Advertisement

Updated June 21st, 2021 at 12:31 IST

India becomes fifth largest recipient of inflows in world with $64 billion FDI in 2020: UN

A UN report has stated that India received USD 64 billion in Foreign Direct Investment in 2020, making it the fifth largest recipient of inflows in the world.

Reported by: Shloak Prabhu
India
Image Credits: Shutterstock | Image:self
Advertisement

The World Investment Report 2021 by the UN Conference on Trade and Development (UNCTAD) has stated that India received USD 64 billion in Foreign Direct Investment in 2020, making it the fifth largest recipient of inflows in the world. The report also stated that the COVID-19 second wave in the country weighs heavily on the country's overall economic activities, however, its strong fundamentals provide “optimism” for the medium term. The existing investment projects and prospects of a recession led multinational enterprises (MNEs) to reassess new projects were slowed down owing to lockdowns caused by COVID-19.

India received $64 bln FDI in 2020: UN report 

The UN report stated that FDI increased 27 per cent to USD 64 billion in 2020 from USD 51 billion in 2019 due to the acquisitions in the information and communication technology (ICT) industry, making the country the fifth-largest FDI recipient in the world. In addition, the COVID-19 situation boosted demand for digital infrastructure and services globally leading to higher values of greenfield FDI project announcements targeting the ICT industry, the report added.  As per the report, some of the major announcements in the ICT industry included a USD 2.8 billion investment by online retail giant Amazon in ICT infrastructure in India. 

Announced greenfield projects in India contracted by 19 per cent to USD 24 billion, “and the second wave in April 2021 is affecting economic activities, which could lead to a larger contraction in 2021,” it said

It added that the COVID-19 outbreak hit main investment destinations such as Maharashtra, which is home to one of the biggest automotive manufacturing clusters. The outbreak also affected Karnataka (home to the Bengaluru tech hub) leading to a delay in investment and disrupting production. 

“Yet India’s strong fundamentals provide optimism for the medium term. FDI to India has been on a long-term growth trend and its market size will continue to attract market-seeking investments. In addition, investment into the ICT industry is expected to keep growing,” the report said.

The report goes on to add that India's export-related manufacturing, a priority investment sector, will take longer to recover, but government facilitation can help. India’s Production Linkage Incentive scheme, designed to attract manufacturing and export-oriented investments in priority industries including automotive and electronics can drive a rebound of investment in manufacturing. The report said FDI in South Asia rose by 20 per cent to USD 71 billion, driven mainly by strong M&As in India.

“Amid India’s struggle to contain the COVID-19 outbreak, robust investment through acquisitions in ICT (software and hardware) and construction bolstered FDI,” it said adding that cross-border M&As surged 83 per cent to USD 27 billion, with major deals involving ICT, health, infrastructure and energy.

The large transactions included the acquisition of Jio Platforms by Jaadhu, a subsidiary of Facebook for USD 5.7 billion, the acquisition of Tower Infrastructure Trust by Canada’s Brookfield Infrastructure and GIC (Singapore) for USD 3.7 billion and the sale of the electrical and automation division of Larsen & Toubro India for USD 2.1 billion. Another megadeal includes Unilever India’s merger with GlaxoSmithKline Consumer Healthcare India, a subsidiary of GSK United Kingdom) for USD 4.6 billion.  India ranked 18 out of the world’s top 20 economies for FDI outflows, with 12 billion dollars of outflows recorded from the country in 2020 as compared to 13 billion dollars in 2019.

“Investments from India are expected to stabilise in 2021, supported by the country’s resumption of free trade agreement (FTA) talks with the European Union (EU) and its strong investment in Africa,” the report said.

UN report on FDI inflows in Asia

However, the report cautions that uncertainties loom even as the Asian region has managed the health crisis relatively well.  “This has major impacts on prospects for South Asia. A wider resurgence of the virus in Asia could significantly lower global FDI in 2021, given that region’s significant contribution to the total,” the report said. FDI inflows to developing Asia grew by 4 per cent to USD 535 billion in 2020, making it the only region to record growth and increasing Asia’s share of global inflows to 54 per cent. In China, FDI increased by 6 per cent to USD 149 billion. Some countries in Asia recorded a contraction, the report said. 

Even so, the report has added that the FDI inflows in Asia are expected to increase in 2021, outperforming other developing regions with a projected growth of 5–10 per cent. Signs of trade and industrial production recovering in the second half of 2020 provide a strong foundation for FDI growth in 2021. Yet, substantial downside risks remain for the many economies in the region that struggle to contain successive waves of COVID-19 cases and where fiscal capacity for recovery spending is limited.

“Economies in East and South-East Asia, and India, will continue to attract foreign investment in high-tech industries, given their market size and their advanced digital and technology ecosystem,” the report said. 

With PTI Inputs 

Advertisement

Published June 21st, 2021 at 12:31 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement

Trending Quicks

Advertisement
Advertisement
Advertisement
Whatsapp logo