Even as Foreign Direct Equity Investments (FDI) into India fell to a five-year low in FY24, Maharashtra, Gujarat and Tamil Nadu have managed to grow FDI year-on-year in the fiscal year.

Gujarat emerged as the leader of the pack raking in $7.3 billion in fresh FDI equity inflows in FY24 at a growth rate of 55 per cent from the previous fiscal. Tamil Nadu and Maharashtra recorded 12 per cent and 2 per cent growth respectively, as per FDI data from the Department for Promotion of Industry and Internal Trade (DPIIT). Gujarat also overtook Karnataka and Delhi to climb to second spot in FY24.

Karnataka saw its FDI inflow fall by 37 per cent y-o-y in FY24, continuing its decline since FY22. For FY24, Delhi stands at the fourth spot in terms of FDI inflows but recorded a decline of 13.4 per cent. Telangana, at fifth position, more than doubled its FDI inflows in FY24 at $3 billion. Despite recent big ticket investment announcements, TN closed the fiscal year at sixth spot in terms of total FDI inflows at $2.4 billion.

FDI equity inflows into India stood at $44.4 billion in FY24, a marginal drop compared with $46 billion in FY23, owing to the global uncertainty and increasing tendency of countries to look inwards while allocating capital.

Marquee investments

Marquee foreign investments in the fiscal year such as expansion of Foxconn and Pegatron electronics manufacturing facilities in TN and Micron’s new semiconductor plant at Gujarat likely helped lift the FDI inflows into the State. Both States have cluster-based industrial approach with presence of diverse sectors. Big ticket investments announced by Amazon and other companies contributed to surge of FDI in Telangana. FDI decline into Karnataka may be attributed to the slow down in start-up funding and an overall saturation of the technology ecosystem in the State. However, analysts caution that methodology around State-wise accounting of FDI is unclear and also depends on the headquarters of the foreign enterprise.

Madan Sabnavis, chief economist, Bank of Baroda, views the overall dip in FDI as a continuation of the tightening liquidity position. “FDI into States is generally guided by the ease of doing business in the State and government support in areas of land acquisition, logistics, availability of infrastructure and requisite man power etc,” he said.

FDI fell across both manufacturing and services sectors. FDI in drugs and pharma, chemicals, automotive and telecom sectors fell by 48 per cent, 54 per cent, 20 per cent and 60 per cent y-o-y, respectively. A significant portion of the FDI inflow in FY24 came into computer software and hardware sector at $7.9 billion, followed by services sector at $6.6 billion. However, both sectors recorded a dip in FDI y-o-y. The construction sector stood out by growing its FDI inflows by almost 3x in FY24.

Mauritius, Singapore, USA, Netherlands and Japan continue to be top five FDI contributors of cumulative FDI inflow into India during fiscal years 2000 to 2024. In FY24, Singapore contributed the most in FDI inflow at $11.7 billion.

The writer is an intern with businessline