Nation Of States

Five southern states are engaged in cut-throat competition to attract foreign investors. The early success of Tamil Nadu in drawing Taiwan’s iPhone contract manufacturer Foxconn to set up large manufacturing units in the state set off the race.

Tamil Nadu Chief Minister M. K. Stalin returned in September 2024 from a weeks-long tour of the United States. His entourage tied up new investment proposals with Google for setting up AI research labs in Tamil Nadu and inked a Rs 2,000 crore deal with Trilliant Networks for a production facility in the state.

Congress-ruled Telangana and Karnataka, allies of Stalin’s DMK in Tamil Nadu, are also making ambitious plans to attract foreign investment in their states. Telangana’s IT Minister Duddilla Sridhar Babu says Amazon Web Services (AWS) is likely to invest $2 billion (Rs  16,800 crore) in the state to expand its data centre. Hospitality major Marriot is meanwhile set to open its first GCC (Global Capability Centre) in India in Hyderabad. Defence and aerospace firms in the US and Europe too are lining up to establish a base in Telangana.

Karnataka, spurred by Tamil Nadu’s success with Foxconn, wants to create more Silicon Valley hubs like Bengaluru across the state. Karnataka’s IT Minister Priyank Kharge says Karnataka has the world’s fourth largest technology cluster with over one-third of India’s tech talent, 52 unicorns and nearly 25,000 startups. 

Andhra Pradesh is also keen to attract foreign investment. Chief Minister Chandrababu Naidu is building a new high-tech capital city in Amaravati. As an NDA partner, it is likely to receive significant investment from the Centre while the state woos foreign firms to invest in the massive infrastructure and technology requirements of a new capital city.

Kerala, contrary to the communist ideology of its government, is keen on foreign investment too. By investing alongside the Adani group in the international Vizhinjam seaport, the CPI government has shown a willingness to cast aside its doctrinaire anti-capitalist ideology.

*Southern comfort
The five southern states are not alone in competing for foreign investment. Maharashtra, Madhya Pradesh, Gujarat, Haryana and Uttar Pradesh are accelerating their investment plans. India’s first semiconductor plant, built by US-based Micron, will roll out chips from its unit in Sanand, Gujarat in 2025. The chips can be used for data centres, notebooks, smartphones and the Internet of Things (IoT).

Amidst all this optimism though are caveats. Most Indian states are financially stretched. While inter-state competition for foreign and domestic investment is healthy, the freebies several states declared before assembly elections have spread red ink over their balance sheets.

Himachal Pradesh and Punjab are delaying paying salaries while Maharashtra, India’s wealthiest state, is setting aside Rs 46,000 crore a year for its “ladki bahin yojana” scheme that guarantees a transfer of Rs 1,500 per month into the bank account of women, married and unmarried, between the age of 21 and 65 with household incomes below Rs 2.50 lakh per year.

Maharashtra faces a tight assembly election in November between the ruling Mahayuti government (comprising the BJP, breakaway Eknath Shinde Shiv Sena and rebel NCP led by Ajit Pawar) and the opposition Maha Vikas Aghadi (Congress, Uddhav Thackeray’s Shiv Sena and Sharad Pawar’s NCP). Haryana too confronts a tough electoral battle between the BJP and a resurgent Congress.

Uttar Pradesh meanwhile has tied up with Zurich Flughafen to build a state-of-the-art international airport in Noida. It will relieve pressure from New Delhi’s Indira Gandhi Airport and establish a vibrant economic corridor between Noida and the National Capital Region (NCR). According to Christopher Schnellmann, CEO of Noida International Airport’s holding company, full operations will begin in March 2025.

Similarly, the Navi Mumbai airport being built by the Adani group will be up and running by June 2025. It will add capacity to Mumbai’s overloaded Chhatrapati Shivaji Maharaj International Airport. New infrastructure, including roads connecting south Mumbai to the Atal Setu sea bridge leading to the Navi Mumbai airport, could transform aviation in India’s financial capital.

*East limbers up
There are plenty of lessons for states in the east. Odisha, West Bengal, Bihar and Jharkhand have not attracted the level of interest India’s five southern states, in particular, have. States like Jharkhand are rich in minerals. Odisha has potential for building new ports on the long eastern coastline. The swiftness with which Telangana offered 2,000 acres of land to Foxconn to set up a Foxconn City is what other states in the east and the north need to emulate. Such large industrial townships are common in China. Workers live in housing next to the factory to improve productivity.

Foxconn chairman Young Liu said he was keen to build Foxconn Cities across Tamil Nadu, Telangana and Karnataka, all of whom have welcomed the proposal. Liu said: “We have been doing this in many different countries. So we are very used to this and we think this kind of township will eventually bring value not just to the employees but also to Foxconn and Foxconn’s customers because the efficiency will be much better.”

From virtually zero a few years ago, Apple plans to manufacture 25 per cent of its total global iPhone production in India by 2025 – most of it for export. In 2023-24, iPhones valued at $14 billion (Rs 1,15,000 crore) were made in India, representing 14 per cent of global production. If this roughly doubles in a couple of years, the value of iPhones made in India will vault to around $30 billion (Rs 2,52,000 crore).

Apple’s success story and the role of Foxconn have been noticed by global firms in sectors ranging from EVs and batteries to data centres and semiconductors. In a nation of states, the competition for global investment can be a win-win for all.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.