Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the Program
Country: India
Program: Gujarat Investment Promotion Program
Loan Agreement: September 15, 2017
Loan Amount: 16,825 million yen
Borrower: The President of India
2. Background and Necessity of the Program(1) Current State and Issues of the Investment Climate in India
The Indian economy, which was once rather closed due to control of the entryof foreign capital and the policy of import-substituting industrialization, began topick up in 1991, when the deregulation and liberation policy was introduced. The
policy began to bear full fruit in FY2000. Since then, the economy has beenprosperous, growing at an average annual rate of more than 7 percent. The Indian
economy is expected to expand even further. The Three-Year Action Agenda(2017-2019) of NITI Aayog (the National Institution for Transforming India Aayog(Aayog means “Commission”)) projects a growth rate of 11-15 percent for FY2019
in nominal gross value added, surpassing the growth rate of 10.4 percent for
FY2016. In response to a drop in the inflation rate, fueled by plunging oil prices,
the Reserve Bank of India reduced the interest rate in stages starting in 2014. The
Indian economy grew by 7.6 percent in FY2015, supported by robust personal
consumption and industrial expansion.
Annual inflows of foreign direct investment, which averaged around 25 billion
US dollars from FY2007 to FY 2013, with the peak year of FY 2011 with 35.1
billion US dollars, topped 40 billion US dollars in FY 2015. They are expected to
grow further. The FY2014 (the 26th) Survey Report on Overseas Business
Operations by Japanese Manufacturing Companies, released by the Japan Bankfor International Cooperation, put India on top of the list of “Promising
Countries/Regions for Overseas Business over the Medium-term (next 3 yrs. orso) Prospects” for the first time, leaving Indonesia behind. The report cites the
sheer scale and growth potential of the Indian market as well as cheap labor. India
was No. 1 for FY2015 and FY2016 as well. (The country has remained on the topof the “Promising Countries/Regions for Overseas Operations over the Long-term(next 10 yrs. or so) Prospects” since the FY2010 Survey).
Yet the FY2014 Survey identified underdeveloped infrastructure, unclear
execution of the legal system, and the complicated tax systems as some of theissues to be addressed in the eyes of Japanese companies in the context ofmaking new or additional investment in India. These and other issues need to beaddressed if India is to lure more foreign direct investment (FDI).
The country’s manufacturing industry is weak, as compared with some 30
percent for China and Thailand, and about 20 percent for Indonesia. It accounts
for only 16.6 percent of real GDP in FY2015. The promotion of the manufacturingindustry is increasingly called for in recent years in the context of job creation thatabsorbs redundant labor force from rural areas as well as export creation thatbanks on cheap and abundant labor.
Gujarat is a state in West Central India. Situated in a strategic node thatconnects with the Middle East, Gujarat State is an engine for the economic

development of India, accounting for 19 percent of total exports and 41 percent of
the total port cargo volume in FY2015. The state is also valued from theperspective of industrial advancement as one of the states covered by the
Delhi-Mumbai Industrial Corridor (DMIC) initiative, a regional development
program that was agreed on in 2006 between the Government of India and theGovernment of Japan. The Government of Japan is considering extending
financial assistance to priority infrastructure development projects that will help toimprove the investment climate in DMIC.
Gujarat is in the process of ensuring a better business climate than manyother states in India. In 2016, the state was placed third among the 36 states andunion territories according to Assessment of State Implementation of Business
Reforms, which was jointly conducted by the World Bank and the Ministry ofCommerce and Industry (MCI).
Still, foreign companies doing business in the state are calling for further
improvements in the local investment climate. Among the major challenges theycite are the qualities of training concerning industrial skill development, firmly
projected deficiencies in infrastructure over the mid- to long-term amid an
expected surge in business operations in India by Japanese auto manufacturers
and related businesses, and delays in processing various kinds of investment
clearance.
(2) Development Policies for Improving the Investment Climate in India and thePriority of the Program
The Government of India is promoting economic growth and job creation
through the promotion of investment from domestic and foreign businesses basedon two policies that Indian Prime Minister Narendra Modi recently announced.
The “Make in India” policy, announced in September 2014, is designed to create
100 million jobs by developing the manufacturing industry. The “Skill India” policy,
released in July 2015, is aimed at providing vocational training and increasing theemployment rate.
As part of its efforts to successfully implement these two policies, the MCI
improved the 98-point action plan for business improvement it established in
December 2014 to come up with a 340-point action plan in October 2015. The
MCI recommended the new business improvement plan to the regional
governments of states and union territories. Among other points in the action plan,
points concerning protection of the interests of small investors were highly
welcomed. This appreciation, together with other efforts, pushed the ranking in theWorld Bank’s Ease of Doing Business index from 142nd among the 189
economies in 2015 to 130th in 2016. Still, the complex procedures of tax
payments for obtaining investment/construction permits and tax remainunresolved. In order for the Government of India to achieve its target of gaining aplace in the top 50, the MCI and regional governments need to further improve theinvestment climate by streamlining various regulations. Apart from complexities in
the procedures for investment permits and the tax system, inadequate industrial
infrastructure constitutes a bottleneck for foreign businesses to do business inIndia. Thus, there remains a great demand for funds to finance infrastructuredevelopment in the regions.
In its development plan “BIG 2020” (August 2009), Gujarat State states that it
aims to triple real GDP from 2.1 trillion rupees to 6.46 trillion rupees by 2020 andquadruple per capita income (adjusted by purchasing power parity) from 3,019 US
dollars to 12,615 US dollars during the same period, among other economic

