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UTTAR PRADESH 5

IN THE

past couple of years India, the world’s largest democracy,

has undergone a sensational transformation both in terms of politics

and the economy. After years of disappointing returns, Asia’s third

largest economy seemed to have rediscovered its mojo in 2014.

Stocks rose by a third; foreign investment grew by a quarter; and

the economy expanded at its fastest pace in over two years.

No surprises then that on the world circuit this emerging BRIC

economy is on the lips of some very influential players and the

spotlight is shining brightly as India’s new poster boy, business-

friendly Prime Minister Narendra Modi, takes to the stage to show

the world exactly what it’s all about.

Since Modi’s landslide win in last May’s parliamentary

elections he and his Government have quite literally opened India’s

front door and placed a very large welcoming mat down for foreign

investors to wipe their feet upon entry. On 3 December, the Modi

Government announced the creation of a panel to help fast-track

investment proposals coming from the US, and the Government

has also extended the withholding tax, treating income as capital

gains, and introducing safe harbor rules for foreign investors.

One influential caller that is about to step through India’s open

door, is US President Barack Obama, the first sitting US president

to visit India more than once, as Modi’s Republic Day guest of

honour. For Modi a good foreign policy means good business

and Obama’s visit gives him ample opportunity to discuss such

things as energy, trade, defense and infrastructure partnerships.

Obama however won’t be the only world leader Modi will be

looking to strike deals with during the coming year.

Away from the spotlight it would seem that a lot of the hard

work to strengthen India’s economic growth is being done at

the state level. While the central Government has been relaxing

foreign direct investment (FDI) limits in different sectors, the Uttar

Pradesh (UP) Government under the leadership of its progressive

and development oriented Chief Minister (CM) Akhilesh Yadav

has announced a string of new policies, made amendments in

old policies to announce fiscal incentives and introduced other

investor friendly measures – such as the Solar power policy

2013, Infrastructure and Industrial Investment Policy 2012, IT

Policy 2012 and Sugar Industry, Co-generation and Distillery

Promotion Policy 2013 all in efforts to help increase investment

and promote growth.

Infrastructure improvement is the number one priority in UP

making this the area for the biggest capital market transactions.

Roads, railways and metros tend to be projects that require

significant financings spread over many years and it’s into these

projects that the mega bucks appear to be flowing. By opening up

its economy, cutting bureaucracy and introducing pro-business

reforms CM Yadav seems to be steadfast in his resolve to grow

the private sector and craft a friendlier environment for business

growth to help support investors and their investments.

“UP can attract huge investments, courtesy of its well-

developed physical infrastructure, good connectivity with all major

cities of the country coupled with robust industrial infrastructure

with various industrial areas and specialised parks/zones. Further,

it offers a rich pool of skilled and semi – skilled human resources,

making it suitable for both knowledge-based and labour-intensive

sectors, both in manufacturing and services sectors,” commented

Zubin Irani, Chairman, CII Northern Region and President –

Building & Industrial Systems (India), United Technologies

Corporation India Pvt Ltd.

UP has already attracted significant investments in sugar,

cotton fabrics and diversified food preparations and the state has

the fifth highest share in the country in value added manufacturing

of nearly 7 per cent. Electronics, leather, textiles and minerals-

based industries have shown a promising growth in industrial

investments over the years and companies in UP increasingly eye

overseas markets as the next logical growth segment.

It comes as no surprise that under the guidance of the state’s

young and progressive CM, foreign companies are starting to look

at the investment potential of UP. According to DS Rawat, national

secretary general of The Associated Chambers of Commerce and

Industry of India (ASSOCHAM), “UP holds tremendous potential

to achieve its aim of an annual industrial growth rate of over 11

per cent and 10 per cent in state gross domestic product (SGDP)

by improving the infrastructure and creating an investor-friendly

environment by offering tax concessions and incentives to lure

industrial enterprises.”

In September a Dutch delegation, led by its Ambassador

Alphonsus Stoelinga, visited Uttar Pradesh’s capital of Lucknow

to discuss the potential of investing in sectors such as agriculture,

dairy development and innovative technologies. According to

Stoelinga, “Four Dutch companies Phillips Electronics, Royal

Haskoning DHV, Ecorys and TNT are already present in UP and

they are seeking to expand their business here.” He said that sectors

like urban planning, water treatment, infrastructure, airports

health are of special interest to them and they are willing to make

investments to set up projects under the Public Private Partnership

with the state Government.

