Investing in India’s Telangana State: A Quick Guide

Foreign companies are advised to carefully consider the industry support initiatives in Telangana and tailored investment incentives when contemplating setting up in India. In this state profile, we provide insights into key industries, highlight notable global investors, and outline operational advantages within special economic zones and preferred business hubs.

The state of Telangana is located in southern India, surrounded by the states of Maharashtra, Chhattisgarh, Karnataka, and Andhra Pradesh. It is one of India’s youngest states, formally inaugurated on June 2, 2014, and carved out of the state of Andhra Pradesh.

The state hosts several Fortune 500 companies and boasts of key IT and life sciences hubs at its capital Hyderabad.

Economic activity

The sector-wise contribution to Telangana’s economy was estimated to be 21 percent for the agriculture sector, 17 percent for the manufacturing sector, and 63 percent for the services sector in 2022-23, at current prices.

FDI

Telangana is the only major Indian state that saw year-on-year increase in FDI inflows in Q1 2023—the state’s FDI inflow soared by 61 percent over the same period in the previous fiscal, reaching INR 68.29 billion (US$820.35 million). However, the state experienced a dip in total FDI in 2022-23, receiving US$1.30 billion. Telangana received US$4064.96 million in the last three years, between 2020-21 to 2022-23.

Industrial investments

Telangana attracted investments totaling INR 2.60 trillion (US$31.23 billion) in industries from 2014 to 2023, facilitated by the state’s industrial policy known as TS-iPASS (Telangana State Industrial Project Approval and Self Certification System). The TS-iPASS system is a unique initiative by the Telangana state government, which allows industries intending to establish units in the state to proceed even if formal permission is not explicitly granted or communicated to the proponent.

It is expected that a unique MSME Policy will be floated next, as this sector is a new thrust for the incoming state government. The Congress political party formed a new government in December after the 2023 legislative assembly elections. The tenure is for a five-year term. Other priorities in this area include taking forward the Life Sciences Policy and Telangana e-Mobility Valley.

Hiring environment

Telangana’s hiring environment appears robust, with high labor force participation, a high and growing worker population ratio (WPR), and improved employment terms. The state’s focus on diversifying its economy and creating quality jobs is indicative of a conducive labor market for future economic growth.

Telangana boasts a services sector-led economy, even though the agriculture sector remains the largest employer in the state. Over time, there have been notable improvements in the terms of employment, particularly in non-agriculture and formal sectors, marked by an increase in access to benefits like paid leave and social security. These positive developments, combined with government support and initiatives, have cultivated a favorable labor market environment in Telangana. As a result, the state has successfully attracted and retained a pool of talented individuals who earn the highest per capita income in the country. This positions Telangana as a hub for sustainable growth and innovation, making it a promising destination for both job seekers and employers.

Below is a list of a few of the prominent educational institutions located in Hyderabad:

• The University of Hyderabad – established in 1974 and offers courses in science and technology, medical sciences, humanities and social sciences;
• Dr. B. R. Ambedkar Open University – established in 1982 and specializing in a variety of courses;
• English and Foreign Languages University – established in 1958 and specializing in language studies;
• Indian Institute of Technology – established in 2008 and with courses specializing in AI, design, engineering, liberal arts, mathematics, and pure sciences;
• International Institute of Information Technology – established in 1998 and specializing in technical research;
• Institute of Chartered Financial Analysts of India – established in 1984;
• Jawaharlal Nehru Technological University – established in 1972 and specializing in engineering; and
• Nalsar University of Law – established in 1998 and specializing in law.

Major sectors in Telangana

Life sciences

Hyderabad is considered the Life Sciences Capital of India with over 800 life sciences companies. The sector has attracted INR 64 billion (US$769.26 million) worth investments from 215 companies in 2021-22 and INR 27.66 billion (US$332.46 million) from around 150 companies in 2020-21. Telangana contributes about 30 percent of India’s pharma production and 44 percent pharma exports. The state has an ambition to grow its life sciences ecosystem to US$250 billion in value by 2030. Major investors are GlaxoSmithKline, Novartis, Dupont, GVK Bio, Biological E. Limited, Ferring Pharmaceuticals.

Hyderabad Pharma City: Established at Mucherla, near Hyderabad, it is being developed as the world’s largest integrated cluster for pharmaceutical industries with thrust on R&D and manufacturing. The hub is expected to attract US$10 billion in investments and 500 pharma and life sciences companies have shown interest in setting up facilities here. It is located 25 km from the international airport.

