Foreign direct investment is showing decline by 46% in Karnataka. The decline might be due to the political instability in the State or improvement in the US macros. These are weaning away investors.
It is a major source of non-debt financial resource for the economic development of any developing country. For a country where foreign investments are being made, it also means achieving technical know-how and generating employment.
Foreign Direct Investment in India:
Following the liberalization of the foreign direct investment (FDI) policy in India in the early 1990s, FDI to India has increased significantly in the last decade. However, the growth in FDI flows has been accompanied by strong regional concentration thereby depriving a large number of Indian states from the benefits of a liberalized FDI regime.
With the presence of a strong agglomeration effect, it is essential to have a conscious and coordinated effort at the national and the state government level to make the laggard states more attractive to FDI flows.
Karnataka – Foreign Direct Investment :
The inflow of FDI last year in the state stood at $4.7 billion (Rs,32,450 crore). Whereas it has seen a decline of 46% i.e., $2.5 billion (Rs.17,234 crore) between April 2018 and September 2018.
This is an indicator that the performance for the whole year may also be slow down. The country as a whole has seen a drop in FDI inflow due political scenario in the United States. There is a rise in investment options within United States.
Foreign Direct Investment impact on other states :
Maharashtra and Tamil Nadu are other two big states with FDI in the country, The Maharashtra reported a decline of 46% and Tamilnadu stood at 29%. New Delhi, Gujarat, Andhra Pradesh and Telangana has shown an upward curve.
According to Madan Sabnavis of Care ratings the visa rule and the economic recovery in the west are having an impact on FDI.
Impact of Rationalization on Foreign Direct Investment:
The State of Karnataka had seen an extra-ordinary increase in FDI in the year 2017-18. The decline this year might be because the investments have rationalized.
The first half of 2017-18 saw FDI to the tune of $4.7 billion, $1 billion, $2.1 billion and $1.1 billion in the same period for 2016-17, 2015-16 and 2014-15 respectiely.
During 2017-18 the FDI saw an increase trend of 300% rise over the previous year.