5 steps India’s State Governments can take to attract investment

Last week I outlined 5 areas of policy reform needed if India’s mission to attract more advanced manufacturing FDI is to be realised. I’m now writing to share 5 top tips for State Governments planning their tactical marketing outreach to potential investors.

Throughout the fifteen years that I’ve worked closely with Indian State Governments, they have always been keen to attract investors. But there is no doubt that their efforts have steadily increased, particularly in the last 5 years. Typical approaches include investor summits, international roadshows, and even promotional adverts in foreign newspapers like the FT and the Economist.

To varying degrees, all these activities help build awareness. But do they actually attract investors?

Over the last five years the UKIBC has hosted in London Chief Ministers and senior figures from many states, including Andhra Pradesh, Madhya Pradesh, Karnataka, West Bengal, Haryana, Assam and Rajasthan. We have partnered with these and other States in India, including taking delegations to State capitals.

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, delivering a simple message – “Invest Here. We are the best”. Unfortunately, this has little or no impact because these states have not taken the time to: build relationships; understand their audience; refine their messages; or, indeed, identify the right channels for these messages.

Too often the messages do not focus on a State’s differentiators – its real value-add. Messages miss the spot by emphasising the availability of land and utilities. These are taken for granted by potential investors, so do not impress.

At the same time, too many states want to talk to big businesses in big groups – 100 plus – rather than in small, sector-focused groups and in a one-to-one situation.

WHAT DOES WORK?

On the other hand, some states have a more evolved approach: they engage UK businesses already based in India; they visit the UK more often and, especially important when seeking advanced manufacturing investment, they get out of London to cities like Sheffield, Manchester and Birmingham; they identify target investors, develop messages for these targets, and engage one-to-one or in small groups.

It’s worth highlighting two other impactful approaches.

On both of her visits to the UK, the West Bengal Chief Minister brought an impressive business delegation. Ms Bannerjee let the delegation do the talking and was keen to engage in a roundtable format. Creating dialogue – B2B and B2G – proved popular because a supportive, business friendly government alongside a strong business ecosystem are two of the things UK businesses look for in an investment destination.

Secondly, States that succeed 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.

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 in which they have a genuinely globally competitive ecosystem, including talented people with cutting-edge skills. 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. And States need to showcase their international connectivity because ease of trading is key for manufacturing supply chain players.

2. Target UK businesses in India first. There are around 600 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.

3. Don’t ignore tech-rich SMEs. States should not just target 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 or at an investment summit will not win investment. 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 who understand and care about their business. Actions speak louder than words.

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

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