Genome Valley: India’s first organized life sciences R&D cluster. Home to more than 200 companies, including four leading vaccine makers. Key investors include Novartis, GlaxoSmithKline, Ferring Pharma, Chemo, DuPont, Ashland, United States Pharmacopeia, and Lonza, among others. A scientific workforce of about 15,000 professionals. The Telangana government is seeking to expand it by 250 acres.

Medical Devices Park: Spread over 302 acres, it is the largest medical devices park in the country. The region benefits from the presence of a vast ecosystem of suppliers – over 1000+ SMEs in precision engineering and over 6000+ plastics manufacturers that handle all types of materials.

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Pharmaceutical production and medical device manufacturing in Telangana State

The life sciences sector in the state benefits from a large talent pool sourced from leading academic and research institutions – Indian Institute of Chemical Technology, NIPER-Hyderabad, Central Institute of Tool Design, Central Institute of Plastic Engineering and Technology, Advanced Research Center for Powder Metallurgy and New Materials etc.; engineering and medical institutes – IIT, IIIT, JNTU, BITS Pilani, Osmania, Gandhi Medical, etc.

Food processing

Food processing is among the state’s key industries. Telangana has a strong agri-food material base that contributes about 25 percent to the production of agricultural allied industry output.

With its additional capacity in the seed and poultry segment, Telangana has the potential for the establishment and promotion of organized meat processing and cultivation of exotic vegetables. It can also further develop its inland fisheries sector and develop greenhouses.

Telangana has around 39,748 registered food processing units worth US$32.75 billion, four major food parks with plug and play facilities, and two new Telangana State Industrial Infrastructure Corporation (TSIIC) food processing parks whose occupants have committed a total fixed capital investment of INR 15 billion (US$180.17 million).

Major multinational companies include Plant Lipids, Monin, Coca-Cola, Hatsun, and ITC Limited.

Information technology

Telangana’s IT sector has experienced continued and rapid growth, and hosts over 1500 IT/IT-enabled services companies. The sector’s IT exports are higher than the national average. More than nine million people are employed by the sector in the state. IBM, Microsoft, Amazon, Apple, TCS, Uber, Google, Deloitte, and Infosys are among leading IT/ITeS multinational companies with a presence here. In Hyderabad, IT activities are concentrated in Gachibowli, Madhapur, and Nanakramguda. The state government is growing two new IT clusters at Adibatla and Pocharam.

Up to 100 percent FDI is allowed in data processing, software development and computer consultancy services; software supply services; business and management consultancy services, market research services, technical testing and analysis services, under automatic route. Also, 100 percent FDI is permitted in B2B e-commerce.

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There are also more than 150 companies in the VFX (visual effects) industry, employing 30,000. Hyderabad’s Ramoji Film City is involved in Hollywood motion pictures by providing equipment, crew, sets and post-production facilities. The Tollywood (Telegu film industry) is the country’s second largest producer of movies. Major VFX investors are Walt Disney, Sony, EA, Tata ELXSI, etc.

Up to 100 percent FDI allowed in teleports, DTH, multi-system operator, cable networks in DAS areas, mobile TV, headend-in-the-sky broadcasting services. 100 percent FDI is allowed in publishing/ printing of scientific and technical magazines/ specialty journals/ periodicals under the government route.

Telangana is also focused on enabling data center investors and has a Data Center Policy in place with fiscal and non-fiscal incentives and provisions for power and energy consumption. Tailor-made incentive packages are also available to manufacturers in this domain. Flipkart, CtrlS, Amazon, Microsoft, and STTelemedia are among major DC investors in the state. Data centers are considered a separate infrastructure category.

Electronics

The sector employs over 50,000 persons, with over 250 companies. The state has an Electronic System Design Manufacturing (ESDM) Policy and two ESDM clusters at the e-City Manufacturing Cluster Limited and the Maheshwaram Science Park, spread across 602 acres and 310 acres, respectively. The electronic systems sector has attracted investments across the value chain, in R&D, and design centers. Key players are Nvidia, Qualcomm, AMD, Foxconn, Apple, OPPO, and OnePlus.

Textiles and apparel

Telangana is the third largest producer of cotton in India, producing five million bales of cotton that account for 15 percent of India’s total production. Telangana’s historical textile sector is empowered by the efforts of local businesses and artisans.

The industry has 50,000 power looms, 17,000 handlooms, 120,000 handloom weavers, 627 weaver cooperative societies, and two textile parks: Kakatiya Mega Textile Park and Sircilla Apparel Park.

Major investors are Korea’s Youngone. Welspun, P&G, Sitaram Spinners Pvt. Ltd., Ganesha Ecosphere Ltd., and Kundana Technotex Pvt. Ltd.

