China will set up two industrial parks in India, in Maharashtra and Gujarat, at an investment of $6.8 billion (Rs 40,800 crore). The two countries signed an agreement for the first park, to be set up near Baroda, on Wednesday.
The deal was signed in Ahmedabad in the presence of visiting Chinese President Xi Jinping and Prime Minister Narendra Modi. The agreement for the second park in Maharashtra will be signed in Delhi on Thursday.
An integrated industrial park providing high-quality infrastructural facilities, and has separate industrial, residential and commercial areas with developed plots/ pre-built factories, power, telecom, water and other social infrastructure. The availability of high quality infrastructure results in lower transaction costs and shorter start-up time for user industries that set up shop in these industrial parks.
The agreement is expected to facilitate investment from Chinese companies into India, and accelerate the development of a competitive manufacturing sector in India.
This is expected to help domestic industry, since many goods which are now being imported from China could be expected to be produced in the country which in turn is expected to reduce the country’s trade deficit. The widening India-China trade deficit is major cause of concern for Indian policy planners.
For the state government, an industrial park offers economies of scale in terms of development of land and infrastructure, including common facilities. It also helps industrial development and facilitates the development of local areas including backward ones. It also helps in state to meet social objectives like generation of employment, creation of social infrastructure and provides additional revenues through taxes and duties.
Both countries have agreed to increase bilateral investments in accordance with the relevant domestic laws and regulations of each country, and on the basis of equality and mutual benefit. China and India have also agreed to share relevant information on the regulatory framework and investment priorities/projects as may be needed during the preparation of investment proposals.