#28 Not All States Dream Alike: How Industrial Policies Shape Our Lives
Welcome to the 28th edition of Policy Mandala by India House. This week, we explore how industrial policies shape jobs, migration, and your hometown’s economic future. Enjoy reading!
You can feel the difference, even if no one says it aloud.
It’s in the closed textile mill your uncle once worked in.
It’s in your cousin’s video calls from Chennai, where he finally found a job.
It’s in your father’s quiet words: “Yahaan toh kuch hota hi nahin.”
And it’s in the way cities across the border buzz with new warehouses, call centres, metro lines, and export hubs.
Why does one place surge ahead while another stays still?
Often, the answer lies in one thing: how seriously a state took industrial growth.
It’s about whether your state made it easy to set up a factory, offered land and power on time, and told investors through actions—not just words—you are welcome here.
That quiet but deliberate choice is called an industrial policy.
If it sounds abstract, think of it this way:
Whether you got a job near home—or had to leave—may trace back to a document your state wrote years ago. It shaped who came to invest, or why they stayed away.
Now, imagine someone like Ankit.
Ankit runs a small but growing startup that manufactures battery systems for electric vehicles. He’s built enough demand to consider opening a second unit—maybe in another state.
Where should he go? To decide, Ankit would turn to industrial policies of each state.
The right policy will help his startup grow. The wrong policy could slow him down or make expansion harder.
That’s why this week on Policy Mandala, we’re exploring industrial policies.
States are placing bold bets on their economic futures. Some are emerging as powerhouses. Others are racing to catch up.
It all started, quietly, in 1972, when Madhya Pradesh became the first state to draft its own industrial policy—well before liberalisation, and long before state competition became fashionable.
Today, every major state has one. But are they all the same? Not quite.
So what really makes a good industrial policy? And how can we tell which states are doing it right?
Let’s break it down.
1. Incentive Structures: The first thing Ankit checks.
Before anything else, Ankit needs to know if the numbers make sense. Will the state help reduce his setup costs? Will it reward him for the jobs he creates or the turnover he generates?
Incentives aren’t just sugarcoating. For someone like Ankit — running on thin margins and investor deadlines — they can decide whether a unit is set up at all.
Gujarat understands this. It moved away from the messy SGST-linked reimbursements and now offers direct capital subsidies. No upper limits. Disbursed over 10 to 20 years. Predictable, scalable, and clear. If Ankit invests ₹50 crore, he knows exactly what he’ll get back—and when.
Tamil Nadu goes deep too. Its Structured Packages can cover up to 40% of eligible fixed assets for FDI projects. It also offers training subsidies of ₹4,000–₹6,000 per worker each month. Incentives vary by project size—Large, Mega, or Ultra-Mega—and the state has a ₹500 crore Venture Capital Fund for startups in sunrise sectors.
Meanwhile, Karnataka has moved towards production-linked incentives (PLIs), adding a layer of support over the Central government’s scheme. If Ankit scales fast, he could earn back 2%–2.5% of his turnover annually for seven years. That’s not just cost relief—it’s growth capital.
And Uttar Pradesh? It's catching up through custom case-by-case incentives for Ultra Mega Projects, especially those relocating from abroad. If Ankit’s firm uses imported machinery, UP considers 40% of that cost as part of the incentive calculation.
But what if incentives get delayed or tangled in red tape?
That’s when Ankit turns to the next filter: Who’s running the show?
2. State Nodal Agencies: The invisible hands that make or break the deal.
Ankit doesn’t just need a policy on paper—he needs someone to pick up the phone. Guide him. Clear approvals. Push files.
Tamil Nadu leads here. Agencies like SIPCOT and SIDCO manage land, infrastructure, and cluster development. "Biz Buddy," its grievance platform, resolves issues within 30 days. The Guidance Tamil Nadu agency even runs international desks in Taiwan and the US for NRIs and foreign investors.
