Tamil Nadu continues to register a negative growth rate in the foreign direct investment (FDI) equity inflow this financial year, if the data compiled by the Reserve Bank of India (RBI) and released by the Union government’s Department for Promotion of Industry and Internal Trade is any indication.
During 2018-19 too, the State had an adverse rate of 18.7%. The performance of the State comes as a contrast to efforts of the State government in wooing overseas investments.
In January 2019, the second edition of the Global Investors’ Meet was organised in Chennai when 304 Memoranda of Understanding (MoU) and 12,360 pacts concerning micro, small and medium enterprises (MSME) were signed with investment commitments of around ₹3 lakh crore.
Months later, Chief Minister Edappadi K. Palaniswami followed it up with a visit to the United Kingdom, the United States and Dubai, and in November, Deputy Chief Minister and Finance Minister O. Panneerselvam went to the U.S.
However, senior officials of the State government do not agree with the data released by the Centre.
They contend that the RBI data does not accurately reflect the actual investments. The data pertained more to the location of corporate offices of companies than the receipt of actual investments.
For example, a firm’s head office may be located in the National Capital Region, which covers the entire National Capital Territory of Delhi and some districts of States such as Haryana and Uttar Pradesh, but the company may be investing in Sriperumbudur or Hosur, they say.
Analysing the trend of inflow in the current year’s three quarters, an official of the State Industries Department says that even though there is an overall drop of around 7%, the first quarter saw an increase of 24% over the same period of the previous year and the third quarter about 7% rise. It was the showing in the second quarter (drop of 43% ) that was responsible for the total negative growth rate.
“Though it is difficult to cite any specific reason, the decrease can be due to the base number of ₹ 6,127 crore (during the second quarter of 2018-19), which, in turn, happened to be an one-off investment,” explains the official, expressing the hope that in the fourth and final quarters of the year, the State will make up the deficit.
True picture
K.R. Shanmugam, Director of the Madras School of Economics, and R. Subash, investment banker, acknowledge that there is a discrepancy in the way the data is compiled. “You can get a true picture if the data on FDI in the manufacturing sector and FDI in services sector are culled out,” says Mr. Subash.
Yet, there are certain steps that the State government requires to take.
The investment banker says Karnataka has done extremely well in the area of start-ups.
“We have the potential to outperform Karnataka if we create a conducive environment by creating better infrastructure and putting in place hassle-free procedures,” Mr. Subash adds.
