Maharashtra has already received .2 billion in the first six months and it is more than the .5 billion it received 2015-16. Andhra has received .07 billion in the first six months. Maharashtra has already received .2 billion in the first six months and it is more than the .5 billion it received 2015-16. Andhra has received .07 billion in the first six months.

The health woes of former Tamil Nadu chief minister J Jayalalithaa, who died last week, may have dented the financial decision-making in the state, with a resultant ripple-effect on the broader investment sentiment. The state, which attracted foreign direct investment (FDI) worth Rs 29,781 crore ($4.5 billion) in 2015-16, recorded just 13 per cent of last year’s total inflows during the first six months of this fiscal at Rs 4,136 crore ($619 million).

This is in sharp contrast to the broader trend of FDI inflows into the country, which amounted to $21 billion in the first six months of FY17 — well over half the total inflow of $40 billion recorded in the entire 12 months of 2015-16.

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Data on FDI released by the Department of Industrial Policy and Promotion shows that Gujarat is another major state that witnessed a sharp decline in FDI flows in the first six month of this year. The state witnessed FDI inflows worth $368 million between April and September 2016, which was 16 per cent of the total inflow of $2.2 billion in FY16. Incidentally, Gujarat also faced leadership crisis during the year as Anandiben Patel stepped down as Chief Minster in August 2016 after months of speculation and political uncertainty.

West Bengal also witnessed a sharp decline in FDI inflows during the first six months this year.

Experts say that political stability and growth opportunity within a state are the most important criteria that investors look for before entering into a state and therefore critical health condition of a powerful leader does impact their investment decision-making. “Political stability is extremely critical for investors because it impacts the prospect of their investment. Investors look at India because there is a stable government at the Centre with a strong leader and an independent judiciary. Once they make the decision on the country, they look at a state which throws opportunity and has political stability,” said Sanjay Sanghvi, partner with Khaitan & Co.

While Tamil Nadu and Gujarat lost out, major gainers in terms of attracting FDI were Maharashtra and Andhra Pradesh. Maharashtra has already received $10.2 billion in the first six months and it is more than the $9.5 billion it received in the year 2015-16. Andhra Pradesh has received $1.07 billion in the first six months, which is almost 70 per cent of the total FDI of $1.55 billion it received in 2015-16. Kerala and Rajasthan too have been big gainers during the six-month period in terms of attracting FDI.

The decline in FDI in Tamil Nadu during the current year comes after a sharp rise in FDI flow in the state over the last six years. While the FDI flow in the state in the year 2009-10 stood at $774 million, it rose to a high of $4.5 billion in 2015-16. The aggregate amount received in FDI during the six-year period, by the state, amounts to $16.6 billion which is 75 per cent of the total FDI ($22.1 billion) received by the state in the last sixteen years between April 2000 and September 2016. AIADMK has been in power in the state over the last five years since 2011.

Incidentally, Tamil Nadu also slipped in the World Bank and DIPP’s Ease of Doing Business rankings this year. While Andhra Pradesh and Telangana topped the chart with a score of 98.78 per cent each, Tamil Nadu slipped from 12th spot last year to 18th spot this year with a score of 62.8 per cent. This year DIPP had listed out a 340-point Business Reform Action Plan as against 98 point action plan last year. These include — labour regulation enablers, online tax return filing to single-window clearances and availability of land among others.

The state has been the manufacturing hub for several global automobile manufacturers such as Hyundai, Daimler, BMW, Nissan, Renault and Yamaha, among others.

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