He added: “Facilitating infrastructure financing loans, ensuring

speedy clearance to projects and imparting technologically

advanced, sound training facilities to enhance the employability of

the youth are certain key focus areas that can help UP emerge as the

most preferred investment destination across India.”

In terms of capital market activities, the services sector is the

most important area in the state for growth. UP has established

itself as a hub for IT companies and ranks fourth in the country in

terms of software exports. It is here that multinational corporations

have been drawn most easily and many have established facilities

in the Noida industrial area, attracted by its talented workforce and

proximity to major markets.

One suchoverseas company that isworking in the region, Studio

Symbiosis, a German-based architect, is involved in a number of

projects, including the Punjab Kesari headquarters in Noidal, Trans

Ganga Masterplan in Kanpur, Allahabad Masterplan, Double Tree

by Hilton in Ahmedabad and Taj Ahmedabad to name but a few.

Britta Knobel Gupta, founding partner of Studio Symbiosis, says,

“UP is at the forefront of growth and development with a clear

vision for the future. In urban master planning

and architecture, UP has launched a number of

hi-tech cities in various cities across the state to

promote the growth of the state creating cutting

edge infrastructure. In India likewise similar

growth is reflected, with states like UP taking

the initiative to create precedents for rest of the

country.”

Her partnerAmit Gupta added: “The projectswe areworking on

in UP are focused on creating sustainable, integrated infrastructure

planned for the future. These projects look at creating synergy

with their surroundings and acting as attractor nodes that would

promote growth for the surroundings as well. The projects we are

developing in UP look at corporate offices and bring in industries

in the state that would result in increased movement to UP from

other parts of the country and in creating more job opportunities for

the state promoting growth. A strong sense of identity is instilled

in these projects.”

Nirmal Singh, Founder of Lotus Greens, whose company has

launched multiple residential projects in Noida this year, namely

Lotus Arena & Lotus Yardscape and Lotus Parkscape, a multi-

housing development project at the Yamuna Expressway, told me

that, “UP has huge opportunities because it has a unique consumer

base to cater to. Since Noida and Greater Noida are governed

by a special law called UP Industrial Act 1976, the city has no

multiplicity of authorities. As Noida is only supreme authority to

take all important decisions, realtors get their issues resolved with

ease unlike in other states where multiple authorities hamper or

delay decision making.” Other developers like NRI City are also

looking at UP to build residential and commercial communities for

both non-resident Indians and global investors.

Overall things are looking bullish for UP from an FDI

perspective, in the past year the total investment in the state

amounted to nearly $14.4 billion, of which infrastructure

investment constituted $11.45 billion. As CM Yadav continues on

this positive path, 2015 could prove to a be fruitful year for the state

making Uttar Pradesh a chosen destination not just for tourists but

for keen foreign investors looking to work with a socio-economic

innovator and development-focused progressive Government.

A

S THE

balance of manu-

facturing and production

power shifts increasingly

east towards the dynamic

centres of India and Chi-

na, it is becoming more evident that these

two nations are vying with each other for

supremacy. In order to increase competi-

tive viability in this fierce skirmish, Uttar

Pradesh (UP) realises that it will need a

well-connected transport and logistics grid

both for receiving raw materials and for ex-

porting finished products. The preparations

for this new reality come back, inevitably,

to infrastructure and new developmental

initiatives such as the freight corridor.

The challenge is simple: to beat

China as an economic powerhouse a

global manufacturing hub is needed. This

is a tough challenge given the fact that

manufacturing only accounts for 15 per

cent of the gross domestic product in India,

compared to China’s 30 per cent. The

stark reality is that no developing Asian

country has yet risen to middle-income

status with figures so low. This fact alone

is perhaps the underlying reason why

Prime Minister Narendera Modi has been

repeatedly emphasising his Government’s

‘Made in India’ campaign since its launch

in September.

