India’s Top 5 Investment Destinations in 2024

Foreign businesses considering an expansion into India should take into account the relative advantages offered by respective states, such as talent pool, infrastructure, and incentives structure, industrial policies, and logistics. We highlight India’s top five investment destinations.

Top 10 sectors in India attracting highest FDI inflow (in US$ million)

The top 10 sectors attracting the highest foreign direct investment (FDI) inflow in FDI are shown in the table below.

Source: Department for Promotion of Industry and Internal Trade (DPIIT)

Because of their strong infrastructure and established industrial ecosystems, the states of Maharashtra, which includes Mumbai and Pune, and Karnataka are considered some of the leading hubs for FDI.

India is comprised of 28 states and 8 union territories, with mature financial institutions, investment handholding agencies, and trade and commercial bodies that mediate relations between local and central bureaucracy on one hand, and business stakeholders on the other. In order to promote export growth and ease of doing business, major industrial states have heavily invested in new or upgraded infrastructure, such as ports, expressways and highways, rail and metro, and airports.

Top 10 states in India attracting highest FDI inflow

India is steadily becoming a favorable destination for international investors and provides small and medium-sized enterprises (SMEs) and multinational corporations with a plethora of benefits that companies can leverage to expand their operations.

In addition to stable economic growth, India’s network of trade and double tax avoidance agreements, as well as its business-friendly reforms, make it an attractive market both locally and internationally. These measures, coupled with programs and plans for a wide range of industries, have improved the nation’s standing as a hub for discrete manufacturing and production.

Maharashtra

Maharashtra is the third-largest state in India, occupying around 9.4 percent of the nation’s total land area. The state is well-connected to all the major markets, with three international airports, road network covering over 303,000 km, and rail network covering 6,165 km. The area is also a popular freight destination in the nation, boasting 720 kilometers of coastline and 55 ports.

Jawaharlal Nehru Port and Mumbai Port are two important ports located in the state. In 2022-23, Jawaharlal Nehru Port handled 83.867 million MT of cargo while Mumbai Port handled 63.608 million MT of products in the same period.

Mumbai, the state capital and India’s financial center, is home to several major corporate and financial institutions. It has two stock exchanges, namely the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). It is also India’s biggest producer of crude oil (offshore) through the Bombay High Refinery.

According to the economic report for 2022-2023, Maharashtra has approved investment proposals of INR 3,573.93 billion (US$42 billion) over the past three years, more than any other state in the nation. Between April 2023 and March 2024, Maharashtra’s exports were valued at US$67.21 billion.

Karnataka

Karnataka comes in second in terms of FDI inflow over the past year. It is acknowledged as India’s R&D hub, home to 3500 businesses, 400 of which are Fortune 500 companies. The state also accounts for 65 percent of India’s aerospace exports. Presenting an exceptional opportunity for logistics investors, Karnataka is presently engaged in the development of several greenfield ports and airstrips.

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Key sectors in the state are aerospace and defense, food processing, auto, auto components and electric vehicles, biotech, pharmaceuticals, medical devices, electronic system design and manufacturing, clean energy, start-ups, steel, capital goods, toys, textiles and apparel, and tourism and wellness.

At the World Economic Forum 2024, Karnataka inked memoranda of understanding (MOUs) valued at INR 220 billion (US$2.6 billion) with four companies, including Microsoft and Web Werks, global industry heavyweights. It is anticipated that the partnerships will catapult the state into a new phase of infrastructure construction, economic expansion, and technological innovation.

The government plans to increase the industrial sector’s contribution to the Gross State Value Added (GSVA) and expand at a rate of 15-16 percent during the following five years. Throughout the reviewed period, the state has received yearly investments of INR 800 billion (US$9.5 billion).

Gujarat

Gujarat is a state in northwest India, and for the majority of the last five years, it has been the top choice of foreign investors due to its significant economic developments. In terms of FDI, the state held the top rank in India for four years running, ending in 2021.

With 49 ports, including 1 major port and 48 minor ports, the state handles 40 percent of all national freight. In addition, 19 airports, including 4 international airports, are in service. Furthermore, Gujarat accounts for 33.55 percent of the nation’s overall exports, placing it at the top of the list.

