Why the battle between Maharashtra and Gujarat over Vedanta-Foxconn deal is good for India

By: Anshul Vipat

Vedanta, one of India’s biggest mining companies, and Taiwan’s Foxconn announced to set up semiconductor and display production plants in Gujarat earlier this week.

Vedanta, one of India’s biggest mining companies, and Taiwan’s Foxconn announced to set up semiconductor and display production plants in Gujarat earlier this week. The joint venture will invest ₹1.54 lakh crore and is expected to create around 1 lakh jobs over the years. However, this announcement has led to a war of words between the political leadership of Gujarat and Maharashtra who are blaming each other for the proposed plant that was expected to be built in Maharashtra. Amid the political tussle, Vendata chairman Anil Agrawal has said they are committed to investing in Maharashtra as well in an affiliate project.

If we ignore the political controversy, a healthy competition between the states to attract investments is a good sign. In recent times, states like Maharashtra, Tamil Nadu, Telangana, Gujarat and Karnataka are going all out for big-ticket foreign investment. This includes investor-friendly policies, development of economic zones and infrastructure and incentives to the companies. Even economically backward Uttar Pradesh has joined the battle, betting on improved road connectivity.

At the onset, Indiatracker takes a look at how states are battling hard to court private investment.

States competing to get industrial investments

While Gujarat was the top investment destination in the country, states like Maharashtra and Karnataka are narrowing the gap rapidly. Infact, Karnataka piped Gujarat and Maharashtra topping the list of states in attracting Foreign Direct Investments. According to the latest figures from Department for Promotion of Industry and Internal Trade (DPITT), an arm of the Union Ministry of Commerce and Industry, Karnataka emerged as the top state in attracting foreign investment worth Rs 1,62,830 crore. Karnataka is followed by Maharashtra at Rs 1,14,964 crore.

Delhi received Rs 60,000 crore, followed by Tamil Nadu (Rs 22,396 crore) and Haryana (Rs 20,971 crore). During the first two quarters of 2021-2022, Karnataka accounted for 48 per cent and 41 per cent of total FDI in India, respectively. Karnataka also registered a 187 percent growth as compared to previous year followed by Delhi (50 percent), Tamil Nadu (30 percent) and Haryana (67 percent). Karnataka's success in attracting the maximum investment is credited to pro-development policies, improvement in local infrastructure, better connectivity and incentives.

Gujarat which had topped the list a year back dropped to sixth position attracting an investment of Rs 20,169 crore in 2021-22. Among the top six states, only Gujarat and Maharashtra saw a decline in FDI inflow. In 2020-2021, Gujarat had accounted for 37 per cent of India’s total FDI, followed by Maharashtra (27 percent) and Karnataka (13 percent).

Maharashtra and Gujarat battling for investment is good politics. This kind of politics will help improve jobs, investment and standards of living. If tapped in a good way, this healthy competition can be a pathway to the country reaching the 5 trillion economy mark.