As a nation, India displays excellence

in discrete pockets of high-tech

manufacturing as global car giants Ford

and Hyundai both run state of the art

production centres in the country. However

in manufacturing where it counts most,

in the areas of lower skilled, and labour-

intensive industries, India does less well.

Ironically, this is where the window of

opportunity is as estimates show 12 million

new jobs will be needed every year until

2030 to absorb the demographic blessing

India has: a wealth of young people.

Export-led manufacturing remains

UP’s best economic hope for the future

however seismic shifts to the way things

are done will be required including a

change to the outmoded labour laws

and a redrafting of the land acquisition

regulations. To succeed cheap labour is a

prerequisite and India has this in spades.

The killer advantage however will be in the

efficiency and effectiveness of the logistics

network and energy supply as both of these

will be the final determinants in convincing

global manufacturers to relocate to UP.

There are observers within India who

fret that it may already be too late and

that China’s first mover advantage may

have met the excess demand that existed,

leaving nothing on the table for India to

aim for. Raghuram Rajan, Governor of the

Reserve Bank of India is one such believer:

“The world as a whole is unlikely to be

able to accommodate another export-led

China,” he said in December 2014 in a

speech warning against the imposition of

more tariffs.

And this is where Akhilesh Yadav’s

initiative of the Delhi-Mumbai Industrial

Corridor (DMIC) is key. The DMIC has

been described as India’s most ambitious

infrastructure programme aimed at

developing new industrial ‘smart’cities and

converging next generation technologies

across infrastructure sectors. The idea

is to expand India’s manufacturing and

services base and develop DMIC as a

global manufacturing and trading hub. The

programme is geared towards providing a

major impetus to planned urbanisation in

India with manufacturing as the key driver.

In addition to the new industrial

cities, the programme also calls for the

development of infrastructure like power

plants, assured water supply, high capacity

transportation and logistics facilities.

On a human scale it will also require

development in soft infrastructure such

as skills development programmes and

education.

As a launch initiative, seven new

industrial cities are beingdevelopedwith the

complete programme being conceptualised

in partnership and collaboration with

the Government of Japan. The overall

vision of the programme is to create a

strong economic base within a globally

competitive environment and state-of-

the-art infrastructure to activate local

commerce, enhance foreign investments

and achieve sustainable development.

From UP’s

perspective, the

Da d r i -No i d a -

Ghaziabad In-

vestment Region

project looks at

five selected pro-

jects including the Greater Noida railway

station, a multi-modal logistics hub and

an international airport at Greater Noida,

another booming city of UP located on the

outskirts of Delhi, the capital of India. The

project is seen as offering good potential

for flagship foreign investment in the re-

gion in which the existing industrial belt is

strengthened and enhanced further. Boraki

and Dadri will be the locations for projects

including the railway station and logistics

hub to help achieve further development

and completion of Greater Noida.

In early January the Noida and Greater

Noida Authorities chairman and CEO

Rama Raman said the project, “Will not

only generate thousand of jobs but also

work as oxygen for the real estate sector

of North India.” Under the project the

Greater Noida Authority, on behalf of

the UP Government, will enter into an

agreement with the centre for developing

infrastructure for first “early bird projects”

in integrated industrial townships in the

state along the DMIC. Both the DMIC trust

and Greater Noida Authority are in talks to

sign a joint venture to executing the project

in UP.

Raman said, “Under the project early

bird projects, there will be development

of Boraki Railway Station as Passenger

and Commercial Cargo Hub, Multi Modal

Logistics Hub at Dadri, Power Project at

Greater Noida, Mass Rapid Transit System

(MRTS) between Dadri-Noida-Ghaziabad

Investment Region and Delhi.”

Nirmal Singh, who is vice chairman of

real estate firm Lotus Greens said, “One of

the important projects undertaken by the

Government of India which will benefit

Uttar Pradesh and National Capital Region

(NCR) at large is the Delhi Mumbai

Industrial Corridor. This is India’s most

ambitious infrastructure development

project which aims at developing

new-age cities we know as ‘SMART

Cities’ and converging next generation

technologies across infrastructure sectors

thereby providing major thrust to planned

urbanisation in India.”

Singh added, “The initial phase

development of DMIC will create a huge

impact on the already developed region of

Delhi NCR including Noida and Greater

Noida due to the construction of the

nodal point of Dadri-Noida-Ghaziabad

Investment Region.”

