Home Finance News India’s FDI rank one notch up in 2021, inflows shrink: UNCTAD

India’s FDI rank one notch up in 2021, inflows shrink: UNCTAD

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India jumped one notch up to attain the seventh position among top recipients of foreign direct investment (FDI) in calendar year 2021 even as flows shrank to $45 billion from $64 billion in 2020, the United Nations Conference on Trade and Development (UNCTAD) said on Thursday.

In its World Investment Report, the agency said that global FDI recovered to pre-pandemic levels in 2021 reaching nearly $1.6 trillion but this course is unlikely to be sustained in 2022.

“Flows to India declined to $45 billion. However, a flurry of new international project finance deals were announced in the country: 108 projects, compared with 20 projects on average for the last 10 years. The largest number of projects (23) was in renewables. Large projects include the construction in India of a steel and cement plant for $13.5 billion by Arcelormittal Nippon Steel (Japan) and the construction of a new car manufacturing facility by Suzuki Motor (Japan) for $2.4 billion.

“FDI in China grew 21% and in Southeast Asia by 44% but South Asia went the other way, falling 26% as flows to India shrank to $45 billion.

Outward FDI from South Asia, mainly from India, rose 43% to $16 billion.

The top 10 economies for FDI inflows in 2021 were the US, China, Hong Kong, Singapore, Canada, Brazil, India, South Africa, Russia and Mexico but among them only India witnessed a decline in inflows.

The top recipient of FDI was the US at $367 billion followed by China at $181 billion and Hong Kong at $141 billion.

China, Hong Kong, Singapore, India, the United Arab Emirates and Indonesia accounted for more than 80% of FDI to South Asia.

Developing Asia which received 40% of global FDI, saw flows rise in 2021 for the third straight year to an all-time high of $619 billion.

Sectoral performance

International project finance announcements in industrial real estate grew in 2021 and deal numbers tripled to 152 projects with a value of $135 billion. Large projects include the construction of a steel and cement manufacturing plant in India for $14 billion.

Of R&D investment in developing economies, India captured almost half of all projects, UNCTAD said.

American digital MNEs targeted India in 8% of the deals, mostly buying minority stakes to gain access to the market and to local innovative solutions.

“For example, eBay (US) jointly with Microsoft (US) and Tencent (China), acquired an undisclosed minority stake in online retailer Flipkart (India), for $1.4 billion in 2017. Similarly, Paypal (US) acquired undisclosed minority stakes in a range of Indian companies across several industries, including software providers, online brokerage systems, professional services and electronic payments (Moshpit Technologies, Speckle Internet Solutions, Scalend Technologies, Freecharge Payment Technologies),” UNCTAD said in the report.!

As per the report, the four Chinese companies in the ranking accounted for 11% of the deals and invested a relatively higher share in developing-economy MNEs (34%) than their developed counterparts did.

“They invested especially in Asia, with shares divided equally between India and South-East Asia,” it said.

Despite positive developments in recent years in a few leading emerging markets such as Brazil, China, India, South Africa and some economies in the Association of Southeast Asian Nations, sustainable funds remain largely a developed-market phenomenon.

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