Business Today

Lucknow & Kanpur: Against all odds

Despite negative perceptions about law and order and poor infrastructure, two cities from Uttar Pradesh—Kanpur and Lucknow—rise buoyed by positive consumer and investor sentiment. Do they denote a glimmer of hope for the rest of UP?

Shalini S. Dagar | Print Edition: September 7, 2008

It is half past nine in the evening at Fun Republic, a mall, across the river Gomti in Lucknow and already time for ‘official’ closure, but some latecomers still rush in to snag those last minute purchases. Azhar Javed, 30, from Bareilly is in no rush. He has been here with his wife, Rubina, for the past few hours. It is their wedding anniversary. Javed, a maintenance engineer with state-owned telecom company, BSNL, is welltravelled, having worked in Delhi and Dubai.

The changing face: First the metro culture, now Lucknow awaits the metro
The changing face: First the metro culture, now Lucknow awaits the metro
However, for now, Lucknow is the most convenient place to stay. “There has been a huge change in the city over the last few years. The metro culture has started coming in here in every way,” says Javed, adding that the city now has all the amenities of the big cities. “Except the metro,” chimes in his wife. If all goes according to plan, then that too will arrive in Lucknow soon after the malls and the multiplexes.

Another man who chose a UP city—Kanpur—over Mumbai threeand-a-half years ago despite his wife’s reservations is S. Kumar. He heads operations at a local tannery in Unnao, off Kanpur. His reasons, though, are completely different. “My son was in the final years of his school education and Kanpur is the only city after Kota that provides excellent coaching institutes,” he says. The move paid off and Kumar’s son is now well placed in a professional institute.

Fact file - Lucknow

Area: 143 sq. km

Population: 2.24 million (2001)

Main industries: Cement, vegetable oils, jute, brassware, sugar production, textiles, leather and footwear, distilleries and breweries, glassware

Average household income: Rs 2.80 lakh per annum

Rents (commercial): Rs 17-28 per sq. ft

Peak power demand: 800 mw

Peak power supply: 800 MW

Peak deficit: None

Power tariffs domestic: For first 100 units, Rs 1.90 per KWh; Rs 2.50 per KWh thereafter

Power tariffs commercial: Rs 4.30 per KWh

Power tariffs public lamps: Rs 3.70-4.10 per KWh

Total water supply: 450 million litres per day

Per capita water supply (city): 150 litres per day

Public transport: Buses, taxis, autorickshaws

If this population of free-floating professionals is an accurate barometer of the attractiveness of cities, then surely it is spring time for the top cities in Uttar Pradesh—Kanpur and Lucknow.

And foreigners, too, are flocking in looking for business as evident from their growing visibility at the Lucknow airport.This writer found two teams of shoe importers—one from Italy and the other from Denmark—on her flight back to Delhi. Does it surprise anyone, then, that Kanpur rose a decisive two places in the BT-Synovate survey over its rank last year, while Lucknow gained a notch?

Quietly, almost unnoticed, these cities are announcing a new trend—it is of UP cities being viable investment destinations on the back of their low cost structures, rising affluence and a vibrant and diversified base of businesses.

According to a recent NCAER-Future Capital report, both the cities have been qualified as the new “boomtowns” of India. Sitting placidly on the banks of the Ganges and the Gomti, Kanpur and Lucknow, respectively, (indeed UP as a whole), have seen the rest of India race ahead for far too long.

Inherent advantages

For Kanpur, originally known as Manchester of the East, the improvement over last year is significant with most votes coming from CEOs and industrialists, the spouses of executives and B-school students.

The region between Kanpur and Lucknow with its base of small and medium enterprises in the leather, chemicals, plastics and electronics segments, offers unique business opportunities.

The region between the two cities accounts for a major ecosystem of small and medium enterprises that form the backbone of the economy. The government, too, seems to be getting its act together.

Add to it the incremental improvements in infrastructure such as flyovers and lifestyle options such as mushrooming residential and commercial complexes and modern retail outlets. “There is a huge transformation in Kanpur with the expansion of the middle class, which is emphasising on education and on careers in the service sector,” says Sanjay G. Dhande, Director, IIT Kanpur, who came to Kanpur as a student and has made it home for the past 37 years.

Kanpur: Undergoing transformation
Kanpur: Undergoing transformation
Yasho V. Verma, Director (Human Resources and Management Strategy) at consumer electronics major LG India, who traces his roots to Lucknow, says that there was always a lot of money with the consumers in the region, but the improvement in the consumer confidence has come from the host of new service-related industries setting up base in the state. Read: financial services, tourismrelated and other services.

 Fact file - Kanpur

Area: 260 sq. km

Population: 2.51 million (2001)

Main industries: Leather products, textiles, fertilisers & chemicals, hosiery, soaps & detergents, electrical goods, etc.

Average household income: Rs 1.59 lakh per annum

Rents (commercial): Up to Rs 30 per sq. ft

Peak power demand: 495 MW

Peak power supply: 290 MW

Power surplus/ deficit: 205 MW

Power tariffs domestic: For first 100 units, Rs 1.90 per KWh; Rs 2.50 per KWh thereafter

Power tariffs commercial: Rs 4.30 per KWh

Power tariffs public lamps: Rs 3.70-4.10 per KWh

Total water supply: 385 million litres per day

Per capita water supply (city): 92 litres per day

Public transport: Buses, taxis, tempos, autorickshaws

The same is true of the state’s political capital, Lucknow, which often boasts of infrastructure superior to Kanpur in every way. Nearly all the big, organised real estate developers— the Sahara Group, Unitech, Ansals, among others— have a presence in the city.

