In a significant shift, Gujarat has slipped out of the top five Indian states attracting foreign direct investment (FDI) during the first half of the current financial year. Data for the period April to September 2025 reveals a sharp year-on-year contraction in inflows into the state, even as several peer states registered strong rebounds.
A Sharp Contraction in Fresh Inflows
According to the latest figures released by the Department for Promotion of Industry and Internal Trade (DPIIT), Gujarat attracted $2.39 billion in FDI during the first half of FY 2025-26 (April–Sep 2025). This marks a substantial decline compared to the same period last year, pushing the state to the sixth position nationally.
The top five states for FDI inflows during this six-month period were:
- Maharashtra ($13.51 billion)
- Karnataka ($11.25 billion)
- Tamil Nadu ($4.34 billion)
- Delhi ($3.94 billion)
- Haryana ($3.53 billion)
Maharashtra retained its top spot, though its inflows remained largely flat with a marginal 0.3% decline. In stark contrast, Karnataka and Tamil Nadu saw explosive growth of 225% and 168% respectively, while Gujarat's inflows contracted by 39.5%.
Analysts Point to High Base and Sectoral Headwinds
Industry experts attribute Gujarat's short-term decline to a combination of factors. A primary reason is the high base effect, as the state witnessed robust FDI inflows in the preceding years, particularly in sectors like chemicals, pharmaceuticals, renewable energy, and infrastructure.
Pathik Patwari, chairperson of the Indian Chamber of Commerce (ICC), Gujarat, provided deeper insights. He noted that sectors where Gujarat holds manufacturing dominance, such as textiles and chemicals, faced headwinds due to factors like US tariffs, leading to a pause in fresh investments. "On the other hand, in industries such as semiconductors and engineering, investments are moving through the pipeline rather than translating into fresh inflows," Patwari explained.
He added that several large projects committed earlier are now in the execution phase, where capital expenditure is underway but does not reflect as new equity in the immediate FDI numbers.
Long-Term Strength and Emerging Opportunities
Despite the recent dip, Gujarat continues to rank third nationally in cumulative FDI inflows since October 2019, underscoring its long-term appeal as an investment destination. The state government remains proactive in pursuing projects, and new opportunities are emerging.
Patwari highlighted that major upcoming events like the Commonwealth Games linked to Gujarat are beginning to attract investor interest in hospitality and sports infrastructure—areas with historically limited exposure. Additionally, policy measures, including a regulated easing of liquor prohibition in GIFT City, are creating new avenues for investment.
Spatial Concentration Within Gujarat and India
The distribution of FDI within Gujarat remains highly concentrated. Ahmedabad district is the undisputed investment magnet, accounting for a dominant share of the state's cumulative FDI. It serves as the primary commercial and financial hub, attracting services-led and corporate investments.
Other industrial districts like Valsad, Vadodara, Surat, and Kutch follow at a considerable distance. This pattern highlights the uneven spread of foreign capital within the state, despite Gujarat's broad industrial base.
A similar concentration is visible at the national level, where FDI continues to cluster around India's top metropolitan and industrial regions. Large urban centers with established ecosystems, deeper talent pools, and better infrastructure readiness draw a disproportionate share of global capital.
The latest data suggests that while Gujarat remains a formidable cumulative FDI destination, investment flows are becoming increasingly selective. Capital is gravitating towards mature hubs and project execution phases, indicating a trend towards quality over widespread geographic dispersal in the current economic climate.
