Investing in India’s Kochi – A Port City and Emerging IT Hub
Kochi (formerly Cochin), is a port city located in the southwest coastal state of Kerala, in India. With an estimated population of 602,046 and an extended metropolitan population of about 2.1 million, Kochi is the largest cosmopolitan metropolis in Kerala.
The city is a cluster of islands and towns, which include Ernakulam, Mattencheri, Fort Cochin, Willingdon Island, Vypin Island, and Gundu Island. The urban agglomeration includes the localities of Trikkakara, Eloor, Kalamassert, and Trippunithura.
Once a global spice trading hub, Kochi is fast emerging as the commercial and industrial hub of Kerala. The city houses a wide range of industries from tourism, spices and seafood, to shipping, information technology and international trade, to chemical-oil refining. Some of the major industries operating in the region are: Fertilizers and Chemicals Travancore Limited, Kochi Refineries Limited, and Kochi Shipyard Limited.
An interplay of several factors has proven advantageous to Kochi: its vast coastline, close proximity to international shipping centres, presence of a major port and interlinked rivers, and the development of information technology (IT) park. Altogether, these have attracted heavy investments in the city.
Kochi is among the fastest growing ‘tier II’ cities in India, and is considered the second most important industrial city on India’s west coast after Mumbai.
Key factors have triggered the economic boom in Kochi, which we will discuss briefly.
Well-connected transport and logistics network
The city has a well-connected transport system that runs through road, rail, water, and air. Kochi’s backwater system provides inter-city connectivity and serves as a cheap mode of transportation for locals. In June, Kochi will begin its new metro rail services.
In addition, Kochi has an all-weather natural seaport located strategically close to the busiest international sea routes like Suez-Colombo, and enjoys the proximity of a trunk maritime route. It handles the export of fish, tea, coffee, and spices as well as the import of mineral oil and chemical fertilizers.
Kochi also has the largest shipbuilding facility in India. To further tap into the potential of the port, international cruise terminals and several marinas are being constructed near the harbor.
Finally, Kochi international airport operates flights to all the major Indian cities, including Delhi, Mumbai, Bangalore, and Chennai, and many international destinations.
Emerging IT hub
Th IT sector in Kochi has shown remarkable growth in the recent years. With low manpower costs, supportive state information technology policies, and a robust infrastructure, the city is fast emerging as a key IT hub.
The state government offers various incentives to IT businesses such as single-window clearance, concessional power tariffs, and sops for green buildings.
Kochi has a dedicated IT park – Infopark – developed by the government of Kerala. The 350 acre campus spread across four locations in Kochi, houses over 200 companies, including IT majors such as Tata Consultancy Services, Wipro, Cognizant, Affiliated Computer Services, OPI Global, IBS Software Services, and US Technology.
Infopark is designed as a green park and offers premier and sustainable infrastructure at a minimum of 30 percent less operating costs when compared to tier-I cities.
In recent years, new technology and industrial parks have emerged in Kochi, such as Muthoot Technopolis, SmartCity Kochi, KINFRA Export Promotion Industrial Park, and Kaloor, among others.
Cochin Special Economic Zone
The Cochin Special Economic Zone (CSEZ) is a foreign territory within India with special policies for facilitating foreign direct investment, such as tax concessions and other fiscal benefits.
Kochi’s SEZ is a multi-product zone, with industrial units operating in electronics hardware, engineering, gem and jewelry, IT and ITeS, agro and food processing, textile and garments, plastic and rubber, among others.
The Vallarpadam terminal is India’s first trans-shipment facility that operates in a special economic zone. The terminal benefits from the SEZ’s fiscal concessions and procedural ease in terms of doing business, which puts it on par with competing international terminals.
Primary internet gateway to India
Kochi is the landing point for the trans-national South Africa-Far East (SAFE) and the South East Asia-Middle East-Western Europe III (SEA-ME-WE III) undersea cable system, making it the primary internet gateway to India.
The city is served by high speed uninterrupted internet connectivity at lower operational costs than any other major city in India.
Booming real estate sector
Kochi’s excellent infrastructure, port-based development for industry, increased foreign investment, and strong growth momentum in the IT and commercial sectors have hugely increased the demand for housing in Kochi.
The city is in fact considered the real estate hub of South India, and has a high population density (1012 per square km) as compared to Kerala’s overall population density (819 per square kilometer) or India’s population density (324 per square km).
It is also important to note that Kerala is one of the few states in India that has already notified its Real Estate (Regulation and Development) Rules, 2017 to implement the Real Estate (Regulation and Development) Act, 2016 (RERA).
Investment potential high, yet pace of reforms remain a concern
Kochi promises to become the go to destination for business in India due to its wide-ranging industries, numerous upcoming infrastructure projects, and excellent connectivity with domestic and international markets.
In addition, the city offers a clean and green environment that provides an excellent alternative to businesses looking to shift their base from the highly congested and polluted tier-I cities.
However, Kerala’s poor performance in the state-wide assessment of ease of doing business for 2016, conducted by the Ministry of Commerce and Industry in partnership with the World Bank, reveals the gaps in governance and implementation of regulatory reforms.
Kochi itself must speed up the execution of several infrastructural projects that are in the pipeline and simplify regulatory processes to complement its business-friendly vision.
At the same time, a big incentive for businesses in this region is greater levels of transparency in governance and administration; Kerala’s positive performance in the CMS Corruption Study 2017 reported very low levels of corruption.