Tamil Nadu accounted for a mere 2.9% of the total Foreign Direct Investment (FDI) of $44 billion into India during the 2016 calendar year — the lowest in three years — according to a report by Kotak Institutional Equities.
Sourcing data from the United Nations Conference on Trade and Development (UNCTAD) for FDI inflows into India and the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, the report analysed the trend of FDI inflows to the country, including the trend in key States.
India attracted investments to the tune of $44 billion in 2016, of which Tamil Nadu’s share was just $1.3 billion (2.9%).
This figure pales in comparison to the $3.92 billion (11.2%) and $5.7 billion (13.1%) of FDI received by the State in 2014 and 2015 respectively.
In 2016, Tamil Nadu dropped six places to 18 — the lowest among developed States — in the business reforms rankings released by the Department of Industrial Policy and Promotion (DIPP) and the World Bank. The operating environment was also uncertain in the State due to the health condition of former Chief Minister Jayalalithaa, as well as a general slowdown in the economy.
Tamil Nadu’s manufacturing growth was a mere 1.65% in 2016-17,according to the economic data on States released by the Reserve Bank of India recently.
The Kotak report noted that with a share of 7.3%, Gujarat leapfrogged Tamil Nadu and Karnataka to become the third largest recipient of foreign direct investment in 2016. Karnataka accounted for 5.1% of the inflows.
“Regional disparity is a salient feature while assessing foreign direct investment inflows. Much of the regional shift has been due to the e-commerce/start-ups segment losing steam in CY2016, thereby slowing the flows to States like Delhi, Karnataka and Tamil Nadu,” said the report.
It also noted that heavy concentration of FDI in select States reflected the aggressive investment pursuit and investor-friendly policies of the respective States.
Over the past decade, Maharashtra (the largest FDI recipient) and Delhi together have accounted for 50% of the total FDI equity flows to India. In CY2016, their combined share improved further to 60%, while Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh accounted for another 20%, Kotak said.
Industry bodies’ concern
Industry bodies such as the Federation of Indian Chambers of Commerce and Industry and the Madras Chamber of Commerce have expressed concern over the ease of doing business and the prevailing political uncertainty in the State.
Shilpa Prabhakar Satish, executive vice-chairperson, Industrial Guidance and Export Promotion Bureau of Tamil Nadu, pointed out that there has been a general slowdown in investment across the country. However, she contended that all is well as far as the State is concerned, with ₹2,000 crore in investment expected this year, and another ₹15,000 crore in the pipeline. “One of the key challenges has been that some States are offering aggressive incentives to attract investment. Tamil Nadu has been conservative in its approach to incentives and does not over-promise,” she said.