Vizag–Chennai Industrial Corridor Xiv Sector- and Node-Based Development Xvi Policy and Regulatory Reforms Xvii Conclusion Xviii
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About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to approximately two-thirds of the world’s poor: 1.6 billion people who live on less than $2 a day, with 733 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. INDIA’s FIRsT COAsTAL CORRIDOR India's First Coastal Corridor VVIZAG–CHENNAIIzAg–CheNNAI IINDUSTRIALNDusTRIAL CORRIDOR CORRIDOR Conceptual Development Plan Draft Inception Report FINAL REPORT AsiAn Development BAnk 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ASIAN DEVELOPMENT BANK www.adb.org DRAFT FINAL REPO INDIA’S FIRST COASTAL CORRIDOR INDUSTRIAL CORRIDOR Conceptual Development Plan DRAFT FINAL REPORT ASIAN DEVELOPMENT BANK Contents List of Figures and Tables iv Acknowledgments xiii Executive Summary xiv Introduction xiv Vizag–Chennai Industrial Corridor xiv Sector- and Node-Based Development xvi Policy and Regulatory Reforms xvii Conclusion xviii Introduction 1 The East Coast Economic Corridor 2 The Vizag–Chennai Industrial Corridor 4 Study Approach and Summary of Findings 11 Analysis of Sectors and Key Enablers for Industrial Development 13 I Industry Analysis 35 Potential of the Corridor Region 35 Industries that Can Drive Growth in the Proposed Corridor 47 Proposed Nodes to Anchor the Industries 82 2 Enabling Competitive Manufacturing through Infrastructure Development 169 Introduction 169 Multi-Modal Transport Infrastructure to Enable Competitive Supply Chains 170 Other Infrastructure to Enable Competitive Value Added 251 3 Institutional and Regulatory Framework 309 Ease of Doing Business in India 309 Streamlining the Institutional Framework 311 Existing Legal and Institutional Framework 314 Emerging Models of Governance and Management 315 Streamlining the Business Regulatory Framework 318 Investment Climate 319 Ease of Logistics 319 Corridor Management: Cross-Cutting Issues 324 4 Urbanization and Land Management Framework 347 Strategic Framework for Proactive Urbanization and Land Management 347 iii List of Figures and Tables EXECUTIVE SUMMARY FIGURE E1. East Coast Economic Corridor: India’s First Coastal Corridor xv INTRODUCTION FIGURES A. Multi-Modal links between ECEC’s Gateway Ports and ASEAN Production Networks 3 B. Three Components of an Economic Corridor 6 C. Economic Clusters 6 D. Distribution Parks 8 E. Role of Cluster Management 9 F. Role of Corridor Management 10 G. Crafting a Strategy for the Industrial Transformation of VICC 11 H. Sectors Identified as Potential Winners in VCIC 13 I. Identification of Locations for Industrial Nodes 16 J. Potential Nodes in the Corridor 18 K. Framework for Assessment 19 L. Regulatory Framework Components 31 TABLES A. Potential Clusters in VICC 17 B. Locations for Node Development in VICC 17 C. Shortlisted Connectivity Projects by Category and Node 28 D. Attractive Investment Climate 32 E. Assessment Framework—Ease of Logistics 33 iv List of Figures and Tables v CHAPTER 1 FIGURES 1.1. Output of the Corridor under the BAU and BIS Scenarios 36 1.2. Contribution to Corridor’s Output by Sector, by 2034-35, Business-Induced Scenario 37 1.3. GVA of the Corridor under BAU and BIS Scenario 38 1.4. GVA of the Corridor’s Manufacturing Sector under BAU and BIS Scenario 38 1.5. Contribution to Corridor’s Manufacturing GVA by Sector, by 2034-35, Business-Induced Scenario 39 1.6. Employment of the Corridor under BAU and BIS Scenario 40 1.7. Wages per Employee in Andhra Pradesh (average from 2008-09 to 2011-12), by Sector 40 1.8. Composition of Sectors – Employment and Wages in Andhra Pradesh 41 1.9. Average Annual Wages – India vis-à-vis Other Countries, by Size of Enterprise 42 1.10. Share of Manufacturing Employment, by Size of Enterprise 43 1.11. Introduction of New Technology and Access to Bank Finance – Exporting & Other SMEs 44 1.12. Policy Measures Taken in Thailand to Develop Automotive Industry 45 1.13. Facilitation Mechanisms Aimed at Developing SME Capacity in Thailand 46 1.14. Network of Tier 1 and Tier 2 and 3 Suppliers – Automobile Industry in Thailand 47 1.15. Approach for Sector Selection 48 1.16. Foreign Direct Investment in Manufacturing Sectors in India, April 2000–July 2013 49 1.17. Completed Investment Trend in Andhra Pradesh and Tamil Nadu (1985–2013) 50 1.18. Industrial Entrepreneurs Memorandums (IEMs) Filed between 2008 and 2013 in India, by Sector 51 1.19. Merger and Acquisition (M&A) Deals in the Past Five years, by Sector 