Emerging Regions

The current government’s reforms include greater co-operation between state and central governments. Doing business in India involves greater interaction with the state governments than with central government and thus better central – state government cooperation will prove a great facilitator for UK investors looking to enter India.

All Indian states have their own government, regulations, courts and taxes, and India’s new government is widely expected to give them even greater powers, ultimately incentivising competition. The recent demise of the centralised Planning Commission demonstrates a shift of power to the States. Patterns of competitive federalism are already evident with many States doing their best to cut down on red tape and simplify compliance procedures to appear more business-friendly and attract investments. In 2013-14, 24 of India’s 29 states grew at rates in excess of 5.5%, with the wealthiest one, Maharashtra (capital Mumbai), recording a growth rate of 7.3%. Some of India’s states such as Bihar, Madhya Pradesh, Meghalaya and Tripura recorded growth rates over 9%.

Businesses new to India are naturally inclined to start in major cities like New Delhi, Mumbai, Bangalore, Chennai or Kolkata. They are well known and well connected. However, smaller Tier II and III cities offer many competitive advantages such as lower costs and less competition, and are large markets in their own right.

The next round of economic growth will take place in India’s emerging cities, with rapid development in rural areas. India currently has 53 cities with populations over 1 million. This is estimated to rise to 68 by 2030. Some are already larger than many countries in terms of population and output. To get a sense of where these emerging regions are concentrated click here.

The benefits of doing business outside the established Indian metros are clear

  • Less competition, for staff and business
  • Lower costs in terms of overheads, real estate, staff and services.
  • Large pool of aspirational consumers with money to spend.
  • Higher profile to attract and retain staff and win business
  • Government support, for example special economic zones (SEZs), to encourage international investment
  • Sharper growth in emerging cities than established metros
  • Better infrastructure

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