Allahabad/Lucknow/Phulpur: Sitting in his expensive house, safe behind high walls and 24-hour security, Virendra Kumar Singhal is trying to explain why it’s tough to do business in Uttar Pradesh (UP).

No, it’s not just the kidnappings. Singhal got a telephone threat, and he dealt with it the way most businessmen do in India’s most populous state—he got himself a bodyguard and spent months looking over his shoulder.

On edge: Virendra Singhal’s paint factory on the outskirts of Lucknow has suddenly (and mistakenly) found itself in the middle of a newly re-zoned green belt

It wasn’t just the unexplained fire in his paint factory, Surface Paints Pvt. Ltd, on the outskirts of Lucknow or the fact that the fire brigade showed up almost an hour late. It isn’t the electricity shortages or local politicians knocking on his door regularly, asking for a “donation".

Instead, three months after a new state government took power on an anti-crime, anti-corruption and pro-business platform, Singhal’s difficulty has to do with a bribe, or the benefits of one. And it isn’t as if the problem is new.

Five years ago, Singhal’s factory suddenly—mistakenly, he says—found itself in the middle of a newly re-zoned green belt, making it illegal for him to expand, or indeed, even to exist. The situation can be rectified, he has been given to understand, but it will cost him Rs20 lakh.

“I would take that risk if there was some sort of guarantee, but there isn’t, is there?" asked Singhal. “But unless I pay the babu, my work will never get done. All I want to do is build more sheds, more godowns, manufacture more paint, but we can’t."

“You tell me, how do we grow?" he said.

All across this vast and politically important state, Singhal’s question is a popular one. For more than a decade, UP has been caught in a turmoil of political instability, rising crime and stagnating investments in infrastructure.

As India raced ahead, fuelled partly by the IT boom and huge industrial projects that invited billions of dollars in foreign investment, UP stagnated. Its growth languished below 5% and in 2004, the last year for which data is available, the average person living in the state had a share of Rs9,900 of the net domestic product—almost half the national average of Rs18,912, according to the Confederation of Indian Industry, an industry lobby group.

Agriculture still employs 72% of the state’s residents, and without the kind of boost in tax revenues that other states have gotten from 10 years of solid industrialization UP spends more than half of its budget servicing debt, leaving little behind for investments in public safety, health or education. As a result, UP residents, who live in India’s most violent state, are among the bottom five in literacy and have a life expectancy worse than that in Saharan Africa.

But of all of UP’s myriad problems, the one that has attracted the most attention, swung the most votes and remained under almost constant public scrutiny is the fact that in the past 10 years, crime in UP has risen unabated. In fact, between 1995 and 2005, the last year for which comparable nationwide data is available, violent crimes in UP increased by about 38%, almost twice the national rate.

In cities such as Kanpur, businessmen—the No. 1 target for kidnappings, along with young girls sold into prostitution—started carrying guns.

In Allahabad, doctors stopped making house calls after several were kidnapped and held for ransom when they visited a sick patient. With about 16% of India’s population, UP accounted for about 24% of the violent crimes reported, according to data collected by the National Crime Records Bureau (NCRB), a department of the Union home ministry, making it even more dangerous on a per capita basis than its equally notorious neighbour, Bihar (the NCRB’s analysis excluded states with ongoing civil conflicts, and only looked at crimes reported under the Indian Penal Code).

In state elections three months ago, the new chief minister of UP, Mayawati, campaigned mostly on a platform of restoring law and order in the hopes of attracting the kind of foreign investment and local economic growth that has largely eluded the state.

“With the amount of fear that is there in the hearts of local businessmen, it is difficult to have any sort of economic progress," said Dharam Singh Verma, the executive director of the Lucknow-based Indian Industries Association (IIA), which represents about 7,000 businesses across UP.

Living, working in fear

“Don’t put my name in the newspaper," begged the businessman, one of the richest in Allahabad, the second largest city in UP.

He has reason to be afraid. Allahabad has a crime rate that’s three times higher than the entire state, according to NCRB. In 2005, the year that this businessman was robbed twice, more than 100 murders and about 60 kidnappings were reported. The businessman had made his fortune in construction and two months in a row, his offices were robbed on payday, when his 120 workers would line up to collect their wages.

Finally, he staggered their payments, paying only four or five on each day, so that at no time did his office have more than Rs20,000 at hand. He spread his money out over seven private banks, so that no one person could guess what his net worth was.

Yet, he lives in fear. He has sent his children to study in New Delhi, and his wife lives with his parents. He can afford a Mercedes, he brags—“two if I want to"—but rides around in a beat-up Maruti Zen. And late one night in September, when he rode around town with this reporter and a local police officer, he opened his briefcase to show off his most recent investment, a large black handgun, a Glock .45.

The gun looks incongruous in his pudgy fingers, and it is obvious he doesn’t know how to use it. In Kanpur, where the state’s businessmen got permission from the police to carry handguns, IIA trained them in target practice. But the businessman couldn’t make it to Kanpur for the training, and he bought the handgun off the same criminals he lives in fear of, hoping word would get around that he now owned a gun.

“Do you know where I can buy bullets for this?" he asked.

All across Allahabad, which for years has elected men with criminal backgrounds to both the state government and to Parliament in New Delhi, crime and business have been intertwined. The current member of Parliament, Atik Ahmed, was a wanted criminal before he won an election to the Union government as a legislator for the Samajwadi Party, the opposition in UP.

On a state police document listing the active gangs in UP, Ahmed is identified as the head of an interstate gang called IS-227. He is wanted in 163 cases of violent crime, according to the document, which was provided by a recently retired director general of police from a neighbouring state (a phone call to a number listed as Ahmed’s legislative office in Allahabad went unanswered—local police officers said he was absconding).

For almost all the businesses in Allahabad, this heady mixture of crime and politics has been bad news—except for retired Lt Col Suresh Singh. He runs the Uttar Pradesh Purva Sainik Kalyan Nigam Ltd, an organization that puts retired soldiers to work as security guards.

“We just can’t meet the demand, no matter how many people I recruit," he said. In 1999, he had 250 employees. Now, just seven years later, he has 12,000, an enviable growth rate that’s an unfortunate “by-product of the chaos that the state has fallen into".

This is the first part of a two-part series on the rising crime rate and its impact on the businesses in Uttar Pradesh.