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Haryana on a high

State Chief Minister Bhupinder Singh Hooda wants to turn the $30-billion local economy into a $130-billion behemoth in 10 years. Investors are eager, but Haryana has several challenges to overcome. Shalini S. Dagar and Saumya Bhattacharya tell us why the state is by far the best destination in India.

Bhupinder Singh Hooda, Chief Minister, Haryana
B.S. Hooda
Think Haryana, think Gurgaon. That is, think ‘big’—big global companies, big buildings, big brands, big investments and big plans. That sometimes also translates into big problems. Last fortnight, it was just that for Kamna Saxena, a resident of Gurgaon who works in Delhi. The 27.7-km Delhi-Gurgaon Expressway had just been inaugurated. And instead of zipping past, the cars (1.25 lakh of them on any given weekday) crawled up to the toll gates inch by inch, minute by minute, sometimes for more than half-an-hour. Unusual? Not really, when you live in Gurgaon—Haryana’s, indeed India’s, showcase city of prosperity. Traffic snarls at virtually every traffic light and power failure lasting many hours is quite routine.

Yet, the city and the state remain an irresistible magnet for investors. Chief Minister Bhupinder Singh Hooda says: “There is Rs 70,000-crore of investment in the pipeline.” He claims that the last three years have seen some Rs 28,000 crore being invested in the state.

No surprise then that Hooda expects the state to post an 11 per cent economic growth during the Eleventh Five Year Plan period (2007-2012). There is clearly enough going on for the state (see Infrastructure Projects in Haryana below).

The chief minister recounts how one of the oldest corporate denizens of Gurgaon, Japan’s Suzuki Motors, has voted with its money for Gurgaon and for Haryana by investing more than Rs 9,000 crore over the last two years. “Osamu Suzuki told me that any penny that Suzuki invests in India will be invested in Haryana,” Hooda says, before adding that Haryana has been the recipient of more than 70 per cent of all Japanese investment in India. Such vote of confidence has now prompted Hooda to aim for a $130-billion (Rs 5.2-lakh crore) economy over the next decade.

 
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Another old Gurgaon and Haryana proponent, Rajiv Singh, Vice Chairman, DLF, shares part of this vision: “We believe Gurgaon will be the showpiece of the new urban India in the next 10 years. Economically, the SEZs of Reliance Industries and DLF with the Manesar area will collectively make this area the largest generator of jobs in the country.”

DLF intends to pump in another Rs 20,000 crore or so into the state in the coming 5-8 years. Industry heavyweight Reliance Industries is planning to invest another Rs 25,000 crore in its SEZ in the state. The company estimates the SEZ will attract additional investment of over Rs 1 lakh crore once fully operational as well as provide six lakh direct jobs.

Advantage Haryana

Clearly, the state which abuts Delhi from three sides has an unbeatable locational advantage. And in case of Gurgaon, that advantage is heightened because it is close to the Delhi airport. That allowed the initial pioneers in Haryana to set up base in Gurgaon. “The state, bordering the National Capital from three sides, offers excellent location to start any industry. Gurgaon and Manesar, where many of the manufacturing units of various companies are located, are in the proximity of the international and domestic airports,” says Pawan Munjal, MD & CEO, Hero Honda Motors. Lured by these advantages, Hero Honda set up the first motorcycle manufacturing plant at Dharuhera in 1984-85.

Pramod Bhasin, President and CEO, Genpact, says, “Today, Haryana has added other businessready cities like Sohna and Manesar, to its credit. Most importantly, the government has been extremely supportive from the very beginning. The state realised fairly early about the vast potential of the IT and ITES industry and developed policies that provided many investor-friendly incentives for this industry. We are bullish about Haryana because it has adapted to the needs of our industry and new businesses very swiftly—with supportive infrastructure practices and telecom bandwidth that are essential to our business.”

Ashok Kapur, Chairman and Managing Director, Krishna Maruti, an auto parts supplier to Maruti Suzuki, agrees. Kapur, who has since 1985 set up around 20 companies in Haryana, says: “I have managed to set up these companies without ever having really met a single government official. That speaks for the state.”

 
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The investor-friendly government and administration extends to the maintenance of peaceful industrial relations too.

Former Maruti Suzuki India MD Jagdish Khattar, who battled over a threemonth strike at Maruti’s Gurgaon plant, says the overall environment over the years has been excellent.

Haryana also ends up scoring over neighbouring Uttar Pradesh due to commonly held perception of better law and order situation.

Osamu Suzuki, Chairman and CEO, Suzuki Motors
Osamu Suzuki
Add to it the weight that history carries. When a particular industry develops in a region, the ecosystem that springs up in support makes it difficult for subsequent facilities to locate elsewhere.

When Maruti Suzuki was looking to expand, the location of the plant close to its existing plant was a no-brainer as 70-80 per cent of its suppliers were within 100 km. Add to it cost efficiencies from well-managed inventories and vendors.

And this virtuous cycle continues with the SEZs. “Haryana is amongst the leaders in most of the new technology and export-oriented industries such as auto and auto components, apparels, IT and ITES services and other knowledge-based industries,” says Shrivallabh Goyal, President, Reliance SEZ Haryana.

Advantage others

For Haryana, success seems to have bred a sense of complacency and also aggressive competitors who have come up with far superior infrastructure and lower costs to woo investors. Read: neighbour Uttar Pradesh with Noida and Greater Noida, Rajasthan with its Bhiwadi option and a score of other states with interesting tax benefits.

Mukesh Ambani, CMD, Reliance Industries
Mukesh Ambani
Haryana’s minimum wages— the highest in the country at Rs 3,510 per month—have led many of the export-oriented labour intensive industries to scout these alternate destinations. A.K. Bansal, CMD, Hanung Toys and Textiles, says: “My wage costs are at least 15-20 per cent lower than those of a comparable unit in Haryana.” Hanung has all its units in Noida and Uttarakhand.

Add to it the high land prices which increase the cost of setting up business for the small entrepreneur, and Haryana seems like an increasingly expensive destination. “It is almost like killing a business by outpricing the infrastructure,” says Samir Chopra, Founder Director of call centre Cybiz, and President, Business Process Industry Association of India. He cites Ireland as an example. Ireland, despite its inherent advantages in the BPO space, lost its edge to low-cost destinations such as Eastern Europe and, eventually, to India mainly due to exorbitant costs. These constraints are showing themselves up in investment decisions too. Despite considering Haryana, Honda Siel Cars India (HSCI) moved to Rajasthan as it did not get a large enough plot of land at good location. “There has been considerable improvement in infrastructure development, especially in Uttar Pradesh and Rajasthan, where we have our plants,” says a Honda spokesperson.

Rajiv Singh, Vice Chairman, DLF
Rajiv Singh
Haryana’s infrastructure, whether it is urban infrastructure or power supply, has clearly not kept pace with its growth. The infrastructure problems for now are getting solved through what Amir Ullah Khan, Director, India Development Foundation, calls stealthy privatisation. “Uncertainty over electricity supply is solved by using captive plants or generator sets. Water is almost always ground water pumped up using the same generator sets. Security is entirely through private agencies. For an industry trying to compete with the Chinese, these high costs are suicidal but there is little choice.” However, there is a limit to the private sector capacities as well. So much so that inverter manufacturer Su-Kam Power Systems, which ideally should be a beneficiary of power cuts, also finds itself on the backfoot in Haryana. Kunwer Sachdev, CEO, Su-Kam, says his customers are complaining as “there is hardly any power to charge even the batteries”.

Notwithstanding these glitches, most of the investors and businesses which have ever been in Haryana are willing to be patient. It still remains by far the best destination in India. Though chief minister Hooda promises the metro, the road linkages and the 5,000-MW capacity in three years, among other things, it is quite clear that all this and more will have to come very quickly. Clearly, the benchmarks are rising. The global investors who are still keen on making Haryana their home cannot and will not take anything less than absolutely the world’s best. So when Chief Minister Hooda says, “It is my passion and ambition to make Haryana the #1 state,” it cannot just be in the country. Here, international benchmarks are in order.

— Additional reporting by Shamni Pande