Another real estate firm that set to come

on board with investment in the region is

Orris Infrastructure. The company’s MD

Amit Gupta believes the proposed DMIC

“promises to open the floodgates of new

investment opportunities and is expected

to be that catalytic factor that promises to

offer investors a gold mine once the project

is over.”

Adding, “There is no denying this

high-speed connectivity between Delhi

and Mumbai offers immense opportunities

for development of an industrial corridor

along the alignment of the connecting

infrastructure.”

Dedicated Freight Corridor

Corporation of India

From a rail perspective, the Dedicated

Freight Corridor Corporation of India is

a special purpose vehicle set up under

the administrative control of the Ministry

of Railways to undertake planning

and development, mobilisation of

financial resources and construction and

maintenance and operation of the dedicated

freight corridors. This is crucial to the

development of UP.

The plan to construct dedicated freight

corridors across the country marks a shift

in the modus operandi of Indian Railways

(IR) that has in the past run mixed traffic

across its network. Once completed, the

dedicated freight corridors will enable

Indian Railways to improve its customer

orientation and meet the needs of the

market more effectively. Creation of

rail infrastructure on such a scale is also

expected to drive the establishment of

industrial corridors and logistics parks

along its path, bringing music to the ears of

the UP Government.

The Indian Railways’ linking of

Delhi, Mumbai, Chennai and Howrah

and its two diagonals, Delhi-Chennai and

Mumbai-Howrah, have added up to a total

route length of 10,122 km which now

carries more than 55 per cent of revenue

earning freight traffic of IR. The existing

trunk routes of Howrah-Delhi on the

Eastern Corridor and Mumbai-Delhi on

the Western Corridor are highly saturated

with line capacity utilisation varying

between 115 to 150 per cent. The surging

power needs for heavy coal movement;

booming infrastructure construction and

growth in the international trade are all

core factors that have led to the conception

of the dedicated freight corridors along the

eastern and western routes.

The Eastern Dedicated Freight

Corridor (EDFC), with a route length

of 1,839 km, is being supported by the

World Bank (WB). In December, the

Government of India and the bank signed a

$1.1 billion agreement towards the second

loan for the EDFC project. The project

itself consists of two distinct segments: an

electrified double-track segment of 1,392

km between Dankuni in West Bengal and

Khurja in Uttar Pradesh plus an electrified

single-track segment of 447 km between

Ludhiana – Khurja – Dadri in the state of

Punjab and Uttar Pradesh.

According to the World Bank the

Project will help increase the capacity

of these freight-only lines by raising the

axle-load limit from 22.9 to 25 tonnes and

enable speeds of up to 100 km/hr. It will

also help develop the institutional capacity

of the DFCCIL to build and maintain the

DFC infrastructure network.

The Eastern Corridor will traverse six

states and is projected to cater to a number

of traffic streams and sectors including

transport of coal for the power plants in the

northern region of UP, Delhi, Harayana,

Punjab and parts of Rajasthan, finished

steel, food grains, cement, fertilisers, and

lime stone. The total traffic in the direction

of Uttar Pradesh is projected to go up to

116m tonnes by 2021/22.

The net result of all this activity paints

a picture of a state that is the middle of its

biggest ever growth phase. Jobs, investment

and prosperity of farmers, manufacturers,

and the common person are forecast to

receive the most significant benefits of this

growth with a once in a lifetime chance to

put Uttar Pradesh on the map as one of the

most significant industrial powerhouses of

the region.

While investors interested in the Indian market are anxiously watching the country’s

Prime Minister, Narendra Modi to see if he will deliver on the many reforms he has

promised to kick-start the economy, much of the real work to bolster India’s economic

growth is being done at the state level. Making investments in states like Uttar

Pradesh a window of opportunity.

Emily Jones investigates

Akhilesh and Mulayam Yadav at the

Lucknow Expressway opening

Germany-based architect Studio Symbiosis’ Trans Ganga Masterplan Kanpur

Star of

the show

Roads, rail and the development

of ports spell a new age for the

industrial sector in UP. The journey

however has only just begun, as

Peter Cunningham reports

knocks

Opportunity