MSME Day: Celebrating the Backbone of Rajkot’s Economy

Rajkot, Gujarat : Every year on June 27, MSME Day is celebrated globally to recognize the significant contributions, potential, and achievements of Micro, Small, and Medium Enterprises (MSMEs). These enterprises play a crucial role in sustaining livelihoods, driving local and national economies, and promoting equitable economic growth. In Gujarat, the city of Rajkot stands out for its dominance in the MSME sector, particularly in the manufacturing of auto parts. Industrialists in Rajkot are now gearing up to venture into producing defense and navy parts, but they emphasize the need for increased government support, particularly in terms of export incentives and GST rate reductions.

Rajkot is home to over 1 lakh MSME manufacturing and packaging industries, employing around 7 lakh workers. Pareshbhai Vasani, former president of the Rajkot Engineering Association, highlights the robust presence of MSMEs in the city. “Today, Rajkot has more than 50,000 registered MSME units, primarily focused on casting, forging, and auto parts. Our exports are substantial, but the rising cost of container freight is a significant challenge. We need the government to increase export incentives back to 4-5% from the current 1-2% to provide relief to the industries and boost exports,” Vasani said.

Auto parts from Rajkot are supplied to almost all automobile companies, and the city is also known for its units producing machine tools, gems, jewelry, and hardware. Although Rajkot was once famous for its diesel engine sector, the advent of electricity has shifted the focus to submersible pumps. The introduction of CNC machines has further accelerated the growth of Rajkot’s MSME sector.

Despite this progress, industrialists in Rajkot face challenges due to high GST rates. Vasani suggests merging the 12% and 18% GST slabs into a single 14% slab and reducing the 28% GST rate on auto parts and automobiles. “This reduction would significantly encourage the industries in Rajkot,” he added. The city has witnessed substantial growth in the MSME sector over the past decade, with the number of registered units rising from around 20,000 to 50,000. However, Vasani calls for the expansion of the Gujarat Industrial Development Corporation (GIDC) to further boost the sector.

The introduction of GST has increased the government’s tax collection, surpassing expectations. Vasani points out that Rajkot’s MSMEs are now paying more than double the GST compared to five years ago. He urges the government to maintain reasonable GST rates while bringing petroleum products under GST to provide additional incentives to industries.

Rajkot’s MSME sector heavily relies on commodities like metal, steel, aluminum, copper, nickel, coal, petroleum products, and packing materials. The Russia-Ukraine war had a direct impact on the sector, affecting the export of bearings, cylinder liners, motor bodies, and various types of pumps, renowned both nationally and internationally.

In a recent meeting between the Rajkot Chamber of Commerce and Industry, MSME Development Commissioner Ashwini Lal, and other officials, several proposals were discussed. One notable request was the establishment of an MSME Bhawan in Rajkot to cater to the growing needs of the MSME sector. Additionally, there has been a long-standing demand for a convention center in Rajkot, and around 32 acres of land in the NSIC ground have been provisioned for this purpose.

According to data from the Rajkot District Industries Centre, 48% of the 1,02,635 industries registered on the Udyog Aadhaar memorandum before June 2020 are manufacturing units, while the remaining 52% are service-based units, including IT, tourism, call centers, and hotels. The enterprise registration started on July 1, 2020, and the number of registered industries has been steadily increasing, with significant growth observed each year.