Business-friendly Karnataka logs big FDI inflow, saves ‘Brand India’

BENGALURU: ‘Brand Karnataka’ appears to have saved ‘Brand India’ from registering a decline in Foreign Direct Investments (FDI) in 2017-18.

Karnataka saw a four-fold increase in FDI inflow from $2.1 billion in 2016-17 to $8.5 billion in 2017-18 — a $6.4-billion increase — thanks to big funding flows into IT and startups. The rise in FDI inflow nationally witnessed only a $1.4-billion increase.

According to Reserve Bank of India (RBI), FDI in most major states — Maharashtra, Gujarat and Andhra Pradesh-Telangana — was lesser than the previous year, pulling down the national growth to the lowest in five years. Without the record growth by Karnataka and decent numbers in the NCR (up $1.7 billion) and Tamil Nadu (up $1.2 billion), the year-onyear FDI growth in India would have been negative.

Experts attributed the increase in Karnataka largely to continued and enhanced funds raised by technology firms and startups, especially the investments made by Soft-Bank, including in Flipkart.

“This year, most of the FDI has flown into the auto sector, along with telecommunications and e-commerce industries. Overall, there is no doubt about Karnataka being a leading destination for investors,” J Crasta, executive member of industry chamber Ficci said, adding investors choosing the state is not surprising given its resources and friendly policies.


Maharashtra attracts most FDI in 2017-18

Karnataka attracted the second highest FDI inflow during the year. Maharashtra was No. 1. Overall, FDI to India increased from $43.4 billion in 2016-17 to $44.8 billion in 2017-18, a low growth rate compared to the preceding three years.

Most states attracted FDI lesser than the previous year: Maharashtra, which had attracted $19.6 billion in 2016-17, received $13.4 billion; investments into Andhra Pradesh (including Telangana) dipped from $2.1 billion to $1.2 billion. Gujarat’s investments also dipped from $3.3 billion to $2 billion. All these states ranked better than Karnataka in the ease of doing business ranking given by the Centre for the year.

Experts said the dip in Maharashtra was not a concern as it still attracted the most FDI.

“The overall decrease in growth can be attributed to three broad reasons: The impact of demonetisation and GST which affected the ecosystem, the change in US tax policy which put American MNCs in evaluation mode, and the larger macroeconomic factors,” Himanshu Parekh, head of international tax at KPMG, said.