Gujarat follows with iNDEXTb and the Investor Facilitation Agency, offering single-window clearances and relationship managers for large investors. The Gujarat Industrial Development Corporation (GIDC) runs over 200 estates, with ready plug-and-play infrastructure.
Maharashtra has MAITRI—its single-window portal—but struggles with perception around delays. Still, for big projects, fast-track approvals and dedicated investor facilitation cells are in place.
Uttar Pradesh’s Nivesh Mitra portal offers 350 services across 29 departments online. It also ranks all 75 districts monthly on investor-friendliness, pushing local officers to deliver.
Ankit knows now: incentives matter—but delivery matters more.
3. Sector-Specific Focus: Is there a natural fit for what I do?
Ankit’s battery systems fall within EVs, energy storage, and advanced manufacturing. He’s not looking for generic support—he needs ecosystems.
Karnataka could be ideal. It’s laser-focused on EVs, aerospace, semiconductors, and biotech. It even offers ₹5 lakh subsidies to MSMEs adopting Industry 5.0 tech. Bengaluru hosts a Centre of Excellence for Industry 5.0, with ₹100 crore committed.
Tamil Nadu, too, has mapped out sunrise sectors: EVs, medical devices, renewable energy, aerospace. It’s building entire corridors—Chennai-Bengaluru, Chennai-Kanyakumari—to host these industries. It has dedicated policies, land banks, and incentives just for these.
Gujarat positions itself as a post-COVID hub for global supply chain relocation. Its special industrial zones—Dholera for EVs and GIFT City for finance, aren’t just projects—they are full ecosystem models.
Uttar Pradesh is investing in value chain integration via its One District One Product (ODOP) initiative and sector-specific clusters. But for deep-tech or future mobility, it still has some distance to cover.
4. Ease of Doing Business: The silent dealbreaker.
If Ankit had to choose between two equally promising states, he’d go where the paperwork moves faster than the chai queue.
In the 2024 the Business Reforms Action Plan (BRAP) rankings, Kerala, Andhra Pradesh and Gujarat, topped the charts. Gujarat retained its ‘Top Performer’ tag with reforms like allowing MSMEs to start with just a Declaration of Intent, digitizing inspections and offering capital subsidies de-linked from SGST.
Tamil Nadu, ranked second, pushed over 301 reforms under the Business Reform Action Plan and launched Biz Buddy to resolve grievances within 30 days. Its New Single Window Portal now covers 180+ services, fully paperless and faceless.
Uttar Pradesh was the fastest mover, climbing into the top six by radically improving Nivesh Mitra, which now offers 353 services across 29 departments, with no human touchpoints. Plus, it’s the only state to run monthly district-level EoDB rankings to create internal administrative competition.
Karnataka, while digitized, still suffers from a Bengaluru bottleneck. Zones 1 and 2 often face slow clearances, and while it introduced deemed land allotments after 60 days, execution is patchy.
On the flip side, Bihar, Jharkhand, and parts of the Northeast remain at the bottom, dragged down by weak online integration, poor grievance timelines, and fragmented single-window systems.
For Ankit, that means more than a slow start—it means riskier expansion.
5. Infrastructure: Where the promise meets the plot of land.
This is where reality bites.
Does the state have land? Is it litigation-free? Are roads and power lines already laid? For Ankit, it’s a question of whether he can start production in 6 months or 16.
Let’s compare.
Tamil Nadu leads again with a 40,000-acre land bank across 57 SEZs and estates. Over 3,500 acres are ready-to-occupy. Linked to four airports and four ports, it’s India’s third-largest exporter. It even built worker housing for 20,000 people near Sriperumbudur—a “walk-to-work” model.
Gujarat has invested deeply in infrastructure-heavy growth. With 920 sq. km at Dholera Special Investment Region (SIR), 49 ports handling 40% of India’s cargo, and land leased at 6% of market rate, it remains unmatched in integrated logistics. Gujarat also accounts for 17.72% of India’s total factory output.
