Investing in South India: Comparing States, Sectors, and Opportunities for Foreign Firms

Investing in South India gives multinational firms access to one of the country’s most attractive and diverse regional economies. Its five states, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh, and Kerala, combine large consumer markets with established clusters in technology, advanced manufacturing, life sciences, export processing, and business services.

For foreign investors, the region provides a variety of opportunities. The key issue is which combination of state and industrial cluster best fits the business model. Factors such as supplier depth, specialist talent, infrastructure, and local incentives vary between states, requiring investors to weigh each location according to its particular offering.

South India’s economic and investment profile

Combined, the five states account for roughly one-third of India’s total GDP. This strong economic performance is reflected in their manufacturing belts, internationally connected technology and life-sciences centres, large consumer markets, and major gateways on both coasts. This breadth offers investors several distinct operating environments within one increasingly interconnected region, ranging from export-orient manufacturing and logistics to high-value services and research-led industries.

Sources: PRS India, Tamil Nadu interim budget, MoSPI’s estimates.

Foreign direct investment appeal

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According to the Department for Promotion of Industry and Internal Trade (DPIIT), the five states received US$106.44 billion in state-attributed foreign direct investment (FDI) equity inflows between October 2019 and March 2026. Karnataka accounted for 66.32 per cent of the regional total, followed by Tamil Nadu at 18.17 per cent and Telangana at 12.23 per cent. Kerala and Andhra Pradesh each represented less than 2 per cent.

Source: DPIIT, FDI Factsheet – March 2026

The region’s value also lies in its range of operating environments. Bengaluru and Hyderabad concentrate technology and research talent; Tamil Nadu offers several mature manufacturing centres; Andhra Pradesh combines industrial land with east-coast gateways; and Kerala adds knowledge-intensive services and maritime connectivity. This range allows companies to separate management, research, production, and distribution functions while remaining within a single region.

Infrastructure supporting investment in South India

South India’s established transport network connects its technology and manufacturing centres with domestic and export markets. For foreign investors, this makes it possible to compare inland research and production locations against port-led manufacturing and distribution sites, rather than treating infrastructure as a uniform state-wide advantage.

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The region’s clearest shared logistics advantage is access to operating gateways on both coasts. Major ports like Chennai, Kamarajar, V.O. Chidambaranar, Visakhapatnam, New Mangalore, Cochin, and Vizhinjam provide options for container, automobile, bulk, energy, and transshipment cargo. New Mangalore Port handled 50.04 million tonnes in FY2025-26, while Vizhinjam Phase I began commercial operations in December 2024 and handled more than 1.43 million twenty-foot equivalent units (TEUs) by January 2026.

International airports across the region support corporate travel, service operations, and high-value or time-sensitive goods. Some, such as Hyderabad’s airport cargo terminal, include specialised infrastructure like temperature-controlled pharmaceutical facilities, an important consideration for life-sciences companies whose location decision depends on handling conditions as well as transit time.

The National Highways Authority of India (NHAI) maps NH44 along the Hyderabad-Bengaluru axis, NH48 between Bengaluru and Chennai, NH16 along the Andhra Pradesh coast towards Chennai, and NH544 through Palakkad towards Kochi—connecting inland business centres with manufacturing belts and ports. These corridors also benefit from India’s relatively low road-freight rates, about INR 3.78 per tonne-kilometre in a recent government assessment, which can reinforce the South’s manufacturing advantage by reducing the cost of moving inputs and finished goods between industrial centres and ports.

Policy and regulatory support for investors

All five states operate single-window systems for business approvals. State platforms such as Kerala’s K-SWIFT and Telangana’s TG-iPASS provide a central route for submitting and tracking many state-level applications. The National Single Window System helps investors identify and apply for participating central and state approvals through a common front end.

India’s official list recorded 277 operational special economic zones (SEZs) as at 31 March 2026, of which 169, or approximately 61 per cent, were in the five southern states. Multi-product, sector-specific, port- or airport-based zones, and Free Trade and Warehousing Zones give investors a range of locations and operating models. Current advantages centre on customs, goods and services tax (GST), and procedural treatment for authorised operations. 

CLICK HERE: India’s Special Economic Zones: A Primer

Consumer-facing investors must also select the correct market-entry structure. Under the Consolidated FDI Policy, read with later amendments, single-brand retail permits up to 100 per cent FDI under the automatic route; where FDI exceeds 51 per cent, a 30 per cent Indian-sourcing requirement generally applies. Multi-brand retail permits up to 51 per cent under the government route in participating states, including Andhra Pradesh and Karnataka. Marketplace e-commerce permits up to 100 per cent FDI under the automatic route, while the inventory-based model is closed to FDI unless the inventory is of Indian-manufactured goods exclusively for export.

Where to invest in South India: State-by-state analysis

Karnataka: Technology depth and advanced engineering

Karnataka’s principal advantage is the ability to combine Bengaluru’s technology and research ecosystem with advanced engineering and manufacturing in the wider Bengaluru-Tumakuru-Mysuru belt. This combination is well suited to electronics, aerospace, biotechnology, industrial technology, and global capability centres that require specialist engineers as well as production and testing capacity. New Mangalore Port provides a west-coast option for projects whose supply chains favour the Arabian Sea.