There are local sourcing opportunities for retail giants like IKEA, which has an outlet in Hyderabad.

Start-ups

Telangana has a Start-Up Policy in place and has set up a supportive ecosystem around it. The state hosts over 4,500 start-wups, 25+ labs, over 120 global captive centers, and several incubation centers. State institutions to support start-ups are T-HUB, TSIC, WE-HUB, T-WORKS, RICH, and TASK.

14 thrust sectors for investment

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Under the state’s industrial policy, there are 14 sectors recognized as thrust areas, where investments are accorded higher priority. These sectors have been identified by the government based on Telangana’s location, available resources, human capital, raw materials, manufacturing capacity, and untapped potential.

Life sciences

• Hyderabad is the bulk drug and vaccine capital of the country.
• Opportunities in life-saving drugs, new vaccines, and biologicals.
• Encouragement needed in emerging life sciences areas.

IT hardware

• Strong IT software sector to complement IT hardware.
• Government-approved IT Investment Region and Electronic Manufacturing Clusters.
• Support for bio-medical devices and medical electronics.

Precision engineering

• Presence of defense aerospace and research laboratories.
• Investment opportunities in the defense sector.
• Innovative aerospace SMEs and 49 percent FDI in defense sector.

Food processing and nutrition products

• Large producer of agro-products and market leader in poultry and seed business.
• Potential for greenhouse and exotic vegetable cultivation.
• Encouragement needed to add value to agro-products.

Automobiles, transport vehicles, auto-components

• Upstream and downstream opportunities in the automobile sector.
• M&M tractor plant and auto-component SMEs as anchors for future growth.

Textiles and apparel

• Potential in textiles, leather, and leather value-added products.
• Growing demand for paper and paper products in the state.

Plastics and polymers, chemicals, and petrochemical

• Significant employment potential in the MSME sector.
• Products consumed nationwide, critical for MSMEs.

FMCG and domestic appliances

• High growth rates in the FMCG and domestic appliances sector.
• Advantageous location for cost-effective transportation.

Engineering and capital goods

• Important for supporting various sectors’ value chains.
• Supply chain for automobile, aerospace, petrochemicals, etc.

Gems and jewelry

• Hyderabadi pearls and traditional jewelry items.
• Potential for diversification and value addition.

Waste management and green technologies

• Essential for all industries.
• Proven profitability of green initiatives.
• Functional waste management models in the state.

Renewable energy and solar parks

• A global priority.
• Large land availability for non-conventional and renewable energy installations.

Mineral-based and wood-based industries

• Exploitation of minor mineral wealth and sustainable plant material.
• Generating sustainable incomes and saving forests.

Transportation/logistic hub/inland port/container depot

• Land-locked state with potential to become a major transit and logistic hub.
• Central location for international investors.

Investor facilitation

Telangana has friendly policies in place for foreign companies. Enacted in 2014, the Telangana State Industrial Project Approval and Self-certification System (TS-iPASS) Act offers swift clearances for mega projects in just 15 days, while projects of other types receive approvals within 30 days. Telangana is the only state to implement the ‘Right to Clearance,’ enabling industrialists to obtain industrial clearances, per Invest India.

Telangana consistently ranks top among Indian states for doing business, with major businesses expanding and re-investing in the state.

Special economic zones

Telangana is home to 67 notified special economic zones (SEZs) and 28 operational SEZs.

SEZs – TSIIC

SEZs – TSIIC joint ventures

TSIIC allottees notified as SEZs

SEZs – private developers

Industrial clusters

Telangana is developing two industrial clusters at Ibrahimpatnam across 123 acres (Ranga Reddy district) for fiber glass and Duddada across 88.19 acres (Medak district) for general engineering – electronics and electrical equipment.

Export performance

The thriving pharmaceutical and jewelry industries have bolstered the export economy of Telangana, making it the second best performing landlocked state after Haryana. Telangana occupied the sixth spot overall on the 2022 Export Preparedness Index 2022 from the government’s think tank, Niti Aayog. This is due to the state’s well-built infrastructure of roads, national highway network, and international airports that connect Telangana to both domestic and international markets.

The state’s Medchal Malkajgiri district contributed the most, at 14.4 percent of the state’s total exports. Enabling factors here include the presence of IT and pharmaceutical parks, no power deficit, transport connectivity via cargo terminals, and logistics capacity via cold storage and warehouses.

Prior to the pandemic, in 2019-20, Telangana’s exports were worth US$7.3 billion, contributing more than 2.5 percent to India’s net exports.

This article was originally published on November 2, 2023. It was last updated December 21, 2023.

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