In the past ten days alone, several investors from abroad have announced plans to open production hubs in Tamil Nadu and Gujarat, two of India’s most industrialised states.
In a press statement released on 6 January, Vietnam-based electric vehicle (EV) manufacturer VinFast announced the signing of a memorandum of understanding (MoU) with the Tamil Nadu State government to build an EV facility in Thoothukudi, a southern port city on the Bay of Bengal.
The total investment will reach $2bn, with an initial commitment of $500m to take place as part of the first phase of the project. The new plant is expected to employ around 3,000-3,500 people, as well as “accelerate the green energy transition in India and the region”, according to Tran Mai Hoa, deputy CEO of Sales and Marketing at VinFast Global.
“The Memorandum of Understanding demonstrates VinFast’s strong commitment to the sustainable development to the sustainable development and vision of a zero-emission transportation future,” Tran said.
Tamil Nadu’s Minister of Industries of the Government Dr TRB Rajaa also stepped in to congratulate the latest agreement signed with VinFast, adding: “EV manufacturing companies are not only important economic drivers but also powerful accelerators to the State’s Green vision.”
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News about the deal came as investors gathered at The Tamil Nadu Global Investors Meet 2024, taking place between 7-8 January in Chennai, Tamil Nadu’s capital.
According to local officials, the regional government signed 631 MoUs totalling 664,180 crores ($79.99bn), which could create “direct employment opportunities for 1,454,712 persons and total employment for 2,690,657 persons.”
“These investments cover diverse sectors, encompassing advanced electronic goods manufacturing, green energy, non-leather shoes, motor vehicles, electric vehicles, aerospace and defence, data centres, global capacity centres, and information technology,” the government statement reads.
India is quickly becoming an attractive partner for many foreign investors intent on following the China Plus One strategy, a measure through which businesses are looking to diversify their supply chains away from Beijing and set up a business footprint in Western-friendly locations.
In 2022, the country ranked as the third-largest investment destination, surpassing China in terms of FDI projects.
The Indian states of Gujarat and Tamil Nadu are among the most industrialised in the country. Tamil Nadu, in particular, had the third-largest state economy in India in FY 2020-21, according to the Reserve Bank of India.
In 2022, both regions emerged as manufacturing hotspots, with Tamil Nadu attracting 22 FDI projects and Gujarat 23, according to the GlobalData FDI database.
VinFast and Pegatron are just two of the major players in the field who have turned towards Tamil Nadu and Gujarat for opportunities. Another one, Suzuki – a Japanese car manufacturer – has promised to invest INR350bn ($4.2bn) through its subsidiary Maruti Suzuki to build a second car plant in Gujarat, stepping up car production from 750,000 at present to two million once the expansion is completed.
“The initiation of major investment deals at the beginning of the year underscores India’s commitment to economic reforms and sustained growth,” says Deepti Aggarwal, production manager of FDI at GlobalData. “Predominantly, these substantial investment agreements are concentrated in Gujarat, followed by Tamil Nadu and Maharashtra. These states have established themselves as leaders in infrastructure development, network capacity, policy stability, and maintain a robust law and order framework.”
Overall, in 2022, India reported $49.35bn in FDI inflows, down from $64.07bn reported in 2020 and up from $44.76bn, UNCTAD data shows.