Dynamics of Inter-States Variation of Foreign Direct Investment Inflows in India

Abstract

With globalisation, flows of Foreign Direct Investment (FDI) in India have been increasing since 1991, in an overall sense. However the FDI inflows into different States in India have not grown uniformly. The purpose of the paper is to study the dynamics of inter state or regional variation of FDI inflows in India. The paper used the ranking method, Bodenhorn's mobility and turnover and Herfindahl-Hirschman Index for measuring inter-state variation of FDI inflows. The period of study is 1991-2016.

The results show that more than 85 percent FDI inflow in India is concentrated in five states - Maharashtra, Delhi, Bangalore, Tamil Nadu and Gujarat. Maharashtra is getting more than 25 percent of FDI inflows in India. Remaining states are receiving less than 15 percent. The competition among Indian states is declining at the rate 9.5 percent per annum. The concentration of FDI inflows in a few states is increasing at the rate of 2.4 percent per annum. North-East states are receiving almost negligible amount of FDI. Government should undertake the survey to identify the potentiality of each state or regions to attract FDI. Government should devise the policy based on this potentiality inculcating attractive elements. So that foreign investors feel to invest in a particular state or the region. The state governments on their part should initiate reform measures to create conducive environment for the inflow of FDI.