indicators. The plan envisions a total of 1,119.2 billion rupees in investment for
urban development (2008-2020).
The Gujarat Investment Promotion Program (the “Program”) is designed torelieve the bottlenecks for foreign businesses wishing to do business in India suchas inadequate industrial human resources, insufficient infrastructure, andinefficient administrative procedures. The Program can be considered one of theundertakings for achieving the BIG 2020.
(3) Japan and JICA’s Policy and Operations for Improving the Investment
Environment
Japan’s Country Assistance Policy for India (March 2016) states that Japan
will provide assistance for de-bottlenecking the constraints to investment andgrowth. It also states that “under the programme-based approach, policy matrices
are mutually agreed through close and continuous policy dialogue; monitoring andreview are conducted; and assistance is guided by its progress” and “Japan will
gradually promote the programme-based approach, as appropriate.” JICA
Country Analysis Paper for India (March 2012) identifies the development ofindustrial and urban infrastructure as one of the priority areas. It states that priority
is given to the development of infrastructure that underpins the entire regional
industry, most notably infrastructure related to DMIC and the Chennai Bengaluru
Industrial Corridor (roads, railways, electricity, water, etc.), and institutional
improvement that may contribute to a better investment climate. JICA’s activities
in this particular area include two ODA loan programs--the Tamil Nadu Investment
Promotion Program (L/A signed in November 2013), and the Tamil Nadu
Investment Promotion Program (Phase 2) (L/A signed in March 2017), as well as
the technical cooperation activity entitled “Adviser on Investment Promotion”(2015).
(4) Other Donors’ Activity
The World Bank has provided technical cooperation to the MCI to improve theinvestment environment (investment climate survey in each state in September2015). The Asian Development Bank has supported the development of
renewable energy in Gujarat State.
(5) Necessity of the Program
The Program is consistent with India’s development policies and Japan’sCountry Assistance Policy for India. It will contribute to improving the investment
climate in Gujarat State through policy and institutional improvement andinfrastructure development. The Program is also expected to contribute toachieving two SDGs: Goal 8 (“Promote sustained, inclusive and sustainableeconomic growth, full and productive employment and decent work for all”) and
Goal 9 (“Build resilient infrastructure, promote inclusive and sustainableindustrialization and foster innovation”). Therefore, JICA’s support for the
implementation of the Program is much needed.
3. Program Description(1) Program Objective
The objective of the Program is to encourage policy and institutional
improvement in Gujarat State in West Central India through financial support withregard to private investment promotion including FDI, industrial advancement andskill development, as well as to improve the investment climate for thedevelopment of infrastructure in the state, including roads, electric power, andwater, thereby contributing to increased private investment such as FDI in thestate.
(2) Program Site/Target Area: Gujarat State(3) Program Component
In view of the plans of operation of the competent departments of the state
government as well as the requests from the private sector with regard to private
investment promotion, industrial advancement, and skill development, theProgram has sorted out policy actions to be accomplished in each fiscal year in apolicy matrix and will support the achievement of these policy actions, with thestate government and JICA monitoring the performance.
In consultation with the state government, eight policy items have been identified,
as shown in the policy matrix below, based on the three pillars of reform--(i) the
promotion of private investment and industry, (ii) skill development, and (iii)
infrastructure development--because they are considered effective and feasible
policy actions. The eighth policy item concerns small infrastructure developmentthat foreign investors have strongly requested--most notably the widening andresurfacing of roads in and around industrial parks. As specific policy actions forthis policy item, the Small Infrastructure Project Empowered Committee to beorganized within the state government will prepare a project monitoring matrix andsupervise and promote the progress using such a matrix for timely infrastructuredevelopment.
Goals
Policy Items
Major Policy Actions
Develop world-class industrial estates across thestatePromote sustainability and green initiatives inIndustrial development
Enable ease of doing business by providing quality
support and last mile infrastructureCompanies in GIDC estate can consult various
matters with GIDC's satellite office near the area in
1. Enabling GIDC'sa timely mannercapacity to develop Development of a Business Plan for next 5 years forworld class industrial
GIDC
estates Create a task force group responsible fordeveloping plans that align with the needs ofindustry etc.
 Promote sustainable industrial park measures toreduce water, and power intensity in Industrial
estates.
 Appointment of relevant officers to the satellite
office Enhance Ease of Doing Business in Gujarat byenabling
100% online approvals for set up/
2. Single window system
operations/ expansion in GIDC estatesfor GIDC industrial
 Integrate application and payment for common user
estatesfacilities into the online system Adopt an online process for disposal of files and
3. Strengthening theSingle Window for
new investments in
Gujarat
4. Strengthening of
iNDEXTb
5. Capacity building of
the PPP cell

