8 January 2020

Chennai: Open The Door To India's Markets

Grant Thornton India


Grant Thornton India
Over the years, Chennai has made concerted efforts to develop a pioneering industrial policy.
India Government, Public Sector
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While Delhi and Mumbai may have captured international attention with their wealth and prestige, Chennai has spent recent years quietly building a reputation as the optimal place to do business in India.

Over the years, Chennai has made concerted efforts to develop a pioneering industrial policy. This long-term strategic approach has laid the foundations for the economic powerhouse that Chennai and the wider Tamil Nadu state have become.

"As of 2018, Tamil Nadu is ranked ahead of all other Indian states in terms of the number of factories and its skilled manpower resources – from engineering and medical professionals, to those in commerce and accounting," explains Sridhar Ramachandran, tax partner at Grant Thornton India.

"Thanks to the policies of the past, the state has very balanced cluster development – for example in textiles, heavy engineering and agri-products."

A rich cultural history

But Chennai isn't just an attractive place to do business: it is also incredibly welcoming, explains Sridhar. "In the past we have welcomed the Portuguese, the French and even the British," he says. "The Chennai spirit is to absorb as much knowledge and foreign culture as possible and merge it into their own.

"Chennai is also more grounded: you might see the arrogance of wealth on display in other parts of India, but Chennai is much more humble."

While the city's appeal might not be immediately apparent to foreign investors, it is swift to win the respect of those who do business there. "Chennai's inherent strengths come to the fore when you actually use the city for business – whether it is in terms of manpower, business services or finance," says Sridhar.

Thanks to its strong industrial development, Chennai has a relatively wealthy population. As such, the state of Tamil Nadu is widely used as a testing ground by producers of fast-moving consumer goods (FMCG), including major multinationals.

This makes Chennai an ideal gateway city for international businesses keen to gain a foothold in the Indian market.

Easy to do business in Chennai

The majority of business taxation in India is now organised at a national level, but the likes of stamp duty and some real estate charges are state-led. Sridhar says that while stamp duty levels are among India's highest in Tamil Nadu, most property and tax-related services are now provided electronically by the local government, which greatly increases the ease of doing business.

"Tamil Nadu has also created a single-window facilitation desk that foreign investors can use to get approvals on a time-bound basis for the likes of land allotment, factory clearances, electricity connections or pollution control board approvals," he adds.

"This service has been around for more than 20 years and has evolved in a very structured manner. The state has also now started providing large investors with project managers that reach out rather than requiring them to visit the facilitation desk."

Thanks to its well-educated workforce, Chennai has become a major outsourcing hub for international banks and insurers, and its electronics manufacturing sector has grown significantly in recent years. Chinese firms in particular have shown considerable interest in setting up facilities in the region.

The local government is also hoping to build on the strength of Tamil Nadu's automotive industry to further develop its defence and aerospace sector, while the region is now one of the main centres for renewable energy in the country.

For businesses interested in seeing what Chennai and Tamil Nadu have to offer, explains Sridhar, "the state has a clear policy on foreign investment: for example, it offers memorandums of understanding and incentive packages, including some subsidies around training and land."

Gateway to India

"Of course, Chennai's position as a gateway city owes a great deal to its history," says Sridhar. "But it is the more recent changes, in particular in terms of industrial policy, as well as cultural and economic openness, that have established its status as the most effective route to growth for businesses coming to India."

Chennai quick facts

  • Location: Tamil Nadu state, south-east India
  • Time zone: India Standard Time, GMT +05:30
  • Population: 7.1 million
  • GDP: US$34.9 billion (2017)
  • Industrial strengths: Manufacturing; light and heavy engineering; textiles; automotive; agri-processing
  • Growth sectors: IT and technology; defence and aerospace; renewable energy
  • Regional access: New Delhi is 1,760 kilometres away, 2 hours 45 minutes by air. Mumbai is 1,030 kilometres away, 2 hours by air.

25 November 2019

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