From Telangana to Gujarat, states compete fiercely for new-age investments

Over the past two years, states, have intensified their competition to attract particularly in new-age industries, such as mobile phone and laptop assembly, semiconductor manufacturing and packaging

In the peak hours of July 9, 2021, a private jet remained on standby at Cochin International Airport, with instructions to be ready for takeoff at a moment’s notice. The flight manifest had one very important passenger — Sabu M Jacob, chairman and managing director of Kitex, the world’s second-largest manufacturer of children’s garments.

  This, however, was not the start of yet another jet-setting meeting of a wealthy business executive. It was a coup, of sorts.

In a rare showdown between an industrialist and a state government, Jacob had publicly criticised the Kerala government earlier that week, accusing it of “hounding” him through repeated inspections of his manufacturing units. While the back-and-forth between Jacob and the state government continued, the then industries minister of Telangana K T Rama Rao sent a private jet with a message that Jacob’s investment was welcome in his state.

  The week-long episode ended with Kitex announcing an investment of ₹1,000 crore in Telangana — one of the rare occasions when a state swiftly capitalised on an investment opportunity that had soured in another.

  Over the past two years, however, states such as Telangana, Andhra Pradesh, Tamil Nadu, Gujarat, Maharashtra, and Karnataka have intensified their competition to attract investments, particularly in new-age industries, such as mobile phone and laptop assembly, semiconductor manufacturing and packaging, electric vehicle assembly, battery production, and solar and wind energy equipment manufacturing.

  All these states have dedicated government or semi-government bodies working to attract investment with competitive policies. These lean state agencies operate in a strictly corporate environment, minimising red tape and state intervention at every decision-making level.

  Sample this: the Telangana government has a publicly stated “meet or beat” policy that aims to offer incentives that “either match or surpass” those offered anywhere else — not just in India but globally.

  The Karnataka government’s Invest Karnataka initiative regularly sends representatives to meet senior executives of global companies in their home countries to persuade them to set up operations in the state.

  One of the main reasons states are aggressively pursuing investments is the realisation that industrial growth, particularly in emerging industries like semiconductors, is the way forward, several experts and state government officials have said.

  “States have realised that there are limitations to how much revenue the services sector can generate. So either you have to have huge mineral deposits in the region or make the move towards manufacturing,” said Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association (ICEA), India’s largest electronics industry representative body.

  Another reason for states competing fiercely is the success of Tamil Nadu and Karnataka in attracting new-age manufacturing industries, such as mobile phone and laptop production, where the number of women employed is far more than men.

  “All age-old industries, despite technological and safety improvements, still employ a large number of men. These new companies are able to attract a large female workforce because of the safety of the tools they work with, the availability of food and lodging facilities, and overall women’s safety parameters,” a senior official from the Ministry of Electronics and Information Technology said.

  A third factor is the realisation that securing one major investment can lead to a ripple effect, bringing in additional investments to build an ecosystem that includes ancillary and micro, small, and medium enterprise (MSME) units acting as suppliers.

  “The automobile sector is a prime example, where the establishment of a large manufacturing plant inevitably draws numerous ancillary industries, fostering SME and MSME growth in the region and generating jobs. To secure such investments, states implement ease-of-doing-business reforms, enhance infrastructure, and continuously invest in upskilling the local workforce,” said Subburathinam P, chief operating officer at TeamLease.

  Beyond offering attractive investment policies, states also compete to recruit and retain top talent. Young consultants working for state investment bodies are often targeted by headhunters from rival states and offered higher salaries, better perks, and greater professional freedom, according to a central government official.

  “We’ve seen several consultants leave us to join their home state’s investment body, not just for financial reasons, but also for the proximity to their families, the flexibility of remote work, and the chance to have a say in the policy of their state by working with the brightest officials there are,” the official said.

  Some states, a state government official said, also remain wary of the allegedly “lopsided” support that the Centre gives to Gujarat and Maharashtra.

  In April last year, Tamil Nadu Chief Minister M K Stalin accused Prime Minister Narendra Modi of diverting a ₹6,500 crore industrial project belonging to a Tamil Nadu-based company to Gujarat.

  State officials claimed that Stalin’s government had already reached an understanding with the company’s promoter when the firm suddenly decided to relocate the project to Gujarat, allegedly due to “pressure from the Centre”.

  “This is not the only project; a similar chip project by a global major was also taken away from Tamil Nadu at the last minute. Some states are getting an unfair advantage because of the Centre's support,” said a source aware of the developments in Tamil Nadu.

  However, central government officials countered this narrative, stating that global companies decide on manufacturing locations based on multiple factors, including labour availability, logistics, land, infrastructure, political stability, and

social infrastructure.

  “Take manpower, for example. Companies consider the availability and cost of labour, the presence of skilled and supervisory staff, opportunities for mid-level employees to advance to senior management, and the possibility of sending personnel abroad for research, training, and development,” said the IT ministry official.