Are Indian States doing what is needed to attract UK investors?

By Kevin McCole

I’ve been in India for the last two weeks and despite the huge media attention on Mr Modi opening the WEF in Davos, 10 ASEAN Heads of Government visiting Delhi, India’s Republic Day celebrations and the 2018 Budget, it has been impossible to miss efforts by different Indian states to promote themselves to investors.

In January there was the Bengal Global Business Summit, and in February there will be investor summits in Assam (3rd and 4th), Maharashtra (18th to 20th), Uttar Pradesh (21st and 22nd), and Andhra Pradesh (24 to 26th).

Four summits in four weeks is, in my view, is too many. All have similar VIP guest lists, so the invitees either have to disappoint some states or spend their time hopping from one summit to another, especially in the second half of February.

Nevertheless, more states doing more to attract more investment is a good thing. A positive outcome of the Government of India’s approach of “competitive federalism”. Investor summits are one outcome, another is the impressive way states are striving to improve their ease of doing business rankings.

This is good news for businesses – Indian and foreign – and for job creation and prosperity.

As I wrote earlier this month, the Government of India is engaging more deeply with the UKIBC and our members on the ease of doing business . At the same time, state governments are reaching out in the same way.

Over the last few years the UKIBC has hosted in London Chief Ministers and/or their senior colleagues from a wide range of states, including Andhra Pradesh, Madhya Pradesh, Karnataka, West Bengal, Assam and Rajasthan. We have partnered with most of the others in India.

Through these interactions, we have learned that each state takes a different approach, with some more experienced and evolved than others. We have also learned how UK businesses regard such interactions, how they want to engage and where they want to engage.

What Doesn’t Work?

Some states still have a basic approach – they visit the UK with a simple message “invest here”. Unfortunately, this has little or no impact because these states have not taken the time to build relationships or to understand their audience.

At the same time, too many states want to talk to big businesses in big groups – 200 plus – rather than small, sector-focused, groups and in a one-to-one situation.

Another reason such visits don’t lead to increased investment is that they are one-offs – not enough emphasis is put on building and maintaining these relationships following the visit.

What Does Work?

On the other hand, some states have a more evolved approach. They engage UK businesses in India, visit the UK more often (and get out of London), have a message geared towards the audience and engage with small groups.

A recent visit to London by the West Bengal Chief Minister hit the spot. This was partly because she brought an impressive business delegation, but also because Ms Banerjee let the delegation do the talking and the interaction was in a roundtable format. Creating dialogue – B2B and B2G – proved popular.

This model of government and business working together to engage UK businesses is one that other Indian states should follow. A supportive, business friendly government alongside a strong business ecosystem are two of the things UK businesses will look for in an investment destination.

The states that have a more evolved approach to promoting themselves also recognise that the ease of doing business is an important factor, and they want to interact with UK investors to get their advice on how to get better.

Perhaps the most forward thinking in this regard is Maharashtra, which is evidenced by the partnership the UKIBC has with the Maharashtra Industrial Development Corporation to curate B2G discussions with existing and prospective investors.

So, how should Indian States best engage with UK businesses?

My five top tips for Indian States:

1. Focus on genuine strengths. States need to identify, honestly, the two or three sectors they are genuinely really good at. They then need to target UK businesses in those sectors, and use local industrialists to pitch the state. Government and business working together is compelling.

2. Target UK businesses in India first. There are over 550 UK companies already in India, and investment and expansion decisions are made or significantly influenced by their local leadership. There is very little point in going direct to the UK to talk to global CEOs who have delegated India decisions to their country heads, and certainly not without having first secured the buy-in locally.

3. Don’t ignore SMEs. States should not just target the MNCs. Most MNCs already have an India presence. So, in the UK, states should target the high-growth medium sized companies that have the technology and IP that will enhance the state’s existing ecosystem. Such investors might not bring hundreds or thousands of jobs in the short-term, but this IP-rich investment will reap strong medium and long-term benefits.

4. Build relationships, in India and in the UK. On its own, giving a speech in London won’t generate positive results. Officials and Ministers should meet business leaders regularly in small groups and one-to-one, and they should be in listening mode. Investors want to work with people that understand and care about their business. Actions speak louder than words.

5. Engage on the ease of doing business. In the UKIBC’s surveys, investors tell us the thing they value most in a state is the speed of getting permissions and the effectiveness of the bureaucracy.

Conclusion

Indian states have upped their game over the last few years. They are much more proactive and are getting increasingly smart in engaging with UK businesses.

And, if approached in the right way and in the right time, UK businesses are interested in a dialogue with state governments and the local business community.

As competitive federalism evolves, inter-state rivalry is going to intensify, and those with the best business engagement strategy and the best operating environment will come out on top.

Of course, this is good for business as they will have a wider range of better investment destinations. And it will be good for ordinary people as there will be more and better jobs.


Get a free consultation with one of our India Advisers