total chemical production. The dyestuff
sector is also one of the crucial segments of the Indian chemical industry, which has several linkages
with a variety of sectors such as textiles, leather, paper, plastics, printing inks, and foodstuffs. This sector
registered the highest growth in production of 18.4% y-o-y in FY14.
The production of pesticides and insecticides segment, which accounts for a major input in the Indian
agricultural sector, registered the fastest CAGR during the period 2009-14 at 7.4%. This segment grew
at about 16% y-o-y.

Pesticides And
Insecticides
2%

Inorganic
Chemicals
9%

Dyes And
Dyestuffs
3%
in Thousand MT

Organic
Chemicals
19%

Five Year Production Trends of Major Chemicals

Alkali Chemicals
67%

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Percentage

Segment-wise share in Production (%)

0
Alkali
Chemicals

FY10

Inorganic
Chemicals

FY11

Organic
Chemicals

FY12

Pesticides
And
Insecticides
FY13

Dyes And
Dyestuffs

FY14

CAGR

Source: Department of Chemicals and Petrochemicals, Ministry of Chemicals & Fertilizers, GoI

International Trade
The Indian chemical sector (includes petrochemicals and excludes pharmaceutical products and fertilizers)
accounted for 9.4% of the total export value and 8.9% of total import value in FY14. During the same
period, the chemical industry exported 1087 thousand MT of major chemicals while it imported 3,721
thousand MT of the same. Import of chemicals appeared to be dominating the international trade, with
organic chemicals itself accounting for more than 65% of the total major chemical imports in FY14.
In exports too, organic chemicals accounted for the highest share of 30.6%, followed by dyes and
pigments, which accounted for 30.2% of overall chemical exports during FY14.

26

Chemicals

Government Policies and Incentives

1. FDI: The government has permitted 100% FDI into the chemical sector through the automatic route.
It is among the most attractive sectors with respect to FDI inflows. In 2014-15, it received FDI inflows
to the tune of USD 669 mn.
2. Export Incentives: The sector also enjoys benefits under some of the prominent export incentive
schemes such as export promotion capital goods scheme, duty drawback scheme, focus product
scheme, special focus product scheme and focus market scheme.
3. Union Budget 2015-16: The recent Union Budget announced some major measures for the
chemical sector such as reduction in basic customs duty (BCD) to reduce cost of raw materials.
Duties on certain inputs were reduced to address concerns over duty inversion. The Union Budget
also announced exemption from Education Cess and Secondary and Higher Education Cess levied
on excisable goods. Further, the government announced general exemptions such as transport of
goods for export by road from the factory to a land customs station.

Apart from the incentives stated above, the sector also enjoys several incentives related to R&D,
areas of operation, SEZ, and state incentives.

Outlook
In the near future, the sector is expected to draw benefits in the form of accelerated investments and
growth. The sector is considered as one of crucial sectors under the Make in India campaign. Further,
with Asia emerging as the global chemical manufacturing hub, Indian chemical exports are expected to
witness more demand. The domestic market too, will witness greater traction with the emergence of new
segments such as speciality and knowledge chemicals.

Chemicals

27

Engineering

30

Engineering

Engineering
The engineering sector plays an important role in the development of other industrial sectors of the
economy. It is closely linked with the manufacturing and infrastructure sectors. The sector caters to
capacity creation requirements in an array of sectors like power, mining, oil & gas, refinery, steel,
automotive and consumer durables. Engineering products are largely used as input in the capital goods
industry. Hence, the growth and demand of this sector is largely fuelled by the growth and demand of
the capital goods industry.
Indian engineering companies enjoy some degree of advantage in some of the engineering sub-sectors
vis--vis foreign players, in terms of manufacturing costs, market knowledge, technology and creativity.
The sector, therefore, attracts immense interest from foreign players. The government has de-licensed
the engineering sectors and has allowed 100% FDI. Between Apr 2000 and Dec 2015, the foreign
direct investment (FDI) inflows into Indias miscellaneous mechanical and engineering industries stood at
around USD 2,993.45 mn.
Engineering is a diverse sector encompassing a number of segments and can be broadly classified into
the heavy engineering and light engineering sectors.

