After much deliberation, it zeroed in on a state that is also its largest market in India. The state’s network of expressways, proximity to the national capital region, an upcoming international airport and the red-carpet welcome rolled out by the state government all helped in the decision-making. Everything — applications to clearances — happened via a single-window digital platform called Nivesh Mitra. Within months, land was acquired, approvals sought and clearances secured. Despite the pandemic, construction is on in full swing. The MNC is pleasantly surprised that whatever was promised has been delivered.
The plant will be operational next summer. Besides the chief minister’s office monitoring the progress, “a direct line with the local district magistrate” helps in resolving routine glitches.
This is the kind of thing one hears about businessfriendly states such as Gujarat, Maharashtra, Andhra Pradesh or Tamil Nadu. But PepsiCo’s new plant is coming up at Kosi Kalan in Mathura district in Uttar Pradesh. “Our plant in UP will not only help us double our snack business over the next few years but also deepen Pepsi-Co’s relationship with the state’s potato farmers,” says Ahmed ElSheikh, president, PepsiCo India.
UP occupies a lot of mind space, but mostly for the wrong reasons. It was recently in the news because gang members of a local don with political connections gunned down eight policemen. Once the state police apprehended him, he was killed in an encounter — a euphemism for custodial killing.
Right now the state is busy with the groundbreaking ceremony of Ram Mandir in Ayodhya, due on Tuesday. It’s the culmination of the Ram Janmabhoomi movement that started in the 1980s and propelled the rise of the BJP, now in power both at the Centre and in the state. These are what UP is often associated with — the quintessential heartland cocktail of crime, unemployment, political fault lines of caste and religion, bad governance and poor socioeconomic indicators.
Its size makes it at once formidable and, to many, ungovernable. With a population of 200 million, it has about as many people as Brazil, the seventh most populous country in the world. With 80 seats in Lok Sabha, it is also the most powerful politically, and holds the key to winning a general election. The turnaround of BJP’s electoral fortunes in the state has been central to its political ascendancy in the country since 2014.
Ever since he came to power in 2017, Chief Minister Yogi Adityanath and his team of ministers and bureaucrats have been putting up a determined effort to attract invest ments into the state. Without improving the state’s economic prospects, they reckon, the BJP reckons, it won’t be easy to retain the voter’s confidence. It has taken time, but the results are beginning to show.
However, in all the din around UP, Adityanath’s take-no-prisoners style, unabashed Hindutva politics and the inevitable controversies, these are easy to miss.
Wooing India Inc
PepsiCo’s bet on UP is not an exception. Microsoft has agreed to set up a 4,000-people campus in Greater Noida, its third after Hyderabad and Bengaluru. The diversified conglomerate ITC is on track to set up an integrated manufacturing and logistics facility.
“Encouraged by the vision of the chief minister and the efforts of this investment-friendly government, ITC is progressively expanding its footprint in UP,” says Chitranjan Dar, member, corporate management committee, and group head (projects), ITC Ltd. Haldiram’s is setting up two new plants worthRs 500 crore, employing 2,000-plus people, in the next three-four years. “Fast-track process, government handholding industry and the upcoming Jewar airport and expressways have helped us decide on UP,” says Sanjay Singhania, vice-president (commercial), Haldiram’s.
The state is fast becoming a mobile manufacturing hub. In 2018, Samsung inaugurated its “world’s largest mobile factory” in UP as part of its $715 million India investment plan. Many more like Vivo and Lava are following. In May-June, even as the state dealt with the pandemic and the migrant labour crisis, the important work of wooing investors didn’t stop.
The state’s Yamuna Expressway Industrial Development Authority (YEIDA) auctioned via video conferencing 63 acres of land for 27 industrial units, entailing investments ofRs 1,600 crore, which would create over 32,000 jobs. Its CEO Arunvir Singh is pitching UP’s network of expressways and the Jewar international airport to woo investors for its upcoming industrial parks. These include a 300 acre park for small businesses, a 700 acre electronic city and a 200 acre textile park. “When completed, they would create 7 lakh new jobs,” he says.
In Lucknow, Minister for MSME, Investment & Export Promotion Sidharth Nath Singh is focusing on global investors. In July, he reckons, in one fortnight he would have made virtual presentations to executives in the US, UK, Russia, Thailand, Germany, South Korea and Japan, to invest in UP. Targeting those looking to derisk from China, UP has set up dedicated foreign desks for outreach — helped by the Centre and embassies. That’s how the Microsoft deal happened. “I got to know at a webinar that Microsoft was planning a campus in North India. I immediately reached out,” says Sidharth Nath Singh.