Gujarat has also established a Diamond Research and Mercantile (Dream City) City, near Surat; spanning 2,000 acres, it will be home to a diamond bourse as well as an international hub for diamond trading. The Tata Group is investing in a fabrication and OSAT (Outsourced Semiconductor Assembly and Test) plant in Gujarat.

Gujarat International Finance Tec-City (GIFT City), situated in the district of Gandhinagar in the state, is a unique financial innovation endeavor for India. As both the first International Financial Services Centre (IFSC) in India and a Multi-Services Special Economic Zone (SEZ), it offers companies a tactical gateway into the fastest-growing economy in the world alongside being able to tap into specific regional incentives.

Refining petroleum products is a major industry in Gujarat, accounting for 30.3 percent of the state’s total industrial production. Chemicals follow with a 16.7 percent share. Other significant categories are agricultural and food items (8.5 percent), clothing and textiles (6.1 percent), basic metals (6.3 percent), machinery and equipment (4.2 percent), drugs (3.7 percent), and rubber and plastic goods (2.8 percent).

Delhi

Delhi, the nation’s capital, covers 1483 sqkm, of which 1113.65 sqkm is urbanized. Its state borders are shared with the states of Haryana and Uttar Pradesh and the Delhi National Capital Region (Delhi NCR) covers prominent business districts from these states. Delhi is the home of some of the nation’s biggest business groups as well as the national offices of key ministries, departments, and trade shows both domestically and internationally.

The NCR is continuously seeing growth at a pace of roughly 11.5 percent. It also has the biggest metro rail network in the nation. The area’s road network spans more than 33,000 kilometers.

The area boasts a robust prospective market for agrochemical-based products, an opportune real estate market, and a rapidly developing railway sector.

Tamil Nadu

The state economy of Tamil Nadu, which is the second largest in the nation, is growing at a rate of 10 percent annually. It has four international airports, 22 small ports, and four big ports. The state’s 12 smart cities, which are developing quickly, present enormous investment prospects.

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Major MNCs and foreign manufacturers with facilities in the state include Delta Electronics, Dell, Caterpillar, Pegatron, Foxconn, Feng Tay Group, Flex, Toshiba, Hitachi, Panasonic, Renault, Stellantis (PSA), Michelin, Total, Engie, Lactalis, Accor, Capgemini, Société Générale, BNP Paribas, Saint Gobain, Hyundai, Mando, and Samsung.

US FDI in Tamil Nadu is mostly directed towards the IT/ITeS, automobile, electronics and renewable energy sectors. Focus sectors in the state are renewable energy, offshore wind, medical devices and pharmaceuticals, and food processing.

Incentives offered under Tamil Nadu state industrial policy

• Investment Promotion Subsidy: Up to 40 percent of EFA.
• Logistics Parks Industry Status: Logistics parks will receive industry status with relaxation on non-processing areas.
• Imported Machinery: Both new and second-hand machinery can be considered as Eligible Fixed Assets.
• Transport Subsidy: 75 percent of relocation costs of capital goods, capped at INR 100 million (US$1.19 million).
• Land Cost Subsidy: Eligible projects in SIPCOT in A & B districts will be offered land at a 10 percent concessional rate, and at a 50 percent concessional rate in C districts for land up to 20 percent of EFA.
• R&D Training Incentive: INR 10,000 (US$119.8) per person per month for a duration of 12 months.
• Standard Incentives & SGST Refunds on Capital Goods: Firms with inverted tax structures will also qualify for standard incentives and SGST refunds on capital goods. 

Tamil Nadu is a state with an excess of energy and is ranked ninth in the world for overall production of renewable energy. It has 19,182.14 MW of installed renewable energy capacity as of 2024 (excluding hydro and including Central Transmission Utility). According to Vishnu V, the managing director and CEO of investment promotion agency, Guidance Tamil Nadu, the state is exploring investment partnerships for fuel cell and hydrogen research. 

Tamil Nadu is actively modernizing and expanding its logistics, boasting seven airports, a robust rail and road network, and extensive infrastructure. With three major ports and India’s second-longest coastline at 1,076 km, the state is strategically positioned. Notably, Tamil Nadu ranks fourth in the Export Preparedness Index 2021.

(US$ 1 = INR 83.44)

(With inputs from Melissa Cyrill.)

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