6. Apex Training Institute
and Training ofTrainers (ToT) for Skill
Development

7. Strengthening ofGujarat Skill
Development Mission& Skill Gap Study

8. Acceleration of
infrastructuredevelopment

other correspondence
Set up and operationalize a comprehensive single
window system
Create an investment monitoring framework
Update and integrate applications on the new single
window portal; developing security and online
payment capabilities at the same time
Create an investment monitoring framework tomeasure the approval timeline
Create a comprehensive database with project
profiles, sector reports, country reports etc.
Facilitate grounding of investments in the state
Create a policy research cell in iNDEXTb. Researchon industrial climate and recommend improvement
areas/sectors. The cell will provide policy/incentive
inputsEnable private sector participation in infrastructure
projects within the State by developing capability to
implement PPP projects
Conduct training sessions/trains for nominatedpeople to improve skills for structuring andimplementation of PPP projects
Develop a project monitoring matrix for monitoringof 5 selected projects
Monitor the selected projects in accordance with the
project monitoring matrix
Enhance quality of training institutions in the state,by creating Gujarat Apex Training Institute (GATI)Create a roadmap for an apex training institution in
PPP Mode agreeable amongst all stakeholders
including private players.
Prepare benchmarking standards for trainers andtrainees based on international affiliations
Perform a state level skill gap analysis & districtlevel skill gap analysis
Identify and implement new models of industry
participation in vocational training
Skill certification program – Recognition of Prior
Learning
Perform a state level skill gap analysis & districtlevel skill gap analysis
Introduce new training trades. Modify existingcourse curriculums for removal of obsolete training
trades.
Small infrastructure Project Empowered Committee
will select the priority projects and allocate budget
properly
The administrative departments and implementing

agencies will appropriately monitor and facilitate thepriority projects
Small infrastructure Project Empowered Committee
will select priority small infrastructure projects
Facilitate implementation of the priority small
infrastructure projects in accordance with theestablished Project Monitoring Matrix(4) Estimated Program Cost (Loan Amount)
ODA loan amount: 16,825 million yen(5) Schedule
The commencement of financial support under the Program is scheduled for April
2016. The targets of the policy actions are set for March 2017, March 2018 andMarch 2019. The program monitoring committee assesses the performance thefollowing fiscal year. Loans will be provided after the attainment of the targets is
confirmed. The Program is considered completed when the last loan is provided(scheduled for June 2019).
(6) Program Implementation Structure1) Borrower: The President of India
2) Executing Agency: Finance Department, Government of Gujarat(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Consideration(i) Category: C(ii) Reason for Categorization: The Program is deemed to have the minimum
adverse impact on the environment as defined by the JICA Guidelines forEnvironmental and Social Considerations, promulgated in April 2010.
2) Promotion of Poverty Reduction: None in particular3) Promotion of Social Development: Consultation with the state government
has acknowledged the importance of vocational training and employment
support for women in the process of improving the investment climate.
(8) Other Important Issues: The Program will also support promotion of theimplementation of small infrastructure projects (such as the widening andresurfacing of roads in and in/around industrial parks) that will benefit industrial
areas including the Mandal-Becharaji Special Investment Region (SIR).
4. Targeted Outcomes(1) Quantitative Effects
1) Outcomes (Operation and Effect Indicators))
Program
objectives