Heavy Engineering
Heavy engineering usually involves the manufacture of high value goods, using high-end technology. It
generally entails huge capital investments and has high entry barriers. The heavy engineering industry
comprises of machineries such as mining equipment, cement machinery, textile machinery, machine tools,
material handling equipment, oil field equipment, rubber machinery, metallurgical machinery and dairy
equipment. The heavy engineering goods find applications in industries such as power, infrastructure,
steel, cement, petrochemicals, oil & gas, refineries, fertilisers, mining, railways, automobiles and textiles,
among others.

Light Engineering
The light engineering sector consists of a diverse set of sub-sectors including items such as medical
instruments, sophisticated process control equipment, castings, forgings, fasteners, bearings, steel pipes
and tubes. These sectors usually use medium to low end technology as compared to high-end technology
used in the heavy engineering industry. Relatively lower requirement of capital and technology makes it
a low entry barrier sector. The light engineering segment is characterised by small capacities and high
level of competition. It is a highly labour intensive sector, and generates ample employment opportunities
in the economy.
Some products that form part of the light engineering segment serve as inputs for the heavy engineering
and capital goods sectors. Demand for engineering and capital goods, therefore, influence the overall
health of the light engineering sector.

Engineering

31

Broad Classification of Engineering Sector

Engineering Sector

Light Engineering

Heavy Engineering

* Textil Machinery
* Cement Machinery
* Sugar Machinery
* Rubber Machinery
* Material Handling Equiipments
* Oil Field Equipments
* Metallurgical Machinery

* Roller Bearing
* Welding Equipment and Consumables
* Medical and Surgical Instruments
* Ferrous Castings
* Process Control Instruments
* Seamless Steel Pipes and Tubes

* Mining Machinery

* Electrical resistance Welded Steel Pipes

and Tubes

* Dairy Machinery

* Submerged-Arc Welded (SAW) Pipes

* Machine Tools

* Industrial Fasteners
* Steel Forging
* Bicycle

Engineering goods exports displayed decent growth in FY15

A major portion of Indias exports of engineering goods goes to UK and Europe, which together account
for over 60% of total engineering goods exports. Recently, Indias exports of engineering goods to
Japan and South Korea have grown significantly.
Indias exports of engineering goods have been growing steadily over the last decade, reflecting a
double digit growth rate. Exports declined during FY10 as the global financial crisis severely impacted
global trade. While engineering exports recovered during FY11 and FY12, it again contracted during
FY13 in tandem with a decline in overall exports. Engineering exports returned to growth in FY14,
growing by 8.1% as Indias overall exports grew by 4.7% during the year. As per data provided by the
Engineering Export Promotion Council of India (EEPC) for FY15, Indias export of engineering goods
grew by 14.7% in spite of a decline in overall exports. In FY15, Indias exports of engineering goods
stood at USD 70.7 bn as compared to USD 61.6 bn in FY14. The sectors share in overall exports stands
at around 23%.

32

Engineering

80000

16
14
12
10
8
6
4
2
0
-2
-4

Exports in USD million

70000
60000
50000
40000
30000
20000
10000
0
FY12

FY13

FY14

Export of Engineering Goods

Growth Rate (%)

Exports of Engineering Goods

FY15
Growth

Source: Engineering Export Promotion Council of India (EEPC)

The Way Forward

Increased investment in infrastructure development and industrial production has helped Indias engineering
sector to grow rapidly over the past few years. The Government envisages the current spending on
engineering services to increase to USD 1.1 tn by the year 2020. With development in associated
sectors such as automotive, industrial goods and infrastructure, coupled with a well-developed technical
human resources pool, engineering exports are also expected to touch USD 120 bn by 2015.
GoI has made several announcements in the recent Union Budgets which are expected to directly and
indirectly help the engineering sector. The Union Budget 2016-17 announced a slew of changes in indirect
taxes, particularly customs and excise duty, to boost local manufacturing. The duty changes on inputs seek
to make manufacturing competitive for sectors such as IT, capital goods and defence. For instance, GoI
has scrapped excise duty on inputs, parts and components, and subparts for the manufacture of charger
or adapter, battery and wired headsets or speakers of mobile phones. Measures such as exemption in
customs duty on machinery used in the manufacture of semiconductor wafer fabrication, capital goods
used in the manufacture of fuses and exemption in excise duty on capital goods used by ship repair units
are also likely to aid the growth of the capital & engineering goods industry.
The government has also taken steps to improve the quality of technical education in the engineering
sector by allocating a sum of ` 5 bn for setting up five more IITs in the states of Jammu & Kashmir,
Chhattisgarh, Goa, Andhra Pradesh and Kerala. Funds have also been allocated for several infrastructure
projects which are further expected to provide an impetus to the engineering sector.

