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Gujarat beats Dragon states in attracting FDIs

India overtook China and became the leading destination for foreign direct investments (FDI) in the Asia Pacific Region in 2015, according to a report published in Financial Times. The Chinese economy has been slowing down since the last three years and global economic growth has felt the burnt. On the other hand, India which has seen a falling growth rate in the last 5 years (since 2010) but achieved growth in 2014 and 2015 for capital investment and project numbers thus enabling India to overtake China.

Gujarat secured the first position among all the 10 states included in the list comprising Indian and Chinese states. Gujarat attracted a total of $12.4 billion worth of investments and claimed 10% of total capital investments in both the countries combined. Maharashtra was ranked 4th followed by Andhra Pradesh and Karnataka. Recently, World Bank also ranked Gujarat at the top spot for doing businesses in India. The sudden influx of FDIs in the home state of the Indian PM Modi has left the other leading industrial states such as Maharashtra, Tamil Nadu and Andhra Pradesh to carve out strategies like that in order to attract more FDIs.

There are number of reasons why foreign companies are choosing Gujarat for setting up industries: extensive network of railways; highest number of airports; excellent network of roads; professional services for investors; industrialization; strategic location providing easy access to Middle east, Western and African Markets; and skilled manpower.

Gujarat constitutes only a five percent of India’s population and only 6% of land mass but it contributes 7.65% of GDP, 22% of exports and 10 % of work force. Gujarat has been an industrial state more or less for a long time. The dry climate left the people with little option than the commerce. The long coastal line favored the international trade – more than 25% of Indian sea cargoes pass through it. These natural endowments and climate motivated people to sharpen their skills in business and even state government focused more on industrial development than anything else. The transformation period of 2001-12 changed the dynamics of business environment in the state under the capable leadership of currently Indian PM Modi. The abundant electricity supply and better infrastructure worked in the favor of the state and even Indian industries like Tata Motors and Reliance Industries favored Gujarat as their business destination.

Manufacturing is the key contributor to the Gujarat economy and manufacturing accounts for 40% of the Gross State Domestic Product (GSDP). The traditional economic wisdom says that availability of larger manufacturing units create more employ-ability and sustains the economy strongly, the Chinese miracle is an example. Unlike other Indian states, Gujarat is not very much dependent on Central funds and it receives only 30% of overall revenue receipts for the state.

The easy of doing business, natural endowment and a better infrastructure facility make Gujarat the best destination for investments in the eyes of domestic and international businesses.


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