Gujarat has ranked first among Indian states in luring new investments from domestic and international firms, with new investments worth Rs 3.98 trillion announced in 2021-22 (FY22), up 273 percent, or by Rs 2.91 trillion, from 2020-21 (FY21).
According to data from the Centre for Monitoring Indian Economy and CareEdge, Gujarat experienced the greatest value growth as Indian states recovered from the Covid-19 pandemic, which had a negative impact on investments across regions the previous year.
Rajasthan was ranked No. 2 but experienced the highest percentage growth (535%) over FY21, bringing in new investments worth Rs 2.37 trillion.
With new investments worth Rs 2.02 trillion announced, Maharashtra came in third place in FY22, followed by Odisha at Rs 1.03 trillion.
Tamil Nadu joined the top five states by attracting new investments worth Rs 84,000 crore in FY22.
Gujarat and Rajasthan still stand out when one compares the new investments for FY22 with the average of the previous four fiscal years (2017–18 through FY21), even though a low base of FY21 may have helped some states in terms of boosting their growth numbers.
Gujarat recently made headlines for winning two multi-billion dollar projects to manufacture semiconductors for Vedanta Group, Foxconn in Taiwan, and Tata-Airbus, and for pulling ahead of Maharashtra in the competition to win both of those projects.
Both Reliance Industries and Adani Group have announced billion-dollar investments in Gujarat over the past two years and have chosen the state to establish gigafactories for their foray into renewable energy.
Vedanta Group Chairman Anil Agarwal stated that they chose Gujarat for their joint venture (JV) with Taiwanese company Foxconn because the state met their expectations.
“They made a significant effort to outbid other states with competitive offers in a meeting with Maharashtra leadership in July. We had to start somewhere, so we decided on Gujarat based on independent and professional advice. We are fully committed to investing in Maharashtra as well as building an ecosystem across all of India. Maharashtra will be our key to advancing integration in our Gujarat JV, said Agarwal in September.
Surprisingly, Maharashtra is in front of other states in terms of projects that are currently being carried out. According to CMIE data, Maharashtra was putting the finishing touches on projects worth Rs 17.31 trillion in FY22.
Odisha (Rs 9.11 trillion) and Gujarat (Rs 8.95 trillion) came in third and fourth place, respectively, in the state league tables for the same year, while Uttar Pradesh came in second with Rs 9.79 trillion worth of projects under implementation. Andhra Pradesh ranked fifth among states in FY22 with projects worth Rs 8.73 trillion under construction.
“Maharashtra continues to rank highly among investment destinations. Government policies and the current ecosystem encourage investment in the state. According to Rajani Sinha, chief economist of CareEdge, the research division of rating agency CARE, factors like relatively easier land acquisition, power availability, close proximity to ports, and better law and order situation are all favorable for investment in Maharashtra.
While some investment projects may have been encouraged to relocate to Gujarat, according to the former industry secretary Ajay Dua, the business environment is evident to every investor.
“Production and logistics costs are impacted by the business environment. There is an 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.
According to Jaijit Bhattacharya, president of the New Delhi-based think tank Centre for Digital Economy Policy Research, businesses are planning their future investments beyond the next five years. Adding further “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”.