Just In Time: Will the Global Investors Summit help UP break into the big league?

Prime Minister Narendra Modi photographed with Defence Minister Rajnath Singh at the UP Investors Summit in Lucknow today (Image credit: ANINewsUP/Twitter)

The Uttar Pradesh Global Investors Summit 2023 has become one of the biggest industry outreach events in recent times. In his second term, Uttar Pradesh Chief Minister (CM) Yogi Adityanath has appeared determined to woo big ticket investment into the state.

In terms of Foreign Direct Investment (FDI), Uttar Pradesh (UP) has trailed far behind the leading industrial destinations of India, managing to attract just 0.6 percent of the inflows. UP’s FDI of $1 billion pales before the $47 billion earned by Maharashtra and $30 billion by Gujarat between October 2019 and September 2022. But CM Adityanath has claimed a breakthrough at the summit, announcing that 18,643 MoUs for investments worth Rs 32.92 lakh crore have been received.

Source:DPIIT

On many indices relating to industry, UP can be bracketed with states like Rajasthan and West Bengal. Rajasthan had attracted $1.8 billion in FDI and Bengal $1.1 billion between October 2019 and September 2022. On other indicators like the number of factories, power consumption by industries, and gross fixed capital formation too, UP is broadly on par with these two states.

Source:India Industrial Land Bank

Of course, biggies like Maharashtra and Gujarat have the advantage of a head start, which ensures more brownfield investment. Attracting greenfield investment is where the competition is hotting up. States like UP are also benefiting from the “double-engine” government – having the same party in office at the centre and the state. Take national highway (NH) construction for instance, where between 2017-22 UP has added four times the length of NHs constructed between 2010-14.

Source: Lok Sabha

SP Sharma, Chief Economist at PHD Chamber of Commerce and Industry, said the race for greenfield investment by the “emerging states” is being driven by replicating the ease of doing business reforms, startup ecosystem, and infrastructure development piloted by Gujarat, Maharashtra, Karnataka, and Tamil Nadu.

“It is healthy competition. States are learning from each other. In addition, you have something like (the central government’s) Gati Shakti, which is a new governance paradigm that helps the convergence of several government departments,” says Dr Sharma.

The Gati Shakti portal could improve the investment prospects of states by offering a multidimensional perspective to investors to help choose projects sites by mapping facets like land availability, rail and road connectivity, human capital, urban amenities, etc., thereby giving every state an equal chance to grab greenfield investment.

Source: ASI

Amitabh Tiwari, an investment advisor who was formerly an investment banker, said UP will have to figure out how to turn its land-locked geography to its advantage and also show potential investors that it can offer the human capital they need. “Law and order has improved of late and there is a stable government. Even land acquisition appears to be smoother, given the speedy expressway developments,” says Tiwari.

Source: RBI

He also suggests that a way to get around the limitations of being land-locked is to explore freight transport through inland waterways like the Ganga river to the Kolkata port. “Alternatively, there could be a focus on services, especially leveraging western UP’s proximity to Delhi NCR,” he added.

At an estimated 240 million, UP accounts for around a sixth of India’s population and faces the tough task of raising the economic prospects of its people. UP’s per capita net state domestic product in 2021-22 was just Rs 68,880 against India’s, which crossed Rs 1.5 lakh. The big question on everyone’s lips is whether the investment commitments will translate into actual investments.