Vibrant Gujarat? Investment intention halves in Jan-Jun 2016

A year later, it seems that this vibrancy in terms of investment intentions has quickly faded away.

PM Modi speaking at the Vibrant Gujarat Conference 2015 to reach out to foreign investors. Photo: Wikipedia

'Vibrant Gujarat' was a campaign launched by Prime Minister Narendra Modi when he was heading the state. The Vibrant Gujarat programme received many pledges from foreign investors to develop businesses in the state.

In January-June, 20015, Gujarat was the leading state in terms of investment intentions at 27.5%.

A year later, it seems that this vibrancy has quickly faded away. This year, investment intentions for Gujarat have seen a drop to 12.1%, according to data from the Department of Industrial Policy and Promotion (DIPP) and Ministry of Commerce and Industry.

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Investment intentions for Karnataka, which was in second place last year in the same period, have doubled in a year. Investment intentions for Karnataka rose to 38.3% in 2016 from 16.7% in 2015.

Gujarat has seen quite a lot of unrest in the last one year. From the Patel agitation for reservation to the agitation that led the state's chief minister Anandiben Patel to step down, seems to have caused severe damage to the investment sentiment in the state.

With Gujarat in the second place, Maharashtra came in next at 8.9%, followed by Andhra Pradesh at 4.8% and Chattisgarh at 4.8%.

Overall, however, the investment intentions for India have improved in the first half of the year. In terms of volume, ie the number of investment proposals, the figure grew 18.7% in the period.

The number of proposals had increased to 1,206 in the first half of 2016 from 1,018 proposals in the same period last year.

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The proposed investment, in value terms, was marginally higher by 1.3% while the employment associated with these proposals was higher by 37.3%. The proposed investment has increased to Rs 1.76 lakh crore in January-June 2016 from Rs 1.74 lakh crore in the corresponding period last year.

This would lead to a proposed employment generation of 3.60 lakh new jobs in 2016 from 2.62 lakh jobs in the same period last year.

These proposals include those under IEM (Industrial Entrepreneur Memorandum), LOI (Letter of intent) and DIL (Direct Industrial Licensing).

Among sectors where the intent for investment has grown, are the electrical equipment and textiles. These two industries featured in the lists of both the years. Electrical equipment investment intentions grew to 43% in terms of the total share in January-June 2016 from 21.8% in the same period in 2015. While in the textile sector, it grew to 6.2% this year from 4.7% in 2015.

“There are however few signs of continuity in higher investment intentions in these years and it appears to be more industry specific. This is reflective of low demand conditions across industries which combined with excess capacity has come in the way of higher investment demand,” said a CARE Ratings report.

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