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States-Cities To Play Major Role In Indian Industrialization

By Avalon ConsultingApril 5, 2019April 24th, 2023No Comments

Indian states and major cities will henceforth play a major role in industrialization of India and the race is on as each state is seeking investment independently.

Given the attractive growth trajectory of 7 per cent per annum in Gross Domestic Product (GDP), foreign investors are responding favourably to recent policy reforms, said Girija Pande, who is Chairman of Singapore-based Apex Avlon Consulting Pte Ltd.

Pande was recently moderating a high-level Investment seminar in Singapore on role of Indian states hosted by the Confederation of Indian Industry and the Indian High Commission here.

“Foreign investors remain bullish on India with its improving economy, backed by the Central Government’s recent reforms of GST and Bankruptcy laws which has improved transparency, ease of doing business and improving the Banking sector so that industrial lending can resume.

“Investors’ favour India for its strong consumer-driven domestic demand as well as huge export potential which falls in line with the Government initiatives,” Pande, previously the Chairman of TCS Asia Pacific, pointed out.

A growing number of Indian states are active in wooing International investors as the Central Government in New Delhi has increasingly delegated its authorities in this area, giving the states a free hand and independence of seeking foreign direct investments.

Under current rules, only very large foreign investments in some restricted sectors and multi-billion-dollar projects requires New Delhi endorsement.

“Clearly Indian States now have most of the authority to attract investors which makes them reasonably autonomous. New Delhi, in a way, has decentralized FDI processes – very similar to what they have for provinces in China,” he pointed out.

“Four southern and two western states along with NCR have been most successful in attracting the bulk of investments into the country by creating a very competitive and enabling environment,” he noted.

The states are Tamil Nadu, Telangana, Karnataka, Andhra Pradesh, Gujarat and Maharashtra with commercial hubs being created in cities of Chennai, Bangalore, Hyderabad, Pune and Mumbai.

Similarly, NCR has Gurgaon/NOIDA cities which are favourites of foreign investors, noted Pande.

He also noted that most of the states were now seeking “ease of doing business ranking in their respective jurisdiction” from international agencies.

“There is now a very healthy competition amongst States to attract investments which is excellent as it improves all,” he added.

The Lee Kuan Yew School of Public Policy School in Singapore has set up competitive metrics for ease of doing business and many Indian states have begun to use such metrics to simplify regulations and improve businesses processes. The School’s Asia Competitiveness Institute ranks the states and help with creating ease of doing business processes.

“Investment promotion requires State Governments to build trust with investors by creating a progressive and stable regulatory regime and attractive incentives.

“These are some of the good measures being adopted by the pro-active Chief Ministers – an increasing number of whom are participating in such investment seminars and setting up one stop online investment portals,” he said.

Pande feels that newcomer states such as Punjab, Madhya Pradesh, Uttarakhand, Rajasthan and Chhattisgarh, who have held investment seminars in Singapore, should focus on differentiating themselves by establishing industry specific clusters.

“The way forward is to establish industry clusters,” said Pande, citing the success of Chennai, Gurgaon and Pune where global automobile component vendors have setup operations to service automobile manufacturers located there,” he said.

Similarly, Bangalore has attracted global IT industry as it has a concentration of IT talent and a very proactive administration, added Pande, who was earlier Chairman of CII in Singapore and has been participating in international investment conferences on India in Singapore over the last two decades.

Punjab and Madhya Pradesh are ideal for building Agro industries clusters or to develop Mohali in Punjab as a knowledge hub for North India. This will bring services and white-collar jobs to the states, he believes.

Uttarakhand, perhaps, should focus on strengthening tourism and healthcare, leveraging on its hill stations and pollution free environment, he said.

Though the states’ FDI campaigns may seem competitive, Pande sees opportunities for the states and their major metros/cities to collaborate actively in this area.

“At the end of the day, to an investor, the city with its myriad services are as important to house talent and provide facilities.