Indicator

Baseline(Actual value inFY2015)

Target (FY2019)[Expected value at
programcompletion]

Application processing
within the target period
at the single window
Policy and portal site for investors
institution (%/year)
improvement Cumulative total of casesthat will where the investment
contribute to promotion bureau has
disseminated new
privateinvestment project proposals or
promotion other information topotential investors
andindustrial Cumulative total of cases
advancemen where iNDEXTb has
supported grounding of 2t
industrial projects
Cumulative total of PPP
project monitoring matrix

N/A

85% of theapplications havebeen processed.

N/A

30

0

2

0

5

Cumulative total of0participants in training(The training institutecourses for trainers andhas yet to be
youths at the state apex
established.)
Policy andtraining instituteinstitution
Rate of increase inimprovement
number/registrations ofthat willyouth interested in
N/Acontribute toskilling (from FY2017 toskill18) (%)
development
Annual percentage ofplacement andN/Aself-employment of theskilled trainees
Improvement
Cumulative total ofof thepriority small
investment
infrastructure projects
climate for
involving roads,
infrastructure
0electricity, water, orsuch asothers, prioritized androads,
facilitated during theelectricity,
program period
and water

200 trainers
500 youths

10

50 (employed)20(self-employed(farmers, etc.))5

Note: The Program aims to attain the goals for each policy item by the time of theProgram completion. Therefore, the operation and effect indicators will bemeasured at program completion. For reference, the Program will also monitor
the annual number of investment-related applications submitted to be processedin the single window clearance system for investors.
(2) Qualitative Effects

Promotion of socioeconomic development in the state through investment climate
improvement, not least the development of the capacity of the state government
to implement infrastructure projects, as well as an increase in FDI to the state(3) Internal Rate of ReturnNot calculated.
5. External Factors and Risk Control
None in particular
6. Lessons Learned from Past Programs(1) Results of Evaluation of Similar Past Programs
The ex-post evaluation in FY2011 of the “Development Policy Support Program(II) (III),” an ODA loan program for the Republic of the Philippines, notes that
although some reforms were achieved, including streamlined administrative
procedures and integration of the points of contact for import permits at harbors
into a single clearance window, Japanese companies in the Philippines were notmuch aware of these achievements. The 2011 evaluation suggests that
information dissemination and sharing with such Japanese firms are important intranslating these institutional improvements into attracting more business
operations.
The Tamil Nadu Investment Promotion Program involved policy monitoring
through ODA loan account technical assistance as well as coordination among
the stakeholders. These activities proved the effectiveness of technical assistancein facilitating progress monitoring and program implementation.
(2) Lessons for the Program
In the processes of drawing up the policy matrix and considering small
infrastructure projects, the Program has made arrangements for the State
Government of Gujarat to take the lead in exchanging views with Japan’s Ministryof Economy, Trade and Industry and local Japanese stakeholders (including
JETRO’s Ahmedabad project office and local Japanese firms). The Program thus
takes the requests from these different entities into account. In monitoring
progress in policy actions, the Program will work with the JETRO office and local
Indian firms as necessary to facilitate the sharing of information on the program
progress with the private sector as well as collaboration with it. The Program will
also consider technical assistance in implementing and monitoring a wide rangeof policy actions and sharing information with the stakeholders, as in the case of
the Tamil Nadu Investment Promotion Program.
7. Plan for Future Evaluation(1) Indicators to be Used
1) Application processing within the target period at the single window portal site
for investors (%/year)
2) Cumulative total of cases where the investment promotion bureau has
disseminated new project proposals or other information to potential investors
3) Cumulative total of cases where iNDEXTb has supported grounding of 2
industrial projects

4) Cumulative total of PPP project monitoring matrix
5) Cumulative total of participants in training courses for trainers and youths at
the state apex training institute6) Rate of increase in number/registrations of youth interested in skilling (from
FY2017 to 18) (%)7) Annual percentage of placement and self-employment of the skilled trainees8) Cumulative total of priority small infrastructure projects involving roads,
electricity, water, or others, prioritized and facilitated during the program
period(2) Timing
At the time of program completion