India Market Watch: Funding Boost for Visakhapatnam-Chennai Industrial Corridor and India, Brazil Sign Investment Treaty

October 17, 2016 Posted by India Briefing Reading Time: 5 minutes

Funding Boost for Visakhapatnam-Chennai Industrial Corridor on India’s Eastern Coast

The Visakhapatnam-Chennai Industrial Corridor (VCIC) at 800 km is part of five economic corridors proposed throughout India, the others being : the Delhi-Mumbai Industrial Corridor, Chennai-Bengaluru Industrial Corridor, Bengaluru-Mumbai Economic Corridor, and the Amritsar-Kolkata Industrial Corridor. Aimed to be finished by 2031, the VCIC received a funding boost recently with from loans and grants from the Asian Development Bank (ADB) and extra funding from the central government. While the ADB is to provide a US$ 500 million two-tranche facility to build key infrastructure and a US$ 125 million two-tranche loan to help with industrial policies and business promotion, the central government will provide the remaining US$ 215 million for the US$ 846 million project. Upon completion, the VCIC will connect four economic hubs and nine industrial clusters, emerging as the first industrial corridor along India’s coastline.

The Visakhapatnam-Chennai corridor will fall almost entirely in the state of Andhra Pradesh, covering four strategic centers on the southern end of the eastern corridor – Visakhapatnam, Kakinada, Amaravati, and Yerpedu-Srikalahasti. Altogether, the VCIC will pass through nine districts in Andhra Pradesh and connect three major ports and 15 non-major ports. In its investment report, the ADB identifies growth of small and medium enterprises (SMEs) as well as the following specific sectors and sub-sectors that will benefit from the VCIC, namely, food processing, pharmaceuticals, auto and auto components, textiles, metallurgy, chemicals and petrochemicals, and electronics. In order to successfully exploit the strategic location of the industrial corridor, extensive infrastructure is planned to be built along the VCIC. This will include 138 km (85.75 miles) of state highways and roads, effluent and water treatment plants, 488 km (303.22 miles) of drinking water pipes, 47 km (29.20 miles) of storm drains, 10 power substations, and 281 km (174.6 miles) of power transmission and distribution lines. The human capital attached to the VCIC undertaking will see the skills training of about 25,000 male and female workers, entrepreneurs, and students.

Finally, the high-grade infrastructure and development of high-performance multimodal transport systems of industrial corridors like the VCIC will create the best possible business environment for manufacturing and logistics in India, connecting production centers, urban clusters, and tourism hubs.

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Slowdown in Job Creation Due to Less Investment in Unorganized Sector

According to a survey conducted by the Delhi-based civil society group PRAHAR, as many as 550 jobs have disappeared every day in the last four years. Basing their calculations against Labor Bureau data released early 2016, PRAHAR estimates that employment in India could shrink by seven million jobs by 2011. The Labor Bureau data itself indicates that India created only 135,000 jobs in 2015 as opposed to 419,000 in 2013 and 900,000 in 2011. The trend is anything but troubling, with the most vulnerable sections being farmers, petty retail vendors, contract laborers, and construction workers.

PRAHAR explains the downward trend in job creation as a fallout of poorly performing sectors, which are ordinarily the largest employers – agriculture (contributes to 50 percent of employment in India) and the SME sector (employs about 40 percent of India’s workforce). The group also observes that investment commitments under the Make in India campaign from earlier this year would only create about six million jobs. The final takeaway of the PRAHAR report is the need for ‘smart villages’ or in other words, investing in a stronger rural India, with the growth and development of the farming, unorganized retail, and MSME sectors.

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India and Brazil Exchange MoUs during BRICS Summit, Promote Strategic Trade and Investment

In order to boost greater investment and trade flow between the two countries, India and Brazil exchanged four memoranda of understanding (MoUs) at the sidelines of the BRICS Summit that took place between October 15 and 16 in India. The agreements include an Investment Cooperation and Facilitation Treaty; an MoU on Genetic Resources, Agriculture, Animal Husbandry, Natural Resources and Fisheries; an MoU on Pharmaceutical Products Regulation; and an MoU on Cattle Genomics and Assisted Reproductive Technologies.

Earlier last week, the Brazilian Ambassador to India, Tovara Da Silva Nunes, spoke about the investment opportunities in Brazil and highlighted the similarities between the two countries such as the strong IT services, medicine, and agricultural sectors. Among Latin American countries, Brazil figures as a major trading partner of India and Indian investments in Brazil amount to more than US$ 5 billion. As pointed out by Ambassador Nunes, sectors of importance in their bilateral trade are medical equipment and medicines, aerospace, aeronautics, oil and natural gas, chemicals, fertilizers, and processed food.

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