DLF announced a project in Lucknow last month. Compared to major metros, housing is still affordable, and that translates into a lower cost of living. “Lucknow has most of the amenities of a metro and yet retains the distinctive charm of a cohesive and harmonious town,” says Jayant Krishna, Principal Consultant, Tata Consultancy Services (TCS), and President, Lucknow Management Association.

Tata Consultancy Services’ global delivery centre in Lucknow is 500-people-strong and an upcoming facility will increase head count to 3,000 over the next year. “We have had a long association with the city and have found the going to be very encouraging. We have low attrition, high employee satisfaction and a strong quality process rigour,” adds Krishna. In fact, a recent NASSCOM and AT Kearney study on attractiveness of 50 cities across India for setting up of IT-ITeS/BPO operations found Lucknow in the challenger league—the category that follows the top seven destinations.

Even now nearly 400-500 people every month are hired for IT/ITeS sector from Lucknow alone. A formidable higher and technical education infrastructure is one reason for the plentiful talent.

UP has 16 general universities, three technical universities, an Indian Institute of Information Technology and a large number of polytechnics, engineering institutes and industrial training institutes. This is, of course, apart from the world famous Indian Institute of Technology at Kanpur and the Indian Institute of Management at Lucknow.

Despite these inherent natural advantages, big-ticket investments still elude the state. “Lot of people want to do many things here. Yet, there has to be that one big investment in the knowledge sector before others can follow,” says Devi Singh, Director, IIM Lucknow, adding that it is a matter of perception more than anything else.

What deters investors? Mostly it is perceptions about the law and order situation, a stifling bureaucraticpolice culture with crumbling urban infrastructure and extremely poor connectivity.

A Kanpur-based industrialist complains that the state government’s approach is negative for investments. “Tell me why has no major hotel chain come here?” he gripes. And this sentiment breeds a vicious self-perpetuating circle.

Shoe factories: Attracting shoe importers from across the world
Shoe factories: Attracting shoe importers from across the world
Industrial corridor picking up steam

Set up by the Mulayam Singh government for the development of the industrial corridor between Lucknow and Kanpur, Lucknow Industrial Development Authority (LIDA) finally seems to have started attracting investors. International firms like Saudi Arabia-based Al Oula Development Company, UK-based London International Hospital and Indian companies like Uppal and HCL are believed to have evinced interest. Currently, 2,000 acres of land needed for the first phase of the project is being acquired. HUDCO is helping finance the project while Delhi-based School of Planning and Architecture is preparing the Master Plan for the area.

However, the stability of the current government coupled with its strong drive on ensuring law and order seems to have helped as can be seen from the improvement in rankings of both Kanpur and Lucknow. “The law and order situation has certainly improved throughout the state under the present regime, and that has boosted investor confidence,” says LG’s Verma. Government initiatives related to specific industries like the leather technology park or the hosiery industrial park also could work wonders if the improvements stay the course. For instance, Mirza Tanners, one of the big employers in the city, is investing Rs 150 crore in a new factory off Kanpur. Managing Director, Rashid Mirza, who moved to Delhi 10 years ago, says: “I still believe in Kanpur. That is the reason we are continuing to invest in the area.”Incremental improvement in infrastructure will help. For instance, residents take pride in the malls, multiplexes and the ocassional flyovers. That props up business sentiment, too. Plus, Kanpur municipality recently got itself rated as part of the reforms linked to the National Urban Renewal Mission.

Then, there is the unbeatable advantage of these teeming towns’ proximity to consumer markets. As S.K. Verma, Managing Director, Uttar Pradesh State Industrial Development Corporation, UPSIDC, says quite pragmatically: “The market is here with nearly a fifth of the country’s population in the state. Whatever is made, wherever it is made, much of it will have to come here.”

Problems remain

This is not to say that the road to salvation for UP will be easy. As IIT Kanpur’s Dhande says, while the turnaround has happened at the level of the middle class family, it has not spread to the entire state. Political brinkmanship still dominates and demolition or reconstruction of memorials and the size of statues are major issues in the heat and dust of UP politics with real issues such as education and healthcare often taking a backseat.

However, if there is one hope, it is the ambition of the current Chief Minister to lead the country as its Prime Minister. As one academician says: “Anyone who can deliver UP, cannot be denied the post of the Prime Minister.” The moot question is whether the current regime will deliver UP.

 Sizing up UP

  • India’s most populous state with over 16.4 per cent of the country’s population.

  • Fourth-largest state, covering 9 per cent of the country’s geographical area.

  • Has a per capita income of Rs 13,262 compared to the national average of Rs 25,716.

  • Has a literacy rate of 56.27 per cent as against the national average of 64.84 per cent.

  • Its installed power capacity is 9,225 MW as compared to 19,820 MW of Maharashtra.

  • Has no international airport or sea ports (the latter because it is landlocked).

What works for Kanpur and Lucknow...

  • A thriving, diversified ecosystem of small and medium enterprises. Kanpur was earlier known as Manch

  • Rising affluence leading to increasing consumption evident in mushrooming malls and multiplexes.ester of the East.

  • Cost of living is still quite low relative to many other emerging urban centres.

  • Perception about safety and law and order has improved with government’s strong drive against lawlessness.

  • These two districts show the highest enrollment for school-going children in Uttar Pradesh.

  • A huge education infrastructure by way of universities, academic institutions and training academies.

  • Townships with modern amenities are cropping up.

...and what doesn’t

  • The perception that it is an industry-unfriendly state.

  • Negative perception about red tape, corruption and crime.

  • Lack of adequate infrastructure.

  • Poor connectivity.

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