"Faridabad is probably the only Indian town where virtually every household has an entrepreneur" Rajiv Chawla, Managing Director, Jairaj Ancillaries

From the outside, the two-storied, pale-yellow building is no different from similar edifices that adorn small-town north India. Standing at the end of an untarred road in Faridabad's New Industrial Township (nit), the building houses the office and factory of JaiRaj Ancillaries, a company that manufactures auto components and supplies them to firms such as Munjal Showa and Endurance Systems, which, in turn, supply systems incorporating these components to automobile manufacturers (in industry lingo, companies like Munjal Showa are called Tier I suppliers). A beige Toyota Corolla stands at the entrance of one shed, indicating that Rajiv Chawla, Managing Director, is in. It's a warm mid-September morning, an important day for Chawla; two executives from TUV Germany have just begun their four-day audit of his company as a run-up to awarding it with a TS 16949 certification, the highest quality standard for automotive components (the standard was created by the Detroit-based International Automotive Task Force). Once JaiRaj makes the grade, Chawla will be able to export components directly to IATF members; the list includes all auto majors General Motors, Ford, Toyota and DaimlerChrysler. "Even a small company like mine needs to be run professionally and think big," chuckles the 40-year-old Chawla, who has ordered a machine to cap the extra demand from an international order that he recently won. He hopes to close the year (2004-05) with Rs 10 crore in sales, double of what the company did in 2003-04. And he hopes to touch the Rs 100 crore-mark in five years.

Chawla's aspirations are no different from those of hundreds of small entrepreneurs across India who are anxious to make the big league. If there is something that sets him apart, it is that he and his company are based in Faridabad, a town in the state of Haryana. Once seen as the best option to heaving Delhi-the town is a stone's throw from Delhi's industrial and commercial districts Okhla and Nehru Place-the one-time industrial estate has fallen behind upstarts such as Gurgaon and Manesar (in Haryana) and Noida and Greater Noida (in Uttar Pradesh). Boosted by investments from multinationals and large Indian firms, and by the emergence of sectors such as it and it-enabled services, these have stolen a march over Faridabad. True, the town plays host to the likes of Escorts, Whirlpool, Goodyear, Eicher and GE Motors, but in the past decade-and-a-half, no large company has put down roots in Faridabad.

Gurgaon is the clear winner in the race to be Delhi's hottest and most happening satellite (and a pretty one-sided race it has been). From capital-intensive industries such as automobiles (think Maruti, Honda, Hero Honda) to corporate offices of every hue (Pepsi, British Airways, Coca-Cola, KPMG) to business process outsourcing firms galore (Convergys, GE Capital International Services), the satellite can boast it all. Gurgaon has also become the trendiest city in India with real-estate majors such as DLF, Unitech and Ansals developing modern office towers, gated enclaves, residential apartments and malls.

Noida comes a close second, thanks largely to its arrival as a destination for it companies: software firms such as HCL Tech and Adobe, BPO firms such as EXL Service and Xansa, even a Software Technology Parks of India campus have tilted the balance in its favour. Greater Noida, 50 km away from Delhi in up, houses some large manufacturing companies like LG Electronics, Moser Baer, Delphi and Yamaha, besides residential colonies; some reckon it to be among the better-planned townships in India. Even Manesar, till the other day just another Haryana town close to Delhi, has morphed overnight into a happening industrial hub, with Maruti and Suzuki announcing an investment of Rs 6,000 crore over the next five years for setting up a new car assembling plant and also a diesel engine facility (which will churn out 2,50,000 cars and 3,00,000 diesel engines, respectively, in the next two to three years). Faridabad has never been on the radar of these companies. That's the bad news.

CROWN PLAZA MALL FARIDABAD Crown Plaza, a mall-cum-entertainment complex, houses big tenants like Ebony, Pizza Hut, Barista and a three-screen multiplex by PVR

The good news is that the town has witnessed, and is witnessing, hectic industrial activity of a different sort, one driven almost entirely by businesses set up by local entrepreneurs, not fat-cat investors from Japan or Korea. This isn't evident as one drives into Faridabad; on the Delhi-Mathura road (one enters Faridabad right after the Badarpur power plant), the companies that meet the eye are Escorts, Talbros, Clutch Auto, Yamaha and JCB. All have been in Faridabad for more than two decades. Once you reach Neelam Bridge in the town's centre, however, the industrial topography changes. This is where Faridabad's small and medium enterprise (SME) story begins. Every fourth person (the town has a population of 2.2 million) works directly or indirectly for an SME; at last count there were 14,000 of the breed in Faridabad that, together, generate sales of some Rs 8,000 crore; and in the last four years 2,000 SMEs have been born here.

Faridabad has over 6,000 light engineering companies (mostly in the auto components business), hundreds of polythene and paper packaging units, home appliance makers (fan-making is a household industry), manufacturers of melamine crockery and machine tools, and businesses into textile dyeing, printing or allied industries. "In Faridabad, you can see all kinds of industries from low-end casting to high-end pharma", says Gurpal Singh, Senior Director in charge of small industries at the Confederation of Indian Industry. The reason: A profusion of enterprise. "Faridabad is probably the only Indian town where virtually every household has an entrepreneur," says Chawla, who is also the honorary secretary of Faridabad Small Industries Association (FSIA), with a membership exceeding a thousand.

Faridabad's population is largely made up of immigrants who abandoned Pakistan in the wake of partition-engendered violence (circa 1947) and Punjab in the 1980s when extremist violence was at its peak in the state. The first wave of entrepreneurship in Faridabad began when Eicher Tractors and Escorts set up shop in the city in the 1960s. "Most of the units came up as ancillaries to these two," says Navdeep Chawla, President, Manufacturers Association of Faridabad, and the owner of pharma company Psychotropics India Ltd. Subsequently, Faridabad emerged the most industrialised satellite of Delhi (Gurgaon and Noida were not part of industrial lexicon then), with some 40-odd big companies setting up base in the town; apart from Eicher and Escorts, this included Goodyear, Tecumseh and Bata India.

Unfortunately, Faridabad's affair with big business was to be short-lived: new businesses in this part of the country soon started looking at places such as Noida, Gurgaon, even Baddi in Himachal Pradesh for a variety of reasons-better infrastructure, tax concessions, the local government's business-friendly policies, or a combination of the three. Then, Eicher Tractors shifted most of its manufacturing to its new plant in Pitampur, near Indore; the Escorts Group, which had 12 different businesses in Faridabad, exited its joint ventures with Yamaha, Claas and JCB, resulting in business restructuring and less work for the local smes; and many traditional large businesses like East India Cotton Mill, Metal Box and Jalani Tools shut shop. Worse was to come: following the defeat of his party's candidates in the elections to the 14th Lok Sabha in 2004, Chief Minister Om Prakash Chautala is reportedly not very keen to further Faridabad's credentials as an industrial hub. The Haryana government has recently asked the central government for Rs 50 crore to develop Faridabad, but this may be too little too late.

THE BADDI EFFECT: Businesses such as Birla Textile Mills are looking at places like Baddi in Himachal that offers better infrastructure, tax concessions and business-friendly policies

Despite government apathy and the desertion of big businesses, Faridabad has chugged along, largely thanks to its SMEs. Some 200 of these have succeeded in graduating to medium- and large-scale companies in the last five to 10 years. There is D.N. Kathuria who started off as a supplier to K.P. Singh's DLF Universal (it used to make fans in the late 1960s and 1970s), and who now heads the five-company-strong Venus Group. Its flagship, Shivani Locks, supplies locks to auto majors such as Maruti, Tata Motors, Ford and General Motors, employs 1,500 people and generates a turnover of Rs 150 crore.

Then there is Gulati Steel Fab, an SME-turned-mid-sized-company that competes with MNCs like LG Construction for infrastructure projects (it is working on the Delhi Metro, some flyovers in the city, and a project at Indian Oil's Panipat Refinery). The company recorded a turnover of Rs 160 crore last year and hopes to grow at 30-40 per cent a year.

And there are others such as Hindustan Syringes, whose Dispovan is a household name, and Lakhani Shoes, the largest manufacturer of sports shoes and flip flops (turnover Rs 300 crore) in the country.

If the Kathurias, Gulatis and Lakhanis are examples of small firms turning into medium or large ones, Faridabad also abounds in stories of professionally qualified local youth trying their hand at entrepreneurship and tasting success. Rahat Bhatia, a 31-year-old mechanical engineering graduate from ms University of Baroda is one such. Bhatia's company Raga churns out sophisticated machine tools for clients like Maruti, Subros and Honda Motorcycles (these used to be imported earlier), from a sub-1,000 sq. ft. facility in Faridabad's nit (it is located in a residential alley that can barely accommodate a light commercial vehicle). "It's unbelievable," gushes Bhatia. "Without any support from the government, Faridabad has several thriving small businesses like mine." Bhatia set up his unit six years ago after a two-year stint at L&T, Mumbai. Raga is expected to cross sales of Rs 1 crore this year and has already tied up a bank loan of Rs 24 lakh to buy an industrial plot for expansion. "I managed to get the loan approved in a week with the help of established entrepreneurs like Rajiv Chawla," says Bhatia.

FARIDABAD'S INFRASTRUCTURE WOES Hundreds of trucks carrying components to auto companies have to brave an under-developed road that connects Faridabad and Gurgaon

That isn't altogether surprising: it may be a function of the external apathy or it may be something else, but Faridabad's small entrepreneurs stick together. For instance, established businessmen who are members of FSIA have taken it upon themselves to help people like Bhatia. Companies often band together in groups of 10 and approach quality audit firms for a block discount when they want to acquire an ISO certification. Even computers, generators and air conditioners are bought collectively.

The result is a hothouse of entrepreneurship that encourages anyone, even those from an underprivileged background, to jump into business. Take the success of Bharatiya Yuva Shakti Trust (BYST), a national-level organisation that helps underprivileged youth set up businesses. Out of 170 people BYST funded in Faridabad four years ago-it lends Rs 50,000 without any collateral to an individual-around 140 are doing just fine, a percentage of success the agency has not enjoyed anywhere else. And seven of the 140 have made it big with a turnover in the region of Rs 1 crore. One, Ramesh Goyal, has just pitched for a Rs 20-lakh loan from the International Finance Corporation (IFC) to expand his spices business.

It doesn't matter if IFC declines; Goyal will get the loan anyway from either the Bank of Nainital or Syndicate Bank that have actively been lending to SMEs in Faridabad (one of his mentors will put in a word). It makes good business sense for the banks to do this. For instance, although 27-year-old Goyal isn't backed by a college education, he makes money and employs seven people. "Entrepreneurship is so widespread in Faridabad that every kid grows up with the idea of starting up a business of his own, whatever his education is," says R.K. Bhatia, 67, Chairman of the Rs 60-crore Belmaks Group, an auto components company.

Faridabad may be thriving, but it has always lived under the shadow of Delhi. A Faridabad marriage will happen in a Delhi farmhouse, a party in a Delhi five-star hotel. Even for shopping, Faridabad residents will hit Delhi. While Gurgaon and Noida have witnessed the mushrooming of malls and multiplexes, Faridabad has all but been ignored. For instance, a local entrepreneur who built Crown Plaza, a 2.4-lakh sq. ft. mall-cum-entertainment complex in Faridabad, struggled to sell the concept for two years. The picture, however, is beginning to change.

"Entrepreneurship is so widespread in Faridabad that every kid grows up with the idea of starting up a business of his own'' R.K. Bhatia, Chairman, Belmaks Group

Only two months ago, PVR, a Delhi-based company that runs multiplexes across the country opened a three-screen one in Crown Plaza. Other big tenants that have moved into the complex include McDonald's, Ebony, Pizza Hut and Barista. Even Citibank has opened a full-fledged branch. Enthused by the response, the promoter, R.S. Gandhi, is building another mall, this time a 7-lakh sq. ft. one. And some 20 malls are in the pipeline (developers include LDF, Eros, Parsvanath and Senior Builders).

Faridabad's chief housing provider still remains Haryana Urban Development Authority (HUDA) save a couple of players like Eros and Omaxe. Compare that to Gurgaon, which is dominated by private colonisers like DLF, Unitech and Ansals that have built more than 20,000 apartments in the last 10 years. Still, Omaxe's Green Valley housing project in Faridabad's picturesque Surajkund area was a sell-out last year, indicating the shape of things to come. And HUDA is auctioning the land for a five-star hotel.

Much of Faridabad's woes have to do with infrastructure. After octroi (tax) was abolished in 1999, the Municipal Corporation of Faridabad barely gets enough income to pay salaries, leave alone allocate any funds for development. Strangely, the local area development taxes (LADT) collected do not come back to the district for its own use, a major grouse of its residents. The result is a host of infrastructure problems-for example, a huge traffic bottleneck at Badarpur, the main entry point to Faridabad on the Delhi-Mathura Road-hampering full-blown industrial growth.

Even the road connecting Faridabad and Gurgaon-hundreds of trucks travel on this stretch every day carrying components to Hero Honda, Maruti and Honda Scooters-is not well-developed.

If that's not enough, the local government has stopped registering units coming up in non-conforming areas (non-industrial plots) from 2000 onwards. For instance, out of the 14,000 industrial units in Faridabad only 3,000 are located in authorised industrial areas. The fault is not entirely industry's. Haryana State Industrial Development Corporation (HSIDC) and HUDA, the two nodal agencies for developing land, have failed to develop small plots ranging from 100 sq. yard to 500 sq. yard for use by SMEs. Currently, the minimum size of a plot hawked by HSIDC and HUDA is 1,000 sq. yard; this could cost anything above Rs 20 lakh (the prices of industrial plots have skyrocketed from Rs 1,500-2,000 per sq. yard three years ago to Rs 7,000 now). Ergo, says Chawla, small entrepreneurs have no option but to set up units in non-conforming areas. This problem may require the authorities' urgent attention before it derails Faridabad's second attempt to become a boomtown.