World MSME Day: Rajkot Leads Auto Parts in Gujarat, Prepares for Defense-Navy Manufacturing; Boosts Export Incentives, Lowers GST: Industrialists
Every year on June 27th, MSME Day is celebrated to recognize the contributions, capabilities, and achievements of Micro, Small, and Medium Enterprises (MSMEs) worldwide. MSMEs play a crucial role in sustaining livelihoods and driving local and national economies. They possess the potential to transform economies, create jobs, and promote equitable economic growth, provided they receive adequate support.
In Gujarat, Rajkot stands out for its dominance in the MSME sector, especially in manufacturing auto parts. Industrialists in Rajkot are now ready to expand into defense and navy parts manufacturing. However, they are urging the government to increase export incentives and reduce GST rates to further support this growth.
Challenges in Exporting from Rajkot’s MSMEs
Pareshbhai Vasa, former president of the Rajkot Engineering Association, highlighted that Rajkot has over 50,000 registered MSMEs, primarily involved in casting, forging, and auto parts manufacturing.
Despite significant exports, recent challenges include a substantial increase in container freight costs, nearly tripling. To alleviate this, there’s a pressing need to increase export incentives for MSMEs, which have dropped to 1-2% from the previous 4-5%. Raising these incentives back to 4-5% could boost exports and provide relief to industries in Rajkot.
Number of Industries in 2023
As of 2023, the number of registered industries in Rajkot is as follows:
- Micro: 98,008
- Small: 4,210
- Medium: 417
Monthly Turnover of Various Industries in Rajkot
Here is the monthly turnover for different industries in Rajkot, measured in crores:
- Auto Parts: 400 to 450 crores
- Casting: 200 to 225 crores
- Forging: 200 to 225 crores
- Machine Tools: 100 to 150 crores
- Submersible Pumps: 150 crores
- Kitchenware: 100 crores
- Hardware: 100 crores
The Importance of Auto Parts Industry in Rajkot
In Rajkot, the casting, forging, and auto parts industries are significant, with auto parts being the most crucial. Auto parts from Rajkot are supplied to almost all automobile companies. The city also has numerous units producing machine tools, gems and jewelry, and hardware.
Historically known for diesel engines, Rajkot has shifted focus to submersible pumps due to widespread electrification. The advent of CNC machines has boosted productivity. While Rajkot is advancing in defense parts manufacturing, its IT sector still holds untapped potential.
Promoting MSME Growth through Government Initiatives
Pareshbhai Vasa emphasized that increasing GIDC (Gujarat Industrial Development Corporation) zones would significantly boost MSME growth in Rajkot. With GST collections rising, he suggested merging the 12% and 18% GST slabs into a 14% slab.
Additionally, he urged reducing the high 28% GST rate on auto parts and automobiles. These changes could incentivize local industries. Rajkot has seen rapid growth in MSMEs, increasing from 20,000 units a decade ago to 50,000 registered units today. Expanding GIDC zones could further enhance this development.
Increasing Government Revenue and MSME Support
The transition from excise and VAT to GST has resulted in higher-than-expected government revenue collections. Rajkot’s MSMEs are contributing significantly more GST now compared to five years ago. Therefore, there’s a call for more reasonable GST rates.
Additionally, including petroleum products under GST could further stimulate industry growth. Expanding GIDC zones and reducing high GST rates on auto parts would provide substantial support to MSMEs, fostering their development and boosting the local economy.
Key Materials Used in Rajkot’s MSME Sector
The MSME sector in Rajkot primarily uses the following eight materials:
- Metal
- All kinds of steel
- Aluminum
- Copper
- Nickel
- Coal
- Petroleum products (petrol, diesel, oil)
- Packing material
The Russia-Ukraine war significantly impacted this sector, affecting exports of Rajkot’s renowned bearings, cylinder liners, motor bodies, and various pumps. This disruption highlights the sector’s vulnerability to global events.
Proposal for MSME Bhavan in Rajkot
A significant meeting was held at the Rajkot Chamber of Commerce and Industry with India’s MSME Development Commissioner Ashwini Lal and other officials to address various MSME issues. Key suggestions included the creation of an MSME Bhavan in Rajkot, providing comprehensive facilities due to the rapid growth of MSMEs in the region.
Additionally, there was a long-pending request to allocate a convention center at the NSIC ground, with approximately 32 acres proposed for this purpose. This would fulfill the ambitions of the MSME community in Rajkot and Saurashtra.
Promising Fields for Development in Rajkot
Rajkot has seen significant progress in the MSME sector, but there are several other fields where substantial work can still be done. Despite the rapid advancement in sectors such as MSME, there are many other fields where Rajkot can excel.
Although the government has introduced incentive schemes such as interest subsidy and capital goods subsidy after the pandemic, their dispersal is not immediate, so attention should be paid to increasing incentives in them.
Industrial Registration Trends in Rajkot District
Since June 2020, industries in Rajkot district have been registered under the Industrial Memorandum on Industry Basis. From July 1, 2020, industrial registration commenced. In 2020, 13,308 industrialists registered their industries.
By 2021, this number rose to 40,642, and further increased to 45,950 in 2022, reaching 1,02,635 by 2023. Among these, 48% are manufacturing units, while 52% are service-based units. Service-based units include IT, tourism, call centers, hotels, and restaurants.