Land parcels in Greater Noida have been sold out. The Yamuna Expressway has got a good response and 53 hectares of its Aligarh node, part of the defence corridor, have been allotted. At the UP Investors Summit 2018, 1,045 MoUs were signed, entailing investments of Rs 4.28 lakh crore. “With two ground-breaking ceremonies, 34% MoUs have matured,” says the minister. Numbers confirm this.
Of late, UP has seen a robust growth of both public and private sector project investment (See chart). According to Projects Today, a tracker of projects, UP’s cumulative investments funnel has doubled from Rs 4.22 lakh crore in March 2015 to Rs 8.07 lakh crore in March 2020. Its project implementation ratio — a proxy for projects getting off the ground — has improved from 36.86% to 43.88% during the period. Fresh annual investments grew fromRs 39,193 crore in March 2018 to Rs 52,211 crore in March 2020, even as the share of private sector grew from 29.45% to 42.18%.
“UP is doing well. If this continues we may see a new UP in the next five years,” says Shashikant Hegde, director, Projects Today. Since 2017, it has got some of its biggest infrastructure projects off the ground — completing old ones and kicking off new. Take theRs 30,000 crore Jewar airport. First proposed in 2001, it is now on track to be ready by 2022-23. Proposals to build 12 new airports, including in Ayodhya and Varanasi, have been cleared. The Agra-Lucknow Expressway (302 km) got completed and the Rs 39,000 crore Ganga Expressway (602 km) has been kicked off.
“Both Purvanchal and Bundelkhand expressways will be built on time. We are working seriously on the defence corridor project with the Aligarh node,” says Awanish Awasthi, additional chief secretary (home), UP government.
Is this for real? Can UP actually turn a corner? Over the last month, ET Magazine spoke to at least two dozen people who are stakeholders in UP’s economy, including corporate executives, businesspeople, real estate developers, representatives of industry bodies, including MSME chapters in towns like Bulandshahr, Deoria, Varanasi, Muzaffarnagar and Agra, and a number of sectoral experts, to piece together the real picture. The view is unanimous — the gap between UP’s image and reality as a destination for business is growing rapidly.
UP is relentlessly wooing businesses, projects and investors. There are several underlying reasons. The NDA government at the Centre deems UP’s economic performance to be key to retaining its voters. Hence, it is deploying all resources — political, economic, religious and financial — to build a robust foundation. UP today has India’s best expressway network and it is set to only get better. Mega projects like airports and its audacious greenfield defence corridor project have been flagged off. “For the first time, I am seeing this aggressiveness and dynamism in UP to woo investors. UP’s defence corridor is greenfield while Tamil Nadu’s is brownfield. The Centre will play a critical role in directing these investments,” says a defence sector expert.
Growth in Projects & Investments
Growth in Projects & Investments
Experts say Make in India could bring in investments of up toRs 1 trillion in the defence manufacturing sector. If successful, some of the most backward regions of India like Bundelkhand could see investments and development. There are some early wins. Ancor Research is setting up aRs 550 crore facility to make defence electronics as part of the Aligarh node. “I did not have to pay a single paisa to get the allotment. That was impossible in the past. The government was prompt and very sensitive to our needs,” says Anupam Prasad, CEO, Ancor Research Labs. CM Adityanath’s operating style is also shaking things up. “When we did project Manthan in 2018, CM was focused and listened intently. He had this no-nonsense approach,” says Archana Shukla, director, IIM-Lucknow.
All the top ministers, bureaucrats and the CM were to come to the campus in buses without their VIP bandobast. “The CM led from the front, getting into the bus first. Everyone just followed,” she says. For her, two things stood out — the CM’s clarity of thinking and determination to deliver results. Two people — a minister and a senior bureaucrat — recall instances of projects being stuck in Raibareli and Gorakhpur because concerned officers were delaying clearances. In his weekly review of delayed projects, Adityanath pulled up the officers, found their explanations wanting and suspended them right away. “His message is clear. Such behaviour will not be tolerated,” says minister Sidharth Nath Singh.
This even as the state is tweaking norms and redrafting incentive packages to woo industries — like shoe manufacturing and agri-processing — away from China. Suspending labour laws for three years was among them. In
May, German footwear maker Von Wellx decided to move its entire production from China to UP with its partner Latric Industries.
Its CEO, Ashish Jain, says, “Government support and CM’s ability to make the bureaucracy move were remarkable.” He has been promised that footwear will be included as part of the garment policy incentive package. His `110 crore project will set up two plants, create 10,000 jobs and will produce 3 million pairs annually.
According to the National Crime Records Bureau 2018, UP has the second highest incidences of crime under IPC in the country, after Maharashtra. The state has been rightly criticised for a spate of extrajudicial killings since Adityanath came to power. The CM has made his tough line on crime quite clear.
