Foreign Direct Investment in China's Provinces: Lessons for the State of Gujarat

Bajpai, Nirupam

All over the world, FDI is seen as an important source of non-debt inflows, and is increasingly being sought as a vehicle for technology flows, and as a means of building inter-firm linkages in a world in which MNCs are primarily operating on the basis of a network of global interconnections. In the current global scenario, it is possible for India to achieve very dynamic growth based upon labor-intensive manufacturing, which combines the vast supply of Indian labor, including skilled managerial and engineering labor, with foreign capital, technology, and markets In this paper, we plan to study the FDI experiences of the Chinese provinces, especially the coastal ones. The lessons from these regions have been analyzed in the context of Gujarat, thereby helping develop some recommendations. We have also undertaken a case study of the Chinese province of Guangdong, which has attracted large sums of FDI in China. Gujarat is not rated as one of the most attractive destinations for FDI in India, perhaps ranked around 5th or 6th in the country. It is interesting to note that while Gujarat is perhaps next only to Maharashtra as far as attracting domestic private investment is concerned, it does not do as well when it comes to foreign direct investment. Gujarat is one of the front runner states of India as far as some of the manufacturing sectors, such as engineering goods, chemical and petrochemical products, drugs and pharmaceuticals, and fertilizers, among others are concerned. However, it is essential that the state focuses much more than in the past on labor-intensive manufacturing production for exports. The potential for attracting much higher volumes of FDI, especially in Gujarat’s SEZs is enormous. This will not only bring in greater FDI flows, but will also raise exports from Gujarat and create large-scale employment opportunities. We conclude with a number of lessons for Gujarat for attracting higher levels of FDI. These are in the areas of legislative and policy reform, government processes and machinery, infrastructure, special economic zones, networking with Gujarati non-resident Indians, and finally, the idea of setting up an FDI council comprising of state civil servants and representatives of large and medium scale foreign invested companies.



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More About This Work

Academic Units
Earth Institute
Center on Globalization and Sustainable Development
CGSD Working Paper, 13
Published Here
September 8, 2015