2008–09 to 2012–13 52 1.20. Relative Trade Advantage of India 53 1.21. Framework for Shortlisting Sub-Sectors 56 1.22. The Fragmentation Theory: Production Blocks and Service Links 59 1.23. Basic Dimensions of GVC Methodology 60 1.24. US–Torreon Apparel Value Chain: Activities and Location 64 1.25. Skill Analysis at Industry level 65 1.26. Distribution of Workers by Occupation 66 1.27. MSME Share to Total Employment, Enterprises, and Gross Output, by State 67 1.28. Exports and Average Output of MSME, by State 68 1.29. Andhra Pradesh: Key MSME Clusters by Districts 68 1.30. Tamil Nadu: Key MSME Clusters, by District 71 1.31. Methodology for Node Selection 83 1.32. Potential Nodes in the Corridor 86 1.33. Manufacturing Sector’s Contribution to State GDP, by District 87 1.34. Contribution to State’s Manufacturing Output & Employment, by District 88 1.35. Employment in Manufacturing, by District 88 1.36. Employment in the Unorganized Sector, by District 89 1.37. Contribution of Shortlisted Nodes to State’s Output and Employment 90 1.38. Mandals in Visakhapatnam Node 91 vi List of Figures and Tables 1.39. Major Industries in the Visakhapatnam Node 92 1.40. Analysis of Visakhapatnam Node 93 1.41. Mandals in Kakinada Node 95 1.42. Major Industries in the Kakinada Node 96 1.43. Analysis of Kakinada Node 97 1.44. Mandals in Gannavaram-Kankipadu Node 99 1.45. Major Industries in the Gannavaram-Kankipadu Node 100 1.46. Analysis of Gannavaram–Kankipadu Node 101 1.47. Mandals in Yerpedu-Srikalahasti Node 103 1.48. Major Industries in the Yerpedu-Srikalahasti Node 104 1.49. Analysis of Yerpedu-Srikalahasti Node 105 1.50. Key Focus Areas for Large Area Development 107 1.51. Contribution to Global Trade 2001-13, by Sub-Segment 111 1.52. Contribution to India’s Trade 2001-13 & Expected Output Growth Rate 2020, by Sub-Sector 112 1.53. Share in Andhra Pradesh’s Electronics Output 113 1.54. Comparison of Andhra Pradesh’s Productivity in Selected Sub-Sectors with Competing States 114 1.55. Contribution to Global Trade 2001-13, by Sector 117 1.56. Contribution of Sub-Sectors to Metallurgy Sector GDP 118 1.57. Growth Rate of India’s GDP vs. Metallurgy Sector 119 1.58. Contribution to India’s Exports, 2001-13; Expected Output Growth Rate 2020, by Sub-Segment 119 1.59. Share in Andhra Pradesh’s Metallurgy Output, by Sector (2011-12); Growth Rate (2008-12) 120 1.60. Comparison of Andhra Pradesh’s Productivity in Basic Iron and Steel 120 1.61. Yearly Trade Volume of Iron and Steel Commodities Expressed as ‘x’ times of 2003 Trade Volume 121 1.62. Contribution to Global Exports, 2001-13, by Sub-Segment 122 1.63. Composition of the Textiles and Apparels Sector 123 1.64. Contribution to India’s Exports, 2001-13; Expected Output Growth Rate 2020, by Sub-Segment 124 1.65. Share in State’s Textile Output 125 1.66. Comparison of Andhra Pradesh’s Productivity in Spinning, Weaving, and Finishing of Textiles 125 1.67. Contribution to Global Exports, 2001-13, by Sub-Segment 128 1.68. Contribution to India’s Exports, 2001-13; Expected Output Growth Rate 2020, by Sub-Segment 130 1.69. Share in Andhra Pradesh’s Food Processing Output (2011-12); Growth Rate (2008-12), by Sector 130 1.70. Comparison of Andhra Pradesh’s Productivity in Food Processing, by Sub-Segment 131 1.71. Contribution to Global and India’s Exports, 2001-13 133 1.72. Comparison of Andhra Pradesh’s Productivity in Pharmaceuticals, Medicinal, Chemical, and Botanical Products 134 1.73. Demand Drivers for India’s Pharmaceutical Industry 135 1.74. Contribution to Global Trade and Exports Growth Rate, 2001-13, by Sub-Segment 137 1.75. Contribution to India’s Exports, 2001-13 138 List of Figures and Tables vii 1.76. Share in Andhra Pradesh’s Chemicals and Petrochemicals Output (2011-12) and Growth Rate, by Sector 138 1.77. Employment and GVA Share of Shortlisted Sub-Sectors 139 1.78. Comparison of Andhra Pradesh’s Productivity in Selected Sub-Sectors 139 1.79. Contribution to Global Exports and Exports Growth, 2001–13, by Sub-Segment 141 1.80. Presence of India Across the Value Chain of OEM Manufacturing 142 1.81. Types of Suppliers by OEMs 143 1.82. Past Trends in Production of Passenger Vehicle (in million units) 144 1.83. Projection of Passenger Vehicle Production (in million units) 2014–2020 144 1.84. Estimation of Production Growth in Auto and Auto Components Sector 145 1.85. India’s Domestic and Exports Sale 146 1.86. Contribution to India’s Exports, 2001-13; Expected Output Growth Rate 2020, by Sub-Segment 146 1.87. Type of Vehicles and Share by Manufacturers 147 1.88.