Chennai – Destination 2020

We recently celebrated 20 years of our presence in Chennai and launched a comprehensive research report on the city titled ‘Destination 2020’ which articulates the salient features of Chennai as a compelling destination for investments in the Southern market.

Our entry into this city was prompted by the need to service our global accounts who had space requirements in this market. Starting with a team of 3 operating out of Chennai in 1998, we have grown over the years to a team of more than 1,000 professionals today.

Chennai has always been the cultural, economic and educational hub of south India. So, what makes Chennai stand out compared to its southern counterparts?

Largest state economy in South India

Driven by stable governance, adequate policy interventions and structural reforms, the state has emerged as one of the preferred destinations for both industries and tech corporates looking to expand their operations. Over the past six years, the state GSDP at 2011-12 constant prices has grown at a CAGR of about 5.5%. One of the key differentiating factors for the state in comparison with its southern counterparts is its diversified economic base, considering the concentration of varied industries such as tech, automobile, electronics, textile and renewable energy.

Skilled tech manpower

Tamil Nadu has made huge progress in the education sector especially in the field of technical education. Compared to other southern states, Tamil Nadu is at an advantage due to the presence of over 21 universities and more than 500 engineering colleges. This has led to IT and manufacturing corporates setting up their base in Chennai and surrounding locations.

Top four investment destinations in India

The state has accounted for about 7% 3 of India’s total FDI inflows since 2000. After a brief decline in 2016-17, the state regained momentum and witnessed FDI inflows worth around USD 3.48 4 billion during 2017, which is about 7.7% of the total FDI received by India. This steady inflow has resulted in about 576 Fortune 500 companies deciding to set up base in Tamil Nadu, thereby giving further impetus to the state economy.

Only state to have presence of three sea ports

Out of 12 major ports in India which cover about 75177 kms of coastal line, Tamil Nadu has three major ports with a coastline of 1076 8 kms. During the year 2017-18, these ports have handled cargo capacity of over 1.1 9 million metric tons. In addition to these three ports, the Government of India has recently approved the construction of a green field deep sea port at Enayam near Colachel. The project is part of the ‘Sagar Mala’ port-led development programme from the government. This project is expected to minimize the logistics cost for exporters and importers in South India. The proposed port is expected to serve as trans-shipment hub for the global East-west trade route.

Leading the way in green revolution

Tamil Nadu is one of top 10 markets in the world to have achieved a high share of renewable energy in its energy mix. Further, the state plans to double its wind energy capacity and increase its solar capacity by six times by 2027.

Leading in green buildings

Besides concentrating on generating sustainable energy, Tamil Nadu is also a leader in developing sustainable buildings. The first list released during 2018 by the US Green Building Council (USGBC) in India ranked Tamil Nadu as the leader on the list of the top 10 Indian states that house the highest number of green buildings with a Leadership in Energy and Environment Design (LEED) certification.

Presence of three submarine cables

Chennai has excellent optic fibre network connectivity with the presence of three undersea cable landing stations. The combined capacity of all the three cables put together will be about 14.8 tera bytes per second. These cable networks coupled with high scale of reliability has led to the city’s emergence as one of the Data Centre hubs in India.

Leading thrust sectors contributing to city’s growth

The presence of major automobile manufacturers and allied industries have resulted in Chennai being called the Detroit of India. Chennai has the production capacity to manufacture three cars every minute, one truck every two minutes and one motorcycle every six seconds.

Second largest electronic hardware manufacturer in India

Besides the automobile industry, Chennai has emerged as the second largest electronics hardware manufacturing hub in India and accounts for about 16% of the national production. Chennai and the surrounding locations of Sriperumbudur, Oragadam and Mahindra World City house more than 20 electronic hardware technology parks. Telecom instruments, electronic instruments and electronic components were the top three exported commodities from the state during 2017-18.

Global In-house Centers (GICs)

The availability of large talent pool coupled with cost advantage has led corporates to set up their Global In-house Centers (GIC’s) in India. While a majority of these GIC’s are established in the Tier I cities with Bangalore and NCR emerging as the preferred locations, Chennai has also gained momentum recently with more than 145 corporates establishing their operations in Chennai with a share of about 10%.

One of the largest exporters of software in South India

Tamil Nadu is also one of the largest exporters of IT/ITeS software in India. To promote this sector, the government has taken several initiatives. For example, Tidel Park, Chennai’s first IT park, was developed by the government and OMR Road was announced as the IT corridor of the city. Further, the government acquired about 950 acres of land under the industrial bodies of ELCOT and SIPCOT along the IT corridor. A separate IT policy was announced in 2008, which provides fiscal incentives for corporates who want to establish their campuses in the state; these incentives included allowing 100% higher FSI for IT developments across the state. The policy was revised during 2018 and a separate initiative to set up start-up warehouses and TIDEL Park phase II was announced. These proactive measures, coupled with the availability of skilled manpower, have resulted in exports from the sector witnessing a CAGR growth of about 18.8%13 between 2012-13 and 2017-18.

In summary, Tamil Nadu is home to a strong social and physical infrastructure backed by a robust and diversified economy. The pivot of Tamil Nadu’s economic activity lies in the capital city of Chennai. Most industries and corporates prefer to be in and around the city. The state government has taken several initiatives to further improve the city’s infrastructure and policy landscape. To support this growth, major commercial space developers are either coming up or planning to come up with Grade A new-age developments catering to needs of the occupiers. Most of these developments are slated for completion by 2020 which is expected to boost the city’s image as an investment destination.