Business & Economy

Gujarat Faces Decline in FDI for Third Consecutive Year Despite 2020-21 Triumph

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Despite leading in foreign direct investment (FDI) in 2020–21, Gujarat is grappling with a sustained decline in FDI inflows for the third consecutive year. Recent data from the Department for Promotion of Industry and Internal Trade (DPIIT) reveals a nearly 30% dip in FDI into the state during the first six months of the current financial year (2023–24). This downward trend follows a national pattern of a 20% decline in overall FDI inflows into India during the same period.

FDI Trends in Gujarat:
Gujarat attracted ₹18,884 crore in FDI between April and September, marking a significant decrease from the ₹26,866 crore recorded during the corresponding period in the previous financial year (2022–23). The decline is only surpassed by Karnataka, where FDI fell by almost 44%. Despite topping the FDI charts in 2020–21 with ₹1.62-lakh crore, Gujarat has witnessed a gradual decline, with ₹20,169 crore in 2021–22 and ₹37,059 crore in 2022–23.

National Discrepancy and Maharashtra’s Growth:
While the overall FDI inflows into India decreased by 20% for April–September, Maharashtra defied the trend with a 5% growth. Maharashtra emerged as the top state in FDI, attracting ₹65,502 crore during the first half of the current financial year. In contrast, Gujarat found itself in the fourth position among states.

Analysis by Economists:
Economists attribute Gujarat’s struggle in attracting FDIs to historical trends. Professor Hemant Kumar Shah, an economist and former acting principal of Ahmedabad-based HK Arts College, commented, “Gujarat has seldom been a top destination for FDIs.” He highlighted that Vibrant Gujarat summits aimed at attracting global investors have seen limited success, with the state facing competition from Maharashtra and even outperformed by states like Odisha in certain years.

Geographical Disparity:
Notably, 90% of the total FDI inflow into Gujarat this financial year has been concentrated in Ahmedabad district, leaving the remaining 10% spread across 13 other districts, including major cities like Surat and Vadodara.

As Gujarat grapples with declining FDI for the third consecutive year, policymakers and industry leaders may need to reevaluate strategies to attract global investments. While historical successes like the peak in 2020–21 remain noteworthy, sustained efforts will be crucial to navigate challenges and revitalize the state’s appeal to international investors. Addressing geographical imbalances and exploring innovative incentives could contribute to rejuvenating Gujarat’s position as a favorable destination for foreign direct investment.

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