HomeBusinessIndia FDI: FDI flows to India slip 26% in 2021: UN report

India FDI: FDI flows to India slip 26% in 2021: UN report

Foreign Direct Investment (FDI) flows to India in 2021 have been 26 per cent decrease, primarily as a result of massive M&A offers recorded in 2020 weren’t repeated, the UN commerce physique has stated. The UN Conference on Trade and Development (UNCTAD) Investment Trends Monitor revealed on Wednesday stated international overseas direct funding flows confirmed a powerful rebound in 2021, rising 77 per cent to an estimated USD 1.65 trillion, from USD 929 billion in 2020, surpassing their pre-COVID-19 stage.

“Recovery of investment flows to developing countries is encouraging, but the stagnation of new investment in the least developed countries in industries important for productive capacities, and key Sustainable Development Goals (SDG) sectors – such as electricity, food or health – is a major cause for concern,” stated UNCTAD Secretary-General Rebeca Grynspan.

The report stated developed economies noticed the largest rise by far, with FDI reaching an estimated USD 777 billion in 2021 – 3 times the exceptionally low stage in 2020.

FDI flows in growing economies elevated by 30 per cent to almost USD 870 billion, with a progress acceleration in East and South-East Asia (+20 per cent), a restoration to close to pre-pandemic ranges in Latin America and the Caribbean, and an uptick in West Asia.

FDI flows to South Asia decreased 24 per cent to USD 54 billion in 2021 from USD 71 billion in 2020.

FDI in the United States – the most important host economy – elevated by 114 per cent to USD 323 billion, and cross-border M&As nearly tripled in worth to USD 285 billion.

“Flows to India were 26 per cent lower, mainly because large M&A deals recorded in 2020 were not repeated,” it stated.

China noticed a file USD 179 billion of inflows – a 20 per cent enhance – pushed by robust companies FDI.

Of the full enhance in international FDI flows in 2021 (USD 718 billion), greater than USD 500 billion, or nearly three quarters, was recorded in developed economies. Developing economies, particularly least developed nations (LDCs), noticed extra modest restoration progress, the report stated.

The World Investment Report by UNCTAD launched in June final yr had stated that amid the pandemic, India obtained USD 64 billion in overseas direct funding in 2020, the fifth-largest recipient of inflows in the world.

FDI to India elevated 27 per cent to USD 64 billion in 2020 from USD 51 billion in 2019, pushed up by acquisitions in the knowledge and communication know-how (ICT) trade, the report had stated.

The report issued final yr had stated the pandemic boosted demand for digital infrastructure and companies globally. This had led to increased values of greenfield FDI undertaking bulletins, concentrating on the ICT trade, rising by greater than 22 per cent to USD 81 billion.

The report had famous that the second wave of the COVID-19 outbreak in India weighed closely on the nation’s total financial actions.

Announced greenfield tasks in India had contracted by 19 per cent to USD 24 billion, and the second wave in April 2021 affected financial actions, “which could lead to a larger contraction in 2021”, it had stated.

The newest Investment Trends Monitor stated investor confidence is powerful in infrastructure sectors, supported by beneficial long-term financing circumstances, restoration stimulus packages and abroad funding programmes.

In distinction, investor confidence in the trade and international worth chains stays weak. Greenfield funding undertaking bulletins have been virtually flat, and the variety of new tasks in international worth chains (GVCs)-intensive industries, corresponding to electronics, fell additional.

The report described the outlook for international FDI in 2022 as constructive however added that the 2021 rebound progress fee is unlikely to be repeated.

The underlying development – internet of conduit flows, one-off transactions and intra-firm monetary flows – will stay comparatively muted, as in 2021. International undertaking finance in infrastructure sectors will proceed to present progress momentum, the report famous.

“New investment in manufacturing and GVCs remains at a low level, partly because the world has been in waves of the COVID-19 pandemic and due to the escalation of geopolitical tensions,” stated James Zhan, director of funding and enterprise at UNCTAD.

“Besides, it takes time for new investment to take place. There is normally a time lag between economic recovery and the recovery of new investment in manufacturing and supply chains,” Zhan added.

The protracted length of the well being disaster with successive new waves of the pandemic continues to be a significant draw back threat.

The tempo of vaccinations, particularly in growing nations, in addition to the velocity of implementation of infrastructure funding stimulus, stay vital elements of uncertainty.

Other vital dangers, together with labour and provide chain bottlenecks, power costs and inflationary pressures can even have an effect on outcomes.



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