Engineering

33

Pharmaceuticals

36

Pharmaceuticals

Pharmaceuticals
The Indian pharmaceutical sector has gained an eminent position globally. It is also known as the
Global Pharmacy of the World. The characteristics of the Indian pharmaceutical market make it unique.
First, branded generics dominate, making up to 70-80 percent of the retail market. Second, local
players have enjoyed a dominant position driven by formulation developments capabilities and early
investments. Third, price levels are low driven by intense competition. While India ranks 14th globally in
terms of value, it is ranked third in volumes. In 2014, the global pharmaceutical market reached a new
high at US$ 1,060 bn. India stands as a key contributor in the global pharmaceutical sector, with key
advantages of low cost of raw material, low R&D costs and scientific manpower availability. The sector
has done remarkably well and has been a game changer in many markets.
For instance, offering low cost treatment towards fighting AIDS in African countries and offering simple,
powerful and cost-effective vaccines worldwide. According to Department of Pharmaceuticals, Indias
pharmaceutical sector accounted for 1.5% of the global pharma sector in value terms and 10% by
volumes in 2015.
Global Ranking of Indias Pharmaceuticals Sector (2015)
With a turnover of over US$ 30 bn, the Indian pharmaceutical sector ranks 3rd and accounts for 10% of
worlds production by volume of production
Ranks 14th and accounts for 1.5% of the global production value
Ranks 3rd in generic production
Exports to more than 200 countries and ranks 17th in terms of export value of bulk actives and dosage
forms
Largest number of US-FDA-compliant plants; nearly 1400 WHO-GMP approved Pharma Plants, and 253
European Directorate of Quality Medicines (EDQM) approved plants.

Domestic Market
According to the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizer, GoI, the annual
turnover of the Indian pharmaceutical sector stood at ` 1,280.4 bn during 2013-14, registering a
growth of 12.7% over the previous year. Of this, the share of export of drugs, pharmaceuticals, and fine
chemicals stood at ` 632.93 bn, accounting for 49.4% of the total turnover.

Pharmaceuticals

37

Growth in Net Sales (%)

Source: Department of Pharmaceuticals, Annual Report 2014-15

International Trade
India continuously for the last three years ending 2014 has been bagging around 30% of the total
ANDAs granted by USFDA and in 2012 & 2013 India was topping the list. To-day India has come to be
known as provider of Responsible Health care. India offers Generics covering all therapeutic categories
and has 2911 active Type-II DMFs filed with USFDA. Over 43 multinational companies operate from
India with manufacturing facilities catering to domestic and overseas markets.
In rupee terms, pharmaceutical exports reached ` 942.8 bn in 2014-15, and have clocked a CAGR of
10.3% to US$ 15.5 billion during 201415 from US$ 10.4 billion during 201011.
Pharmaceutical Exports

Source: Pharmexcil Annual Report 2014-15

38

Pharmaceuticals

Formulations continued to dominate the Indian pharmaceutical exports with 73% share; while the share
of bulk drugs has reduced drastically from 41% in FY11 to 23% in FY15.
Composition of FY15 Exports (in %)

Source: Pharmexcil Annual report 2014-15

India exports to over 200 countries. During FY15, the top five exporting destination countries for the
Indian pharmaceutical sector comprised the US, UK, South Africa, Russia and Nigeria, with the US
accounting for more than 25% of the total exports according to Pharmexcil, Ministry of Commerce &
Industry, GoI. The US is the largest importer of Indian products with the export rate rising at an annual
rate of 19.8%.

