India (Commonwealth) _ Because of their strong infrastructure and established industrial ecosystems, the states of Maharashtra, which includes Mumbai and Pune, and Karnataka, home to Bengaluru, are often thought of when discussing India’s reputation as a magnet for foreign direct investment (FDI). But when it comes to drawing foreign direct investment (FDI), Chandigarh, a little-known union territory with a population of little over a million, is India’s most competitive state.
With a score of 2.79, it is little higher than Telangana (2.58). With its score, Chandigarh is drawing 2.79 times the amount of national greenfield FDI projects that it should be, considering the size of its economy. Even though it makes up only 0.17% of India’s GDP, it is able to draw in 0.48% of the nation’s greenfield foreign direct investment.
In 2022, six new foreign direct investment projects were drawn to the union territory, which has one of the highest per capita incomes in India. Four of the six initiatives had the US as their primary source market; the other two were from Canada and Austria.
Among these initiatives were the announcements of plans by US-based technology consulting firm XenonStack to add 300 new employees to its global delivery center and the opening of a new office by CBRE, which would add 100 jobs over the course of the next two years.
Telangana strikes out
While Telangana receives 12.89% of India’s inbound greenfield FDI, the state only contributes 5.01% of the nation’s GDP. In 2022, the youngest state in India drew 160 fresh foreign direct investment projects. In actuality, Hyderabad, the state capital of Telangana, receives 91.8% of the state’s FDI. The largest city in Telangana and a center of technology saw 147 distinct foreign firm growth in 2022. When considering only greenfield developments, it comes in at number eleven in the world and fourth in Asia-Pacific for FDI recipient cities.
With a $1.9 billion investment, US IT giant Microsoft has revealed plans to establish three new data centers in Hyderabad. In the meantime, US automaker Biliti Electric said in 2022 that it will invest $150 million to build the largest electric three-wheeler manufacturing in the world in Hyderabad generating 3,000 employment.
Over 25% of Indian states are “profitable”
Six Indian states, including Telangana and Chandigarh, have multiple one-star ratings on the ranking. With an index score of 2.11, Karnataka—the sixth-largest Indian state by land and the home of Bangalore, the capital—ranks as the third most competitive state for drawing in foreign direct investment. Bangalore, the state capital of Karnataka, is where most foreign investment is centered. With 219 inward FDI projects, the city ranked sixth globally and second in Asia-Pacific in 2022—only surpassed by Singapore.
Maharashtra, with a score of 1.71, is ranked fifth on the index, yet it got the most foreign direct investment (FDI) projects in India in 2022. While Maharashtra is responsible for 20.23% of India’s inbound investment projects, its share of the country’s gross domestic product (GDP) is just 11.82%. In addition, four more Indian states received index scores higher than one, demonstrating their greater contribution to national GDP than to inbound investment. Goa, the smallest state in terms of area in India, is one of these states. Goa has a score of 1.71, which places it fourth on the index despite drawing far less foreign direct investment (FDI) than Karnataka and Maharashtra. This is mostly because Goa contributes less to India’s GDP (0.33%). Other states with index scores above one are Tamil Nadu (1.44), Delhi (1.08), and Haryana (1.44).
Who benefits from FDI in India?
Between 2019 and 2022, there is minimal difference in the share of the national GDP that each Indian state contributes. The number of inbound investment projects varies significantly by state and year, nevertheless. The only two states that have scored higher than two on the inward investment state competitiveness index each of the last four years are Telangana and Karnataka. In three of the previous four years, Chandigarh has scored higher than two.
There are states with more volatility. Over the course of the time, Goa’s state competitiveness score has fluctuated between being above and below one. Meanwhile, the ratings of Odisha, Kerala, Uttarakhand, and Himachal Pradesh have all been below one.
Other states that have continuously maintained scores below include West Bengal, Uttar Pradesh, Rajasthan, and Punjab. .. Their yearly variations were, nonetheless, somewhat less erratic.
Methodology
Every state and union territory receives a score on the state competitiveness index (SCI). The formula is based on how many inbound greenfield FDI projects each state obtains relative to the entire nation. Next, this amount is divided by the state’s GDP (gross domestic product). When a state has a score higher than one, it means that its economy is outperforming expectations and attracting more foreign direct investment. Instead, a state that scores less than one shows that, relative to the scale of its economic production, it is underperforming in terms of the quantity of inbound investment it receives.
