India pledges easy access to land for factories leaving China

New Delhi

INDIA is developing a land pool nearly double the size of Luxembourg to lure businesses moving out of China. A total area of 461,589 hectares has been identified across the country for this purpose.

This is according to several sources with the knowledge of the matter. They asked not to be identified because they are not authorised to speak to the media.

The total area includes 115,131 ha of existing industrial land in states such as Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh.

Land has been one of the biggest impediments for companies looking to invest in India, with the plans of Saudi Aramco to Posco frustrated by delays in acquisition.

Prime Minister Narendra Modi's administration is working with state governments to change that as investors seek to reduce reliance on China as a manufacturing base in the aftermath of the coronavirus outbreak and the resultant supply disruption.

At present, investors keen on setting up a factory in India need to acquire land on their own. The process, in some cases, delays the project as it involves negotiating with small plot owners to part with their holding.

"Transparent and speedy land acquisition is one of the factors which can help in boosting FDI (foreign direct investment) inflows," said Rahul Bajoria, a senior economist at Barclays Bank.

"This is one dimension of ease of doing business, and perhaps a more comprehensive approach is needed to supplement easier access to land."

Providing land with power, water and road access may help attract new investments to an economy that was slowing even before the virus hit, and is now staring at a rare contraction as a nationwide lockdown hit consumption.

The government has hand-picked 10 sectors - electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles - as focus areas for promoting manufacturing.

It has asked embassies abroad to identify companies scouting for options.

Invest India, the government's investment agency, has received inquiries mainly from Japan, the US, South Korea and China, expressing interest in relocating to the Asia's third-largest economy.

The four countries are among India's top 12 trading partners, accounting for total bilateral trade of US$179.3 billion. The foreign direct investments by the four nations between April 2000 and December 2019 stand at over US$68 billion, government data showed.

Making unused land available in special economic zones, which already have robust infrastructure in place, is also being examined. A detailed scheme for attracting foreign investments is expected to be finalised by end of May.

States have been separately urged to evolve their own programmes for bringing in foreign investments. Mr Modi held a meeting on April 30 to discuss steps to fast-track strategies for wooing investors.

Andhra Pradesh, a southern Indian state, is in touch with several companies from Japan, the US and South Korea.

"We have the advantage of coastline and ready-made industrial parks with necessary clearance," said Rajat Bhargava, the special chief secretary of the state's revenue department.

"We are focusing on certain sectors like IT and related manufacturing, food processing, and chemicals and have been holding video conferences with investors."

The northern state of Uttar Pradesh is also developing an online system for land allotment for all industrial and commercial purposes and is in talks with global companies for attracting investments in sectors such as defence and aerospace. BLOOMBERG