Robust growth in foreign direct investment

It grew about 18% to ₹8,364 crore in April-September 2021 from ₹7,062 crore in the same period last year

Published - January 14, 2022 12:21 am IST

The foreign direct investment (FDI) in Tamil Nadu grew about 18% to ₹8,364 crore in April-September 2021, from ₹7,062 crore in the same period last year, according to data from the Department of Promotion of Industry and Internal Trade under the Union Ministry of Commerce and Industry.

Pooja Kulkarni, MD and CEO of Guidance Tamil Nadu, the nodal agency for investment promotion, said the State had shown a strong and resilient growth in the face of uncertainty and disruption brought on by the COVID-19 pandemic.

“The State’s economy grew at a real rate of 1.42% in FY 20-21, while India’s real GDP contracted by 7.3% in the same period. This resilience is what has continued to drive domestic and global investors to repose trust and invest in Tamil Nadu,” she said.

Standing fifth

Ms. Kulkarni pointed out that Tamil Nadu ranked the fifth among the States in FDI inflows, having received ₹32,807 crore between October 2019 and September 2021.

The FDI inflows have seen an increase of 8% in FY 2020-21 vis-à-vis FY 19-20, noteworthy considering the negative impact of the pandemic. The key sectors which attracted significant FDI investments are construction, financial services, manufacturing (auto, electronics, machinery), retail and information technology services, she added.

On the State’s low share of 4% in the total FDI flows into India, compared with the other bigger States like Maharashtra, Ms. Kulkarni contended that traditionally strong regions — Mumbai and Delhi — have several corporate offices.

“This led to two issues. FDIs meant for States such as Tamil Nadu get accounted for in Mumbai and Delhi where their corporate offices are located. Second, FDIs in major merger and acquisition deals are driven through these regions, especially in sectors such as telecommunications,” she explained.

Not fully captured

Besides, the current method of measuring FDI does not capture foreign investment from multinational companies completely.

“For instance, marquee FDI investors such as auto OEMs, which invested in the State, have ploughed back the profits made by their local subsidiaries and reinvested it into the State in expanding their capacities. This reinvestment of MNCs through their local subsidiaries does not get captured. Other States, which see first-time FDI investors, do not face this issue.”

Tamil Nadu’s improving investment climate has led to increased domestic investments, indicated through reports by independent agencies, such as CARE Ratings and Projects Today, which have declared Tamil Nadu the leading investment destination, Ms. Kulkarni said.

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