Karnataka is catching up. It’s developing 50 industrial parks, with mega logistics parks of 100+ acres. But KIADB’s land processing timelines are a known drag—especially in Zones 1 and 2.
Uttar Pradesh is leveraging the Eastern and Western Freight Corridors. But its land availability often lags in terms of plug-and-play readiness compared to southern states.
So what more can states do?
Even with all the bold steps we’ve seen, the road ahead isn’t just about more—it’s about better. Here's what’s still missing in many state industrial policies, and what could change the game:
1. Measure more than money.
Most state policies obsess over investment inflow numbers—₹ lakh crore signed at summits, MoUs inked, FDI received. But few ask: Did those investments actually create jobs? Were they inclusive? Did they reach underdeveloped districts?
States need to go beyond vanity metrics. Create dashboards that track job creation, skilling outcomes, MSME survival rates, and regional equity.
2. Second-generation EoDB reforms.
Almost all states have single window systems. But many still stop at licensing. The next frontier is post-establishment support—faster utility connections, real-time land dispute resolution, municipal compliance easing, and MSME grievance monitoring. Tamil Nadu’s Biz Buddy and UP’s district competition model are promising starts—but others must follow.
3. Deep tech and R&D ecosystems.
Startups get lip service in most policies. But very few states actually invest in R&D infra. Karnataka’s ₹100 crore for Industry 5.0 and Tamil Nadu’s ₹500 crore Industrial Ecosystem Fund are outliers.
States must co-invest in testing labs, design centres, innovation funds, and university–industry linkages if they want to leapfrog in global value chains.
4. Real decentralisation.
In most states, industrial growth remains concentrated—Chennai and Coimbatore, Bengaluru and Mysuru, Mumbai and Pune. Policies must build economic corridors beyond metros. Tamil Nadu’s A/B/C district model and UP’s ODOP initiative show how incentives can be restructured to spread opportunity. Gujarat too offers higher subsidies in backward talukas. This approach needs scaling.
And now, we come back to you.
You might not read state industrial policies, but if you’ve ever moved for a job,
If your sibling’s new job appeared suddenly, or
If you’re waiting for your district to be noticed—
You’ve felt industrial policy’s impact.
So think about this:
Does your state have a clear industrial policy? Have you ever heard your local leaders speak of it?
If you could rewrite your state’s priorities, what would you focus on? Incentives? Infrastructure? Green growth?
India’s future isn’t being shaped in Delhi boardrooms anymore.
It’s being drafted, debated, and delivered in state capitals.
The only question is—will your state keep up?
Book Mandala
In this section, we suggest a book to be read/listened to each week, for the inner policy enthusiast in you :)
Book: Behold the Leviathan: The Unusual Rise of Modern India
Author: Saurabh Mukherjea & Nandita Rajhansa
About the Book:
India’s rise has long defied predictions—and Behold the Leviathan explains exactly why. Mukherjea and Rajhansa map the quiet revolutions taking place in unexpected places: among rural Indians, women, and historically disadvantaged castes.
The book uncovers the stories that statistics miss—from moon missions to a chess renaissance—and asks why, despite such dynamism, only a handful of Indian companies are truly thriving. Backed by deep research and field interviews, it’s part data, part insight, and part invitation to rethink India’s economic narrative.
Our Take:
Behold the Leviathan challenges the usual tropes that paint India’s growth story as either overhyped or undercooked. What makes this work stand out is its insistence on looking where most others don’t: at the progress brewing in rural districts, among women, and across caste lines. It’s refreshingly data-rich but deeply human, built not just on spreadsheets but on conversations with over 50 thinkers, entrepreneurs, bureaucrats, and academics.
What we appreciated most is the optimism grounded in realism. The authors don’t romanticise India’s rise. They document it, decode it, and challenge us to think differently about its future trajectory.
If you’ve ever felt that the big picture of India is missing its finer strokes, this book is for you.
Co-authored by Mrinal Rai and Aswathi Prakash.
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