Shortly after taking office, in 2017, Adityanath had openly said that criminals would either go to jail or be killed in police encounters. Under Adityanath’s watch, 119 such killings have occurred, according to media reports. The cops have been acquitted in 74 cases where a magisterial enquiry has been completed. Many entrepreneurs and executives say the crime situation has improved, going by their experience. Pankaj Agarwal, promoter of Bindlas Duplux Ltd and head of the Muzaffarnagar chapter of the Indian Industries Association, says in the past his manager was once shot at.
THE SHIFT : The Yogi Adityanath government has rolled out a slew of initiatives-
His 20-odd contractors typically had to pay a monthly extortion fee. “Khule aam hota tha. Ab kaafi kam hai. Badmashon ko dar hai (Earlier it used to happen openly. Now it’s a lot less. Extortionists are a bit scared). Law and order has improved,” he says. This is something one hears from businesspeople across UP, from Varanasi to Agra. Says Rajive Kumar, chairman, UP RERA, and former chief secretary: “From Day 1, the CM wanted to focus on two things — law & order and infrastructure. We have improved substantially on both.”
THE SHIFT : The Yogi Adityanath government has rolled out a slew of initiatives-
UP is infamous for rampant corruption, especially in land deals allotment, and under-the-table payments used to be allegedly settled in Lucknow, the state capital. According to businesspeople in the state, while petty corruption continues, institutional corruption — in key areas ranging from land allotment to pollution clearances — has sharply dipped. UP’s digitisation push, like the Nivesh Mitra platform, is at the core of Adityanath’s anti-corruption strategy.
Avinash Kumar, an IITian and IAS officer with stints in private sector and startups, is special secretary to the CM and oversees the platform. He was brought to Lucknow in 2017 to build a robust, user-friendly, single-window clearance digital platform to monitor all applications and approvals. “Through Nivesh Mitra, CM directly monitors key projects with his Team 11 to remove hurdles,” says Awasthi. (Team 11 is a group of top bureaucrats.) Today, Nivesh Mitra offers 149 services across 20 departments. In 2018–2020, it got 2.05 lakh applications and gave 1.63 lakh clearances.
Despite lockdown, between April 1 and July 20, 34,361 applications were filed and 28,248 clearances were issued. With timebound deadlines for bureaucrats and a transparent view of where files are stuck, the application-to-approval cycle has been smoothened. Weekly project reviews by the CM is creating a hustle culture in a sclerotic bureaucracy. “Time to get the factory licence has halved from three-four weeks earlier to onetwo weeks now,” says Sanjeev Agarwal, CMO of phone maker Lava International. Sunil Chaturvedi, chairman of Gainwell Commosales, recalls how pleasantly surprised he was when the electricity duty discount due to him was credited to his account without any follow-up or palm-greasing.
Perception vs Reality
All of this perhaps amounts to a good start in the herculean task of turning UP around. Changing perception will be UP’s biggest challenge. Says Abheek Barua, chief economist, HDFC Bank: “UP seems to have gotten its act together. It has done very well on project execution. I feel much more positive about the state than the perception that exists about it.” Beyond perception, UP also grapples with some historical baggage. With the second lowest per capita income in India, 35 lakh migrant workers returning since March will only exacerbate its woes. Says Badri Narayan, director, Govind Ballabh Pant Social Science Institute: “UP has handled the migrant crisis well.
But livelihood and rehabilitation of so many will not be easy for any government.” MSMEs in UP are in deep crisis. From Bulandshahr to Varanasi, they are hurting and many won’t survive. Says Sanjeev Arora, head, Deoria chapter (Gorakhpur), Indian Industries Association: “The government announced many pandemic schemes. We have got nothing. It is all in the air, more promises than action.” Add to this the skewed development within the state.
Says Sunil Kumar Sinha, principal economist, India Ratings: “The dichotomy between east and west UP is stark. UP has to grow faster to fill the deficit.” From Bundelkhand Expressway to the defence corridor, the Centre is helping UP attract investment and develop some of its most backward regions. But this is easier said than done. The top-down approach of driving change from Lucknow also has its limitations. DS Verma, executive director, Indian Industries Association, says: “Intention at the top is good. But lower and mid-level (government) machinery is rusted.”
Finally, if UP wants to become part of the global supply chain, it needs to dramatically up the game. “Forget China, we can’t even compete with Uttarakhand. Power here is costlier byRs 2 per unit,” says a Bulandshahrbased entrepreneur. Adds Pankaj Mohindroo, president, Indian Cellular Association: “If UP wants to be at the high table of global mobile manufacturing, it has to improve fast. Plugand-play industrial infrastructure with integrated township is critical.”
For now, CM Adityanath is basking in the populist glory of Ram Mandir. But he and his party know that the art of getting votes has both celestial and earthly dimensions. That balancing act will be worth watching.