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Foreign Direct Investment

FDI: A new era dawns for UP

With every effort being made to simplify the investment process, it’s no wonder the foreign direct investment climate in UP is heating up. Paul McNamara reports

With all of the development planned and underway in Uttar Pradesh (UP), there is ample opportunity for investment partners to come on board. The state has a great partner in the Indian federal Government, who is associating in much of UP’s expansion story, but inevitably there are significant investment opportunities for foreign players hoping to get a seat at the table at one of the most exciting regional growth stories around today.

Opportunities abound for investment in traditional industries like food processing and tourism but the list of other areas ripe for foreign direct investment is exhaustive including IT, agriculture, services industry, crafts, hospitality, energy, infrastructure and real estate.

To help change the perception of India being a country blighted by poor bureaucratic inefficiencies and prolonged delays the Government of UP has devoted time and energy to stripping away the red tape that is seen to impede investment and has worked  to create an efficient, effective and simplified system for investors.

Vikramjit Singh Sahney, an entrepreneur and honorary Consul General of the Republic of South Africa committed to strengthening commercial and economic relations between India and South Africa recently stated, “With the leadership of the current Chief Minister, the infrastructure and developmental projects underway, and the sheer size of the population Uttar Pradesh is a prized possession and an incredible window of opportunity for any investor.”

With the creation of a single-window system UP has ensured that investors can submit the required regulatory documents at a single location and obtain all necessary permits and clearances within this single Government department. This single window clearance system has been initiated and implemented with the vision and desire of the Chief Minister (CM), Akhilesh Yadav, to attract international investors and foreign direct investment (FDI) for the many opportunities that exist in the state. The initiative goes under the name of Udyog Bandhu and can be accessed at http://nm.udyogbandhu.com

Jiwesh Nandan, Principal Secretary, Information Technology & Electronics for the Government of Uttar Pradesh, says, “The first thing investors can do is to use our telephone helpline or send an email to us. We would then nominate an officer to look after them. Once we have established that they are a serious investor I would personally call them and have a discussion to establish which areas interest them, when they want to make the investment and how much they want to invest and discuss if there are any potential areas of collaboration with the state.”

The aim of this process is to ensure that time wasters are removed from the equation as early as possible so that serious investors receive timely and personal attention as FDI is very important to Uttar Pradesh. “We then let you know what sorts of documents you need to fill out. Most of these documents are available online and it should take about 30 days to clear everything for you and have you investment-ready, commented Nandan.

Investment is encouraged in all of its forms, but to date, most investors in UP have come in and set up on their own rather than as a JV partner with an Indian company. “Examples of successful businesses that have come and set up include Honda from Japan. They make cars here in UP in Greater Noida. LG is in Greater Noida and Samsung is in Noida. They manufacture domestic appliances and mobile phones. Most of the phones that are manufactured here are sold here,” says Nandan.

Success stories are not limited to heavy industries and hardware as there are also numerous foreign IT companies like Adobe, which have successful operations in UP. Equally importantly there are still a raft of opportunities for overseas companies wanting to join the UP bandwagon. At present there is huge demand for semiconductor wafers [used in the technology sector] but little local manufacturing thus representing yet another big opportunity. Uttar Pradesh’s most important cash crop, sugarcane, alone offers an attractive investment prospect, as do other sectors like infrastructure, IT, minerals extraction, tourism and hospitality.

 

Local population offers a market in itself

FDI has also been aimed at catering to the needs of the indigenous population of over 200 million people. As Alok Ranjan, Chief Secretary of the UP state says, “If UP were a country by itself, it would be the fifth largest country in the world. This means that for anyone investing in UP, there is a huge consumer marketplace. We are the number one producer in India of a wide range of foodstuffs like wheat and sugar cane and we are among the top few in the production of vegetables.”

It is clear that the agricultural sector is at a stage where investment can help to increase yields and output, supplying a far wider area than UP itself and positioning the state as the food basket of the entire nation. Food production, food processing, transportation and marketing are all areas that are set to boom in the next decade in UP and present limitless opportunities for the globe’s leading food companies.

But it is not just about food. “We need to step up our state domestic product because this will lead to higher per capita income for our people. We want to move people out of being dependent upon agriculture alone and move into other sectors like industry and services. That is why we are focusing on skills development,” says Ranjan. “We need more investment in industry and partners in food processing. We are also looking at a lot of investment in IT and the electronics sector. We already have two hubs for these sectors.”

Naturally, such growth is best seen in tandem with the state Government’s increasing focus on augmenting and constructing better infrastructure. Ranjan says, “We are looking for two things. The first is that we need to improve our infrastructure and that is why the Government’s commitment to infrastructure spend is up 80 per cent for the year. But we are also looking at public private partnership (PPP) opportunities.”

Together with roads, power and water there is the increasingly important area of urban development where industrial, manufacturing and residential hubs are envisioned alongside the corridors being demarcated by the newly built expressways, train lines and metro lines. Attracting foreign money into these areas has been challenging in the recent past with the rest of the world still struggling to get to grips with the fallout from the global financial crisis. “The climate for PPP has not been good for the past few years because of the global financial climate. That is why we are funding so many of the projects ourselves,” says Ranjan but makes it clear that the door is now open to overseas investors with an eye on future growth markets.

The huge population of UP has other side benefits for investors. UP also has a large number of educated students being pumped out of the colleges, universities and polytechnics every year. The state education mechanism constantly produces highly educated, trained and motivated staff ready and willing to take part in the challenge of building a new UP that has moved several notches up the value chain of production. As Ranjan says, “UP is a giant that has woken up and we have great potential. Things are happening now in the state. We have an enabling policy framework. We have a Government with a vision. We have a bureaucracy that is responding to the vision of the Government. We are trying to make it easier for people to do business.”

Opportunities are whatever the foreign investor wants to make of them. “There is a lot of opportunity for partnerships in the infrastructure sector,” says Ranjan. “Any investor wishing to come in here these days only has to go to one website for all his needs. He can apply online, check progress online and receive his clearances online. This is a big development for attracting investors. Clearance has to be approved within 45 days.”

With determination of the CM for UP to become an investment hub the Government’s policies, programs, and regulations have become investor-friendly to invite and accommodate foreign investors. In addition there is an abundance of land, and water with the power supplies being augmented constantly. Combined with a variety of state financial institutions also being set up to provide institutional finance and a single-window clearance system this has helped to ensure an environment welcoming and encouraging for investors.

Following the lead of other developing regions, UP also offers special industrial areas such as software technology parks, electronic city, toy city, plastic city, integrated agro park, leather parks, chemical complex and textile city to cater to the needs of investors with specialist needs in fast growing sectors.

According to Sahney, “With the focus on building partnerships and attracting both investors and investment Uttar Pradesh seems poised to be on the right track to become a global investment hub.”