Regional Disparities in Foreign Direct Investment and Their Impact on Economic Growth: A State-Level Analysis of India (2005–2019)

Abstract

Foreign Direct Investment (FDI) has been a major driver of India’s economic growth, bringing capital, technology, managerial expertise, and integration into global production networks. However, its distribution across states from 2005 to 2019 has been highly uneven, with industrially advanced and urbanized regions such as Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Delhi capturing the majority of inflows. Less developed states, including Bihar, Jharkhand, Odisha, and the North-Eastern states, received minimal FDI due to weaker infrastructure, limited policy support, and governance challenges. Sectoral analysis shows concentration in IT, financial services, automobiles, telecommunications, and petrochemicals, reinforcing regional specialization. High-FDI states experienced stronger GSDP growth, employment generation, and industrial diversification, whereas low-FDI states remained reliant on agriculture and domestic consumption. Institutional standards, investment assistance, and policy frameworks all have an effect on persistent disparities. To close these gaps, we need to make specific changes to infrastructure, governance, along with state-level industrial policies to make sure that growth is fair and that differences between states are smaller.