India has slipped to the 10th spot in attracting foreign direct investment

  • The latest World Investment Report showed India dropping a spot to 10th, in the list of top FDI receiving countries.
  • India’s witnessed 6% growth in FDI, to reach $42 billion in 2018.
  • Global FDI inflows slipped by 13%, from $1.5 trillion to $1.3 trillion, South Asia witnessed 3.5% increase in FDI inflows.
  • China, which retained the number two position, received the highest foreign inflows among the developing countries at an all time high of $139 billion, a growth of 4%.
Despite a 6% surge in its Foreign Direct Investment (FDI) inflow in 2018, India slipped a spot in the list of countries receiving highest FDI, to 10th.

The latest World Investment report of the United Nations Conference on Trade & Investment ( UNCTAD), an organization that aims at maximizing trade, investment and development opportunities of developing countries.

The increase in FDI inflows is being attributed to manufacturing, communication and financial services sectors, which were the top three FDI recipients in India. Growth in cross-border mergers and acquisitions -- from $23 billion in 2017 to $33 billion in 2018 -- was primarily due to retail trade, which includes e-commerce, and telecommunication, said the report.

The $16 billion acquisition of Flipkart by Walmart, and telecommunication deals worth $2 billion involving Vodafone and American Tower, were among the major deals this year.

The report also highlighted the changes to India’s FDI policy, which it termed as “restrictive.” In February 2019, India introduced changes to its e-commerce sector where it banned foreign companies to sell their own products in e-commerce marketplace companies like Amazon.

Global FDI slowdown

Global FDI flows fell by 13% in 2018 from $1.5 billion in 2017 to $1.3 billion in 2018, which is the third consecutive annual decline, according to UNCTAD’s World Investment Report.

The contraction was largely precipitated by United States multinational enterprises (MNEs) repatriating earnings from abroad, making use of tax reforms introduced by the country in 2017, designed for that purpose.

Developed countries were the