Gujarat and Rajasthan are Corporate India's investment lodestone

Gujarat tops with Rs 4 tn in fresh investments, Rajasthan is second with Rs 2.37 tn investments in FY22

Gujarat has topped the list of Indian states in attracting fresh investments from Indian and foreign companies, with new investments worth Rs 3.98 trillion announced in 2021-22 (FY22), up 273 per cent, or by Rs 2.91 trillion, compared with 2020-21 (FY21).

Gujarat was the highest gainer in value terms as Indian states recovered from the Covid-19 pandemic which impacted investments across regions in the previous year, according to data sourced from the Centre for Monitoring Indian Economy and CareEdge.

By attracting new investments worth Rs 2.37 trillion in FY22, Rajasthan was placed No. 2, but was the highest gainer in percentage terms (at 535 per cent), compared with FY21.

Maharashtra with fresh investments announced at Rs 2.02 trillion and Odisha at Rs 1.03 trillion bagged the third and fourth places, respectively, in FY22. 

Tamil Nadu joined the top five states by attracting new investments worth Rs 84,000 crore in FY22.

While a low base of FY21 may have helped some states in terms of augmenting their growth numbers, Gujarat and Rajasthan still stand out if one compares the new investments for FY22 with the average of the previous four fiscal years (2017-18 through FY21).

Gujarat was recently in the news for scoring a multi-billion semiconductor manufacturing project of Vedanta Group and Taiwan-based Foxconn and Tata-Airbus aircraft manufacturing project and taking a lead over Maharashtra which was also in the race to win both projects.

Both Reliance Industries and Adani Group have selected Gujarat to set up gigafactories for renewable energy foray and announced investment worth billions of dollars in the state in the past two years.

While selecting Gujarat for their joint venture (JV) with Taiwanese firm Foxconn, Vedanta Group Chairman Anil Agarwal said they had decided on Gujarat a few months ago as the state met their expectations.

“In a July meeting with Maharashtra leadership, they made a huge effort to outbid other states with competitive offers. We have to start in one place and based on professional and independent advice, we chose Gujarat. We will create a pan-Indian ecosystem and are fully committed to investing in Maharashtra as well. Maharashtra will be our key to forward integration in our Gujarat JV,” said Agarwal in September.

Projects under implementation

Interestingly, Maharashtra is ahead compared to other states for projects under implementation. In FY22, work on projects worth Rs 17.31 trillion were under implementation in Maharashtra, according to CMIE data.

Uttar Pradesh emerged No. 2 with Rs 9.79 trillion worth of projects under implementation, while Odisha (Rs 9.11 trillion) and Gujarat (Rs 8.95 trillion) emerged No. 3 and 4, respectively, in the state league tables for the same year. There were Rs 8.73 trillion worth of projects under implementation in Andhra Pradesh — placing the state at No. 5 among states in FY22.

“Maharashtra has consistently retained its position as a top investment destination. The existing ecosystem and government policies are supportive of investment in the state. Factors like relatively easier land acquisition, power availability, proximity to ports, and better law and order situation are all favourable for investment in Maharashtra,” said Rajani Sinha, chief economist of CareEdge, the research arm of rating firm CARE.

Former industry secretary Ajay Dua said while some investment projects may have been prodded to shift to Gujarat, the business environment is visible to every investor.

“The business environment translates into production and logistics costs. There is appreciation for businessmen in Gujarat and probably in parts of Maharashtra as well. But in many other parts of the country, even if the government rolls out the red carpet, businesses are unlikely to shift,” said Dua.

Jaijit Bhattacharya, president of Centre for Digital Economy Policy Research, a New Delhi-based think tank, said companies are looking beyond the five-year horizon for their future investments.

“They know that they have to stay there if they are putting in money and it has to be based on a sound business decision,” he said. 

“I am not surprised by the Vedanta-Foxconn semiconductor investment moving to Gujarat as a lot of work has already been done in Gujarat,” said Bhattacharya.

On increased competition among states for investments, he said a few states were always competitive. ‘A united Andhra Pradesh was very competitive under former chief minister Chandrababu Naidu. Gujarat used to catch businessmen even in lifts! For Karnataka, the weather did all the selling. Now the number of states that are aggressive has gone up. Now, Odisha and Assam have also become aggressive. It’s a healthy tussle among states. In future, it (choice of site) will come down to which state is less corrupt and has less inspector raj,” he said.

Arindam Gupta, partner and leader, Deloitte India, said private investors go by their own requirements. “Industrial infrastructure in the form of good quality industrial parks with land availability and with last-mile connectivity,” said Gupta.

According to the Tamil Nadu government, the state is seeing a rise in investments, driven by domestic and foreign investments.

“We have done extremely well in overall investments. We have crossed about Rs 2.3 trillion in the 16 months since the new government took charge (May 2021). The positive fact is that it is spread across the state in various sectors — from general manufacturing and services to textile and renewable energy,” Industries Minister of Tamil Nadu Thangam Thennarasu told Business Standard.