Investment Scenario in Indian Pharma Sector

Drugs & Pharmaceuticals have been amongst the sectors attracting highest FDI inflows since many
years. In FY15, the Indian drugs and pharmaceutical sector attracted FDI of US$ 1,523 mn, registering
a growth of almost 20% over the previous year. It ranked fifth in terms of attracting FDI during FY15
amongst the top sectors.
Foreign Direct Investment

Source: Department of Industrial Policy and Promotion (DIPP)

Pharmaceuticals

Government Initiatives
The Department of Pharmaceuticals has been continually enabling the Indian pharmaceuticals industry
to play a leading role in the global market and to ensure abundant availability of good quality medicines
at reasonable prices within the country for mass consumption.
Under Make in India initiative for creating an enabling framework for stimulating investments in Pharma
manufacturing, Department of Pharmaceuticals has formed Task Forces on
TF 1- Enabling the Private Sector to lead the growth of Pharmaceutical sector
TF 2- Medical Devices and Pharmaceutical Manufacturing Equipments
TF 3- Development of capabilities for each critical vertical

Indian pharmaceutical companies are all set to join the league of leading global players. The GoI is
also making efforts to attain world class healthcare facilities within the country and achieve pharma
penetration in rural areas as well. Some of the recent schemes launched by the government include:
1. Scheme for Cluster Development Programme for Pharma Sector (CDP-PS): The CDP-PS scheme was
launched in July 2014 to enhance capabilities of SMEs in the pharma sector. The scheme involves
setting up new pharma clusters and upgrading the existing ones. Projects will be sanctioned for
upgrading infrastructure in industrial estates, parks, industrial areas and Greenfield projects.
2. FDI through automatic route: In the pharmaceutical sector, 100% FDI is allowed through the
automatic route for Greenfield investment and through government approval route for brownfield
investment. In a recent move, 100% FDI through the automatic route for manufacturing of medical
devices has been permitted. This move is expected to increase manufacturing of medical devices in
the country and drive collaborations to develop new technologies.
3. Foreign Trade Policy 2015-20: Under the recently announced Foreign Trade Policy 2015-20, India
aims to double its exports to US$ 900 bn by 2019-20, by promoting trade in sectors such as drugs
& pharma and engineering goods. It also plans to overcome the challenge of market access and
non-tariff barriers that hinder pharma exports across countries such as China and Japan.
4. Pharma Vision 2020: As per this programme, the government aims to make India a global end-toend drug manufacturing country.
5. Jan Aushadhi: The government launched its Jan Aushadhi campaign, under which it markets low
cost generic medicines under its own brand. Under its first phase, the government launched 501
medicines which are available at local chemists.

39

Textiles

42

Textiles

Textiles
Indias textile Industry is largely constituted of small-scale companies, non-integrated spinning firms,
weaving firms, finishing firms, and apparel making enterprises. With only a few large players and
numerous small and medium-sized companies, the Indian textile industry is fragmented. It can be
classified into the hand-spun and hand-woven sector and the capital intensive, organized mill sector,
which comprises spinning and composite mills. Readymade garments, cotton textiles, man-made textiles,
wool and woollen textiles, silk, handloom products, carpets, jute, coir, and coir manufacturers are the
main sub-sectors within the textile industry.
India is one of the few countries in the world with a complete and integrated textile value chain. As
per the Ministry of Textiles, the Indian textiles industry accounts for 14% of industrial production, which
is 4% of GDP, employs about 45 million people and accounts for 13% share of the countrys exports
basket. Data furnished by the US Comtrade 2013 as in June 2014 ranks India 2nd in terms of textile
and clothing exports with a value of USD 40 bn.

