4 Strong Reasons to Shift Manufacturing in UP

In a new normal, when international manufacturers are scouting alternatives to China, the Province of UP in India is amongst preferred destinations. Numerous Japanese and Korean companies are in advance stages of discussion with the local authorities to move in. This includes fish hatcheries, food production, & power plants.

In a new normal, when international manufacturers are scouting alternatives to China, the Province of UP in India is amongst preferred destinations. Located in the northern parts of the country, UP or Uttar Pradesh is of the size of Brazil in population. A few years back, UP was counted amongst some of the underdeveloped states in the country.

However in recent years, through major policy changes & investments in infrastructure, it is emerging as an industrialized state.  It is further fortifying its position as an industrial destination in the wake of the current crisis.

In a post COVID world, when global organizations are either planning to shift out from China or at least look forward to a China+1 strategy, provinces like UP offer a viable alternative. Numerous Japanese and Korean companies are in advance stages of discussion with the local authorities to move in. This includes fish hatcheries, food production, & power plants. The German Military and Aerospace hardware company Rheinmetall is also planning to form a JV with a state-run enterprise. Microsoft is also planning to set up its training facility in Noida, UP.  

There are numerous reasons, behind the province's ascent as a formidable manufacturing destination.

Large Land Banks

The Province has over 100,000 acres of identified land banks, which is a major draw for industrial activities. These land banks are much cheaper compared to other parts of the country. These land banks are spread across the state. The state government is also planning to develop industrial townships around expressways to boost manufacturing activities.

Additionally, the state government is offering single-window clearance and land acquisition support to manufacturers which will set-up their operations. To further attract MSMEs, the state government is also setting up plug and play factories.

Infrastructure Development to Boost Manufacturing in UP

To foster manufacturing and trade-led growth, the province with the support of the central government has been addressing its infrastructure bottlenecks. It is developing a prolific network of roadways & highways, industrial clusters, riverways, power plants, high-speed transit lines, etc.

The Delhi Meerut highway is operational, which will ensure a smooth commute between western parts of the state and the Indian capital. Three other major expressways are under implementation, namely Bundelkhand Expressway (296 KM, connecting Bundelkhand region to Delhi), Ganga Expressway (628 KMs, connecting Meerut to Prayagraj), & Purvanchal Expressway (354 KMs, connecting the state capital Lucknow to neighbouring Bihar border).

Simultaneously, the province is also building extensive railway corridors. Work on the Detailed Project Report (DPR) has begun on the 856 KM High-Speed Railway (HSR) between Varanasi (PM Modi's constituency) and Delhi. Likewise, UP is also an integral part of the Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC). Once these dedicated railway corridors will be completed, it will give a tremendous boost to trade in the region.

UP is included in the Delhi Mumbai Industrial Corridor (DMIC), which is one of the largest infrastructure projects across the globe. Under DMIC, industrial regions in North-Western parts of UP namely, Dadri-Noida-Ghaziabad & Meerut-Muzzaffarnagar are being developed.

Currently, cargos from UP takes large and tedious land routes to reach ports in Mumbai and Kandla. However, work is going full steam in the World Bank-backed National Waterways 1 project, which will connect Varanasi & Prayagraj with the Port in Haldia (West Bengal) through the river Ganges. The project will allow large cargo vessels (1500-2000 tonnes) and will also complement the EDFC. 

Subsidies, Policy Impetus & Fiscal Incentives

UP is building dedicated business clusters and industrial zones. Simultaneously, it is offering numerous subsidies, policy impetus, & fiscal incentives to support industrial activities.

The UP Defence Corridor (UPDC) is operational and seeing a lot of interest from international and domestic manufacturers. The 6 node corridor is going to play a significant role in the indigenization of the Indian defence production. Manufacturers can avail of various reimbursements and subsides to establish operations in UPDC. Rheinmetall has expressed interest to set up a manufacturing base in UPDC. Russian manufacturer Kalashnikov is already operational, following a JV with Indian Ordinance Factory.

Likewise, IT parks, Electronic Parks, Pharma Parks, Food & agro-processing Parks, MSME parks are developed with dedicated policy support.

The state has unveiled a new electronic manufacturing policy, which offers incentives such as land subsidy, 15% capital subsidy (10% additional for an investment of over USD 140 million), 5% concession on interest rates, and much more. The new manufacturing policy aims to further boost the smartphone industry, consumer durable, IT & Telecommunication hardware industry in the state and aims at an investment of USD 6 billion in the next 5 years.

An abundance of Human Capital

There is plenty of quality human capital available in the province at an affordable price. UP has a huge population of 200 million, thereby ensuring a seamless supply of workforce. Wage rates in UP are relatively less when compared to other international manufacturing locations such as Vietnam.

There are premier Institutions like IIT Kanpur and IIT-BHU that can work as a knowledge partner and value innovation provider, thereby catalyzing further growth. Besides, there is a slew of state-run & private technology institutions & research centers, which can further feed into the demand for quality human capital.

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