The Karnataka Industrial Policy 2025-30 and its operative guidelines support eligible manufacturing and specified service projects, with benefits varying by investment category and location. Capital subsidies begin after commercial production and are paid over five annual instalments for large projects and above; the employment conditions generally require at least 70 per cent Kannadiga employment overall and 100 per cent in Group D roles. Recent projects show both sides of the state’s proposition: KK Wind Solutions began production at a new Dobbaspet factory in April 2025 and reported 250 factory employees when it opened the following month, while IBM launched its first Indian Infrastructure Innovation Centre in Bengaluru.

Tamil Nadu: A distributed, export-oriented manufacturing base

Tamil Nadu is particularly attractive to manufacturers that value supplier depth and more than one production and export location. The Chennai-Sriperumbudur-Oragadam and Hosur belts support automotive, electric-vehicle, and electronics production; Coimbatore and Tiruchirappalli add engineering capabilities; and the western districts sustain specialised textile and apparel supply chains. Chennai, Kamarajar, and V.O. Chidambaranar ports give exporters access to gateways in both the northeast and south of the state.

For new projects, the state’s policy portal lists sector-specific frameworks. Under the Tamil Nadu Shipbuilding Policy 2026, shipyards using the capital-subsidy route can receive a 2 per cent interest subvention of up to INR 10 crore a year for 15 years. The Semiconductor and Advanced Electronics Policy 2024 offers eligible advanced-electronics manufacturers a 20 per cent fixed-capital subsidy and a training subsidy of INR 4,000 per Tamil Nadu resident employee per month for six months. Investment outcomes support the case for TN-based manufacturing: VinFast inaugurated its Thoothukudi assembly plant in August 2025, its first outside Vietnam, with an initial annual capacity of 50,000 vehicles. Separately, Tamil Nadu exported US$1.59 billion of footwear and leather products in FY2025-26, nearly 37 per cent of India’s total in those categories. Together, these examples demonstrate the strong productive capacity and pro-business governance of Tamil Nadu.

Telangana: Life sciences, research, and specialised services

Hyderabad anchors Telangana’s investment proposition through its combination of IT and global capability centres with pharmaceuticals, biotechnology, medical devices, and research. Projects like Genome Valley and the Medical Devices Park give life science companies access to laboratories, manufacturing locations, and specialist suppliers within the same metropolitan economy. The airport’s pharmaceutical-cargo facilities strengthen the case for temperature-sensitive exports.

The Next-Gen Life Sciences Policy 2026-30 covers advanced biomanufacturing, biologics and biosimilars, precision medicine, diagnostics, medical electronics, and life sciences global capability centres while targeting US$25 billion of investment and 500,000 jobs by 2030. In July 2026, the central government reported that 16 approved applicants were manufacturing active pharmaceutical ingredients across 48 Telangana production units. Sanofi inaugurated an expanded Hyderabad global capability centre in February 2026.

Andhra Pradesh: Coastal production and industrial processing

Andhra Pradesh is most competitive where ports, industrial land, agricultural or marine inputs, and large production sites drive the location decisions. Visakhapatnam and Kakinada serve the northern industrial and processing economy, while Krishnapatnam and the Sri City-Tirupati-Nellore belt provide export-oriented locations in the south. This geography supports food and marine processing, cold chains, bulk logistics, white goods, automotive components, electronics, and other industries that benefit from linking production with an east-coast gateway.

The state’s Industrial Development Policy 4.0 covers the 2024-29 period and sets out category-, location-, and sector-based eligibility. New units must obtain consent for operation or commence commercial production during that period; qualifying expansions generally require at least 25 per cent additional fixed investment or capacity and 15 per cent additional employment. Daikin commenced commercial operations at its integrated Sri City air-conditioning and compressor factory in January 2024. A September 2025 central-government update also recorded actual investment across four automotive manufacturing units approved under the production-linked incentive (PLI) scheme in the state.

Kerala: Knowledge industries and maritime services

Kerala hosts a variety of sectors including skilled services, healthcare, digital technology, food and marine activities, and maritime logistics. Thiruvananthapuram and Kochi are the principal locations for IT and knowledge-based operations, while four international airports support companies requiring frequent international access. Cochin Port and the operating Vizhinjam transshipment terminal add a maritime dimension to a state traditionally associated with service industries.

The Kerala Industrial and Commercial Policy 2023 identifies 22 priority industries, including artificial intelligence, biotechnology, medical equipment, food technology, and logistics. It offers eligible micro, small, and medium-sized enterprises (MSMEs) a capital subsidy of up to 45 per cent, capped at INR 4 million for micro, INR 10 million for small, and INR 20 million for medium enterprises, together with a five-year electricity duty exemption. The Kerala Logistics Policy 2025 was adopted under that framework as a sub-sectoral policy to promote integrated, value-added logistics services and reduce logistics costs. Corporate activity also demonstrates the technology opportunity: IBM inaugurated an ecosystem incubation centre at its Kochi software lab in July 2025, while Vizhinjam’s commercial throughput provides an operating outcome for the state’s maritime strategy.

Investing in South India: Choosing the right location

No single state leads across every operating model. Investors should begin with the operating model rather than a state ranking, then compare clusters on market access, suppliers, workforce, incentives, and implementation support.

Investing in South India gives multinational firms access to economic diversity, established infrastructure, and dynamic consumer markets. Its breadth of investment opportunities makes the region attractive not only within India but also across Asia.

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