Mumbai: Amid a raging political debate over Gujarat allegedly getting big-ticket investments at Maharashtra’s expense, Union government data has revealed that the latter has in fact always been far ahead in attracting foreign investments, though Gujarat has been catching up.
Industry insiders from both states told ThePrint that while Maharashtra has been a leader in terms of drawing foreign investments, complacency and the political instability following the 2019 assembly election — which saw the Maha Vikas Aghadi alliance of the erstwhile Shiv Sena, the Congress and the Nationalist Congress Party forming a government, before being toppled by the rebellion in the Sena earlier this year — have not helped.
Meanwhile, Gujarat, benefitting from the Union government’s strong political will for the state, has taken strides towards attracting investments, they claimed.
“Maharashtra has been the business capital for the entire country for a long time, but when (Narendra) Modi ji became Gujarat chief minister (between 2001 and 2014), slowly he brought in a lot of investments in the automobile and solar sectors and attracted major industries,” said Kantibhai Patel, an entrepreneur and president of the Federation of Industries and Associations, Gujarat, who runs a range of companies as part of the Khodiyar Group.
Patel added: “I don’t know about Maharashtra now, but Gujarat has really flourished in the past five or six years because of the government, and since Modi ji became prime minister (in 2014), investments have come even more speedily.”
According to data from the Union government’s Department for Promotion of Industry and Internal Trade, Maharashtra has not only got more foreign direct investment (FDI) than Gujarat in four of the past five fiscal years, it has also consistently been among the top three states in drawing foreign investments. The data for the neighbouring Union territory of Dadra and Nagar Haveli and Daman and Diu is included within Maharashtra’s total.
In 2020-21, however, when the Covid-19 pandemic hit the country, Gujarat managed to beat Maharashtra and emerge at the top of the list of states in getting FDI. That year, the total FDI in Gujarat jumped to Rs 1.62 lakh crore from Rs 42,976 crore the previous year, while Maharashtra’s FDI tally was at Rs 1.19 lakh crore. The year after, however, Maharashtra once again overshot Gujarat by miles.
The ongoing political debate over investments in Gujarat versus in Maharashtra was sparked off in September this year, when the Vedanta-Foxconn joint venture announced that it had decided to set up its Rs 1.5-lakh crore semiconductor manufacturing and display fabrication unit in Gujarat. The company was known to be in advanced stages of negotiation with Maharashtra.
The same month, the Union government approved proposals for Gujarat, Himachal Pradesh, and Andhra Pradesh to set up bulk drug parks, with Gujarat then announcing at Rs 2,300 crore drug park. Last month, another major investment, that of Tata-Airbus, to set up a plant worth Rs 22,000 crore for the manufacture of C-295 planes for the Indian Air Force, formally went to Gujarat.
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Political stability
Opposition parties in Maharashtra — the Shiv Sena (Uddhav Balasaheb Thackeray), the NCP and the Congress — have slammed the Modi-led central government for allegedly being partial to Gujarat.
According to experts, however, while this might be true, a lot of the favour for Gujarat also stems from the fact that the state has been politically stable for the past many years, with the BJP having been in power for the most part since 1995. And while Gujarat has seen three CMs since Modi moved to the central government in 2014, all of them have been indirectly driving his agenda.
“The political stability contributes. Investors want continuity, stability and predictability. So, perhaps Gujarat has been successful in that aspect,” Ajit Ranade, a Maharashtra-based economist, told ThePrint.
He added: “Till 2019, Maharashtra had political stability, first with three terms of the Congress-NCP government (1999-2014) and then a full term of the BJP-Shiv Sena government (2014-2019). It takes some time for investors to gauge how stable a government is.”
The political stability, or the lack thereof, is also cited by other experts while comparing the two states.
“The Centre and Gujarat are like a single unit. Narendra Modi has strived hard for Gujarat as its CM. He will obviously want to grow the state,” said Yogesh Parekh, who is associated with the Gujarat Chambers of Commerce and Industries.
“In comparison, Maharashtra has been politically unstable. Industrialists are wary of coming to some place where there is a threat of the government falling at any time. If there is a stable government, the policy making will be effective,” he added.
According to the Department for Promotion of Industry and Internal Trade data, in 2017-18 and 2018-19, Maharashtra had maintained its giant lead over Gujarat in foreign investment, getting over six times more FDI than Gujarat. In 2017-18, Maharashtra got FDI of Rs 86,244 crore, as against Gujarat’s Rs 13,457 crore. In 2018-19, Maharashtra’s total FDI was Rs 80,013 crore, as against Gujarat’s Rs 12,618 crore.
The situation changed dramatically in 2019-20 when there was a change in Maharashtra’s power structure and the newly formed MVA formed a government with Uddhav Thackeray as CM. Maharashtra’s total FDI at Rs 77,389 crore was only 80 per cent more than Gujarat’s at Rs 42,976 crore, and in the pandemic year of 2020-21, Gujarat overtook Maharashtra with 36 per cent more FDI.
In 2021-22, however, Gujarat’s performance was dismal with FDI of Rs 20,169 crore as against Maharashtra’s Rs 1.14 lakh crore.
Basic infrastructure and ease of doing business
According to Narinder Nayar, managing director of the Mumbai-based Concast (India) Private Limited, Maharashtra is in a different league as an investment destination compared to Gujarat, .
“The infrastructure, facilities, have always been better (in Maharashtra), but there are political considerations that have worked in Gujarat’s favour,” Nayar said.
He, however, added that successive governments in Maharashtra have been complacent about the state’s inherent advantage.
“The ease of doing business in Maharashtra needs to be improved. Some efforts have been made, but it is not enough,” said Nayar, also the chairman of MumbaiFirst, a group of private sector individuals who have come together to aid the government in Mumbai’s infrastructure development.
The Union government’s latest ‘Ease of Doing Business’ rankings for 2020 placed Gujarat among the seven states that were “top achievers”, while Maharashtra featured in the second level of states which were categorised as “achievers”.
According to Ranade, industries mainly need two things — stable electricity and easy access to land — and Gujarat has done well on both these fronts.
Dimple Patel, president of the Vatva Industrial Association, an industrial cluster in Ahmedabad, said infrastructure improvements may have helped in attracting large investments to Gujarat, but this hasn’t trickled down to small and medium-sized firms.
“The cost of water is still very high (in Gujarat). Industries dependent on water cannot survive around Ahmedabad. If businesses are thinking about opening up units in the big industrial townships that the government is developing, the availability of manpower there is also a problem. They have to take manpower with them from the established hubs, so it turns out to be costly,” said Patel, proprietor of Navrang Industries, which makes dyes and other speciality chemicals.
He added: “Big businesses can find a way around all of this. It is the small and medium-sized businesses that suffer.”
(Edited by Poulomi Banerjee)
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