Trends in the local market

According to the Ministry of Textiles, Indias aggregate cloth production grew by 2.7% in FY15 to
64,333 mn. sq. mtrs. The powerloom segment accounts for nearly 60% of the total cloth production.
Indias cloth production (million square metres)
Particulars

FY11

FY12

FY13

FY14

FY15

CAGR

Mill Sector

2,205

2,313

2,418

2,531

2,486

3.0

Handloom

6,907

6,901

6,952

7,104

7,203

1.1

Power Loom

38,015

37,445

38,038

36,790

37,750

(0.2)

Hosiery

14,634

12,946

14,541

16,199

16,894

3.7

Total

61,761

59,605

61,949

62,624

64,333

1.0

Source: Ministry of Textiles

Export Scenario
According to the Ministry of Textiles, the value of Indias textiles & clothing exports (including handicrafts)
grew by a handsome 19.8% in FY12, 6% in FY13 and another 12.9% in FY14 to touch USD 39.5 bn.
Exports of ready-made garments account for the largest share with close to 50% of the total textiles
exports, followed by cotton textiles with 35% and 18% of man-made textiles. Indias textiles products,
including handlooms and handicrafts, are exported to more than a hundred countries across the globe,
with the US and EU accounting for nearly two-thirds of Indias textiles exports.

Textiles

Main Features of Vision 2024-25

According to the Vision, Strategy and Action Plan for Indian Textile and Apparel sector: The sector needs to get USD 180-200 bn investment for achieving a production capacity target of
about USD 650 bn by 2024-25
With a 20% CAGR in exports, India would be exporting about USD 300 bn of textiles and apparel
by 2024-25; with a lower 15% CAGR exports would stand at USD 185 bn
Considering the targeted growth in exports, Indias market share in the global textiles and apparel
trade will have expanded from the present level of 5% to around 15-20%

43

Vadodara
Cluster Insights

46

Vadodara Cluster Insights

Vadodara Cluster Insights

Introduction
Dun & Bradstreet conducted a study of the small and medium enterprises (SMEs) from Vadodara. SMEs
from varied manufacturing & services sectors such as chemicals, packaging, steel, glass, pharmaceuticals,
auto components, and software among others were a part of this study. The study was aimed at finding
the perspective of SMEs about the business environment in Vadodara cluster including their growth
prospects, guidelines for new entrepreneurs and future challenges among others.

Following are some of the key findings of the study:

Business environment of Vadodara and
growth prospects of SMEs
According to the survey, more than 60% of the
respondents stated that Vadodara offered ease of
doing business. Around 80% of the respondents
were optimistic about the growth prospects of their
business, with 52% stating that they had a very
optimistic outlook about business in the district for the
next three years.
Positive aspects of doing business in
Vadodara
The study reveals many positive aspects of doing
business in Vadodara. Of these, some of the aspects
that most respondents stated were: Conducive business environment with ample
growth opportunities
Better connectivity through rail and road making
it easily approachable
Good infrastructure facilities

Vadodara Cluster Insights

47

Tips for new entrepreneurs keeping in mind

todays business environment
The study also attempted to seek inputs from
established entrepreneurs on what new entrepreneurs
in Vadodara would need to set up businesses
successfully. Accordingly, some of the tips provided
were as under: Focus on good and sound sales & marketing
Maintain good quality products
Timely supply of goods & services
Major challenges to doing business in
Vadodara in the next 2-3 years
The study also sought to capture respondents
perspectives on negative aspects of doing business
in Vadodara. The negative aspects pointed out are: Lack of skilled manpower
Domestic competition
The major challenges for entrepreneurs seeking to do
business in Vadodara over the next 2-3 years are: Availability of skilled labour with around 57%
respondents indicating this as a major challenge
Around 53% cited competition from multinational
companies as another challenge
Around 43% of the respondents found lack of
infrastructure development in the city

48

Vadodara Cluster Insights

Major things expected from financial

institutions for faster growth of SMEs
Support from financial institutions is essential for SMEs
to sustain their growth. The study shows that SMEs
in Vadodara seek support from financial institutions
largely in terms of: Reduce cost of finance including rate of interest
with over 40% respondents expecting this
Need to be ease up entire process for SME,
including faster clearance and less documentation
in loan procedure indicated by 27% respondents
Opinion about governments Make in India
campaign for Vadodara SMEs
Nearly 87% respondents agreed that Make in
India campaign is beneficial for them.