Andhra Pradesh's port-powered success

Strategically located on the Bay of Bengal, Andhra Pradesh is India’s seventh largest state by area, and its leaders claim it has the potential to be the country’s gateway to the rest of Asia through port-led development. 

Situated on the south-eastern coast and with a population of more than 54 million people, the state has one of India’s fastest growing economies. GDP expanded by an average of more than 13% annually between 2011 and 2016, and by 11.2% in 2017, and total GDP now stands at about $125bn. The state attracted FDI inflows totalling $18.47bn between April 2000 and March 2019, according to India's Department for Promotion of Industry and Internal Trade.

Andhra Pradesh has one of the longest coastlines of any Indian state, at 975 kilometres, and is developing four new sea ports. As well as a greenfield international ‘aerotropolis’ at Visakhapatnam, the state is planning seven smaller airports. A large seaport is planned at Dugarajapatnam, located in Nellore district in the south-east of the state. It would cover a 2000-hectare area and involve an investment of $1.2bn under a public-private partnership. In August 2019, Indian conglomerate Adani Group said it was holding talks to acquire Krishnapatnam port, another deep-water port in the Nellore district, for $775m, which would be expanded if the acquisition goes ahead. 

Dual capitals

In 2014, Andhra Pradesh was ‘bifurcated’, or split into two new Indian states: Telangana and the remaining Andhra Pradesh (also known as Seemandhra). Hyderabad is the biggest city in Telangana, with a 6.8 million population. Amaravati – a planned city covering 217 square kilometres whose foundation stone was laid in 2015 – is the ‘de jure’ capital of Andhra Pradesh, while Hyderabad is the ‘de facto’ capital. The metropolitan area of Amaravati encompasses the cities of Guntur and Vijayawada. 

Andhra Pradesh’s main cities include Visakhapatnam (often shortened to Vizag), with 1.7 million inhabitants; Vijayawada, with a population of about 1 million; and Guntur, with 750,000 people.

“Andhra Pradesh is a good place to establish a company,” says Srinivas Raju, plant operations director at Lixil India, a subsidiary of the Japanese sanitary ware producer Lixil, located in West Godavari, about 90 kilometres from Vijayawada. “The cost of labour is cheaper in India than in other Asian countries. The state also has abundant electricity; power cuts never take place here. It also has a lot of very good, talented people, and we have had no problem hiring the right people.”

The Lixil plant – which covers 18 hectares – currently manufactures 790,000 sanitary ware units a year but plans to take this number up to 2 million units by employing a further 500 people. About 80% of its products are destined for the US market but Thailand and China are major markets as well. Lixil has invested more than $56m in the West Godavari plant, which it acquired from Sentini Sanitarywares in January 2018. 

Andhra Pradesh state has 368 engineering colleges teaching a total 160,000 students; 18 state universities; 400 management schools with 46,500 students; 128 pharmacy colleges with 11,700 students; and 78 industrial training institutes. 

Services make up 44% of the state's economy, followed by agriculture at 34% and industries at 22%. The agricultural sector expanded by 17.8% in 2017, while services grew by more than 9%. 

Smarter city

Sri City is a privately owned, integrated smart city located in the south of Andhra Pradesh, close to the border with Tamil Nadu state and 55 kilometres north of the city of Chennai, one of India’s four biggest cities with a population of 10.6 million people. Set up in 2008, Sri City is based on a holistic development model centred around ‘work, live, learn and play’. Spread over more than 3000 hectares, it has been designed to meet international standards in infrastructure development and service delivery. 

It includes a multi-product special economic zone, a domestic tariff zone, a free-trade and warehousing zone, and an electronics manufacturing cluster. Sri City is home to more than 185 companies, including 56 foreign firms from 27 countries, including multinationals such as Kellogg’s, Isuzu, Mondelez, Pepsi, Alstom, Kobelco, Foxconn and Danieli. More than 50,000 people work at the park and more than 50% of the workforce is female. 

“Sri City is one of the main reasons foreign investors come to the state of Andhra Pradesh,” says Ramesh Subramaniam, president of Sri City Foundation. “The state is highly regarded within India and internationally for its ease of doing business. It is also seen as very stable politically; policies are predictable and consistent.

“We have worked closely with the state government to develop the park and in total the equivalent of $4.2bn has been invested there. Many managers and executives live in Chennai and commute to Sri City. It only takes about 75 minutes by car.”

Attracting manufacturing

Toray Industries India, a subsidiary of Toray Industries, a Japanese company that makes key materials for a range of industries, plans to invest $141m in a manufacturing unit in Sri City. It is the biggest investment in India for the firm, which is the 20th Japanese company to set up a facility at the park. Its 34-hectare site will host two factories, including a polypropylene spun bond plant that will produce the advanced technical textile Meditech, which is used in nappies. It is expected to start commercial production in March 2020. 

The other unit is an engineered plastics resin compounding plant that makes raw materials for electrical components used in cars and in electrical and electronic connectors. It started its commercial production in September this year. 

“We surveyed more than 150 sites in India and in the end decided on Sri City,” says Ajai Singh Sirohi, head of strategic planning at Toray Industries India. “There is a great team behind the park and they have a really good track record. The land surface is reasonably flat, there is a large land bank, and the park has good infrastructure and maintenance. Four shipping ports are within a 100-kilometres distance. It is close to Sriharikota, India’s equivalent of Cape Canaveral in the US. We decided that if the area is good enough for the country’s space industry, it is good enough for Toray.”