Rank in attracting FDI fell from 3rd to 5th in 2017-18, the same as its spot in EODB rankings for 2017
Is Gujarat losing out in the race to attract foreign investors? Even as the state slipped two places to fifth in the Ease of Doing Business rankings released last week, official data shows that foreign direct investment in the state declined by 38% in the last year. FDI in the country showed an overall increase of 3% in the same period.
Figures released by Commerce Ministry’s Department of Industrial Policy & Promotion (DIPP) show that Gujarat received foreign direct investment of $2.09 billion (Rs13,457 crore) in financial year 2017-18, nearly 38% lower than previous year’s $3.36 billion (Rs22,610 crore). The figure was also lower than in 2015-16 when the state attracted $2.24 billion as FDI.
Gujarat, which was third among states in terms of attracting FDI in 2016-17, fell to fifth position in 2017-18. Maharashtra, Delhi, Karnataka and Tamil Nadu were ahead of Gujarat, and by some distance.
In what could be an uncanny co-incidence, Gujarat’s rank among all states and union territories in the Ease of Doing Business rankings for 2017, prepared by World Bank and DIPP, which were released just last week, also slipped from third to fifth.
The DIPP statistics show that FDI inflow in the country as a whole rose 3% from $43.48 bn in 2016-17 to $44.86 bn in 2017-18. Because of the lower FDI inflows, Gujarat’s share of overall FDI basket declined sharply to 4.7% in 2017-18 from 7.75% in the year before that.
Gujarat government officials pointed out that FDI in the state had risen by more than 50% in 2016-17, and hence a decline is not at all surprising.
“Most of the FDI in Gujarat in the past few years has been in manufacturing sector, and especially in automobile segment. Since most of these projects are completed, there is a decline, but this will be temporary as many of these investors have lined up expansion plans,” said a senior official.
Ford, Suzuki and tyre-maker Maxxis are among the major foreign companies that have invested in Gujarat in the past 2-3 years. The cumulative investment by these three companies is in excess of Rs14,000 crore, according to official figures. Suzuki said recently that it plans to expand capacity of its Hansalpur plant from 2.5 lakh units a year to 7.5 lakh units by 2020. Its wfresh investment is pegged at Rs4-5,000 crore.
Unsurprisingly, officials said that Japan has been the largest contributor to FDI in the state in recent years. Besides projects like Suzuki, many smaller Japanese companies have invested in the state. Chief Minister Vijay Rupani said recently that investment in the state from the ‘Land of the Rising Sun’ is expected to triple to $3 billion by the year 2020.
“Gujarat is among the states with the highest visibility to international investors. We believe that this decline is a temporary one, and FDI in the state will rise going ahead,” said another official.
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