Foreign Direct Investment (FDIs) sits at the nerve centre of a state’s financial health. It’s often considered a measure of how a state is perceived to attract global capital.
Service, manufacturing, and infrastructure projects need the heft of FDIs.
Naturally, a shift in FDI standings impact projects. It could result in delays, bring about change in sectoral cycles, and often loss of competitiveness.
Gujarat is perceived as a heavyweight lifter that drives India’s economy. Ironically, the state has fallen out of favour where FDIs are concerned.
Reports indicate a sharp dip in FDI inflows for Gujarat during April–September 2025.
Shaktisinh Gohil, Congress Rajya Sabha member from Gujarat, lamented that Gujarat doesn’t have a conducive atmosphere to attract investors. Investors are naturally shifting base to Karnataka and Telengana, regarded as Congress’s bastion, he said,
“Gujarat has been a developed state and the real investment came during the Congress regime in early 1990s. Development is in Gujarat’s DNA,” Gohil told The Vibes of India.
Meanwhile, other states reported strong recoveries from a low base.
Financial pundits believe the latest data is a short-term setback for Gujarat. The general sentiment is Gujarat’s longer-term investment record remains intact.
The Department for Promotion of Industry and Internal Trade’s (DPIIT) data suggests that Gujarat received $2.39 billion in FDI during the first half of FY 2025–26.
These figures were published by a national daily.
This placed the state behind Maharashtra, which attracted $13.5 billion, Karnataka with $11.25 billion, Tamil Nadu with $4.34 billion, Delhi with $3.94 billion, and Haryana with $3.53 billion during the same six-month period.
The data shows Gujarat slipping in the rankings despite having been a strong performer earlier.
The fall comes after the state recorded robust inflows in previous years.
What then is the way forward?
Political and economic analyst Hemant Shah believes Gujarat should try to emulate other states in rates and incentivise local manufacturers.
Self-reliance will also help to grow exports, Shah told Vibes of India, adding that other states have been offering land at a cheaper rate.
“They have started organising investment summits. It means foreign investors have options. Earlier, the options were limited to Gujarat, Maharashtra, Tamil Nadu or New Delhi,” he told The Vibes of India.
Meanwhile, other analysts hold the view that the data concerning Gujarat is linked to high base effects and timing-related distortions, especially since investments in sectors like chemicals, pharmaceuticals, renewable energy and infrastructure had already peaked earlier.
When a state does very well in one period, that strong performance becomes the “base” for comparison the next year.
Maharashtra retained its position as the country’s largest FDI recipient with inflows of $13.51 billion, although its performance was largely flat on a year-on-year basis, marked by a marginal decline of 0.3%.
Financial analysts have indicated that key manufacturing sectors such as textiles and chemicals were impacted by US tariffs. It’s cited as a major factor in a slowdown in fresh investments in areas, traditionally Gujarat’s stronghold.
They are positive that sectors such as semiconductors and engineering are progressing regardless.
The report added that projects are being followed up by the state government and new areas are opening up.
Sporting events like the Commonwealth Games linked to Gujarat are bringing interest into hospitality and sports infrastructure.
These are segments where Gujarat has not seen much activity earlier.
Additionally, experts pointed out that policy steps like regulated easing of liquor prohibition in GIFT City are opening up more room for investments.
Despite the recent decline, Gujarat continues to rank third nationally in cumulative FDI inflows since October 2019.
It highlights the state’s long-term investment strength. Within the state, foreign capital remains heavily concentrated in a limited number of districts, with Ahmedabad emerging as the dominant investment hub.
The district accounts for a substantial share of Gujarat’s cumulative FDI, driven by its role as the primary commercial and financial centre and a preferred base for services-led and corporate investments.
Other industrial districts such as Valsad, Vadodara, Surat and Kutch trail far behind, underlining the uneven spatial distribution of foreign capital across the state.
The report adds that a similar concentration pattern is visible at the national level, where FDI inflows remain clustered around India’s top five markets, led by Maharashtra and Karnataka.
Large urban centres with established industrial and technology ecosystems continue to attract a disproportionate share of global capital, supported by deeper talent pools, infrastructure readiness and sectoral diversity.
While Gujarat remains among India’s strongest cumulative FDI destinations, the latest numbers suggest that investment flows are becoming more selective, with capital favouring mature hubs and projects already under execution rather than broad-based geographic expansion.
Also Read: Gujarat’s Total FDI Inflow Slips to Fifth Position In Q1 FY 2025 https://www.vibesofindia.com/gujarats-total-fdi-inflow-slips-to-fifth-position-in-q1-fy-2025/
