How Indian states outpace Pakistani provinces in investment competition

LAHORE: Indian states actively compete for investments by leveraging policy incentives, infrastructure development and ease of doing business reforms. In contrast, Pakistan’s provinces have limited autonomy in economic policymaking, with investment attraction largely managed at the federal level.

The inter-state competition, which benefits the Indian economy, is driven by the country’s federal structure, granting states significant control over economic policies. Indian states continuously enhance governance to ensure a level playing field for investors.

The Indian government, in collaboration with the World Bank, ranks states based on the ease of doing business (EoDB). States such as Gujarat, Karnataka, Maharashtra and Tamil Nadu consistently perform well, attracting significant investments. Reforms in land acquisition, labour laws, contract enforcement and tax administration have further improved their rankings.

Many states offer sector-specific policies, including Tamil Nadu’s Electronics and EV Policy, Gujarat’s Textile Policy, and Karnataka’s IT Policy. Andhra Pradesh and Telangana provide investment incentives such as tax breaks, capital subsidies and single-window clearances.

Maharashtra (Mumbai) and Gujarat (GIFT City) have developed world-class financial and industrial hubs, while states invest in highways, industrial corridors, special economic zones (SEZs), and smart cities to attract investors.

States like Uttar Pradesh and Madhya Pradesh have relaxed labour laws to boost manufacturing investments, while Tamil Nadu and Karnataka offer incentives for skilled workers in IT and manufacturing. Large investor summits, including Vibrant Gujarat, the Uttar Pradesh Investors Summit, and the Bengal Global Business Summit, showcase investment opportunities and facilitate agreements with global investors.

Several Indian states have established international trade offices. Tamil Nadu and Maharashtra maintain strong ties with Japan; Gujarat has partnerships with the UAE and the UK, while Telangana and Karnataka attract US tech giants through direct negotiations.

While Pakistan’s provinces engage in some level of investment competition, it remains significantly less structured and aggressive compared to Indian states. Several factors hinder this competition, including limited provincial autonomy in economic policy. Unlike their Indian counterparts, Pakistan’s provinces lack independent authority over taxation, industrial policy, and investment incentives, with most business-related policies controlled by the Board of Investment (BOI), the Ministry of Commerce, and the Federal Board of Revenue (FBR).

There is no formal ranking system among provinces for ease of doing business. Punjab has made some progress by digitising land records and establishing industrial zones, but other provinces lag behind.

Investment-friendly policies exist but are inconsistent. Punjab is the most proactive, developing SEZs and industrial estates under the Punjab Board of Investment and Trade (PBIT). Sindh focuses on Karachi but faces governance challenges, hampering SEZs near Port Qasim and Dhabeji. Khyber Pakhtunkhwa (KP) promotes hydro and tourism projects but struggles with security concerns. Despite Gwadar’s potential, Balochistan lacks the infrastructure and stability needed to attract large-scale investments.

Infrastructure and industrial development vary across the provinces. Punjab has better road networks, power supply, and industrial parks, while Sindh benefits from Karachi’s financial hub and port but faces land-related issues. KP and Balochistan possess rich natural resources but suffer from investor scepticism due to political instability.

Unlike India, Pakistani provinces do not host large-scale investor summits. Punjab and Sindh occasionally promote industrial zones but lack aggressive international marketing. Foreign investment in Pakistan is primarily driven by the federal government. Projects under the China-Pakistan Economic Corridor (CPEC), including Gwadar and energy initiatives, are negotiated at the federal level, with provinces playing a secondary role. Unlike some Indian states, no Pakistani province has an independent trade office abroad.

While Punjab and Sindh have taken some initiatives, there is no structured investment competition similar to that of India. To enhance their investment appeal, Pakistan’s provinces require greater autonomy, transparent rankings and proactive marketing strategies.