Ahmedabad, Oct 10 (Reuters): Mukesh Patel`s factory making decorative lights sits eerily silent during what should be one of its busiest times of the year. Work at the plant in Ahmedabad, the largest city in Gujarat, has come to a standstill just ahead of India`s crucial festival shopping season as dozens of his workers have fled the state.

Their departure in recent days followed news of violence in Gujarat against migrant workers from the central states of Bihar, Uttar Pradesh and Madhya Pradesh.

Tens of thousands of them have fled in recent days, and many of the small factories and businesses they work in have come to a standstill in one of India`s most industrialised of its 29 states. No one knows if or when the workers will come back. "There aren`t enough people, so how will we continue?" said Patel, sitting in the reception area of his office opposite his factory building.

In addition to businesses, many of Ahmedabad`s street food stalls are closed because they were mostly run by people from the three states to the east of Gujarat.

The exodus began after the rape of a 14-month-old girl last month, allegedly by a man from the state of Bihar, sparked anger among locals, who threatened, and in some cases physically attacked, migrant workers from the three states. No one was killed and injuries were relatively minor, but the threats caused panic.

Local media reports said a speech by an opposition party politician, who vowed to take revenge for the crime if police did not act, may have stoked some of the violence.

Police arrested the man accused of the rape, but messages and videos of the threats spread quickly both via vigilante mobs and social media. Authorities have tried to defuse the crisis - police say nearly 500 people have so far been arrested and charged with rioting, assault and cybercrime, in relation to more than 50 reported offences. But the workers are fleeing back to their villages despite assurances from business owners and protection from the police.

"For more than a week, migrant workers have been leaving the state in jam-packed trains and vans every day," said Shyam Singh Thakur, who heads an association representing migrants. He estimated more than 70,000 workers had fled Gujarat since the beginning of the month but said it was difficult to provide any concrete data.

On Monday, an express train bound for Uttar Pradesh from Ahmedabad was full of people going back home because of the violence and the threats.

Among them was Trilokinath Chauhan, a welder, headed back to his village in the Ballia district of Uttar Pradesh, after working for nearly five years in Gujarat. He said a mob of about one hundred people threatened him and his friends on Saturday night, asking them to take "the first train out of Gujarat or face the consequences."

Chauhan and two of his friends decided to leave. "We`re all very scared," he told Reuters on Monday morning, sitting in a crowded compartment in the Ahmedabad-Lucknow Express. "I don`t know what to do now. I will have to look for a job in the village or work in the fields," he said as the train started pulling out of the station.

Atmosphere of fear

The exodus could badly hurt small- and medium-sized businesses in Gujarat, the home state of Prime Minister Narendra Modi, which he ran for 13 years and pitched as a model for industrialisation and growth. The state continues to be governed by his Bharatiya Janata Party. In the last two years, many of these businesses had already been stung by a slowdown due to two of the Modi government`s biggest reforms - demonetisation and the introduction of a nationwide Goods and Services Tax (GST).

"This will delay production and businesses will miss delivery deadlines," said Atulbhai Kapasi, president of the Gujarat State Small Industries Federation, adding that sectors such as textiles, engineering, chemicals and pharmaceuticals will suffer the most. "This will hurt their profits."

Some business owners have hired personal security guards for the workers while others have made arrangements for them to stay in their factories, he said. Some people have also set up relief camps on the outskirts of Ahmedabad to provide food and shelter to migrants and plead with them to stay.

"A lot of effort is being made to persuade people not to leave," said Sanjay Srivastava, an additional director general of police in the state.

The timing is especially bad as of demand for finished goods peaks around October and early November for the major Hindu festivals of Dussehra and Diwali.

Festive shopping is a big boost for Indian businesses as the period is considered auspicious for buying goods like jewellery, clothes, automobiles and houses. Economists estimate that sales of goods and clothing in October typically make up 35-50 per cent of annual sales.

Many businesses also take advance orders to fulfil the high demand and any disruption in production can lead to significant losses. "The biggest impact will be on the business-friendly image of Gujarat. That will take a beating," said Kapasi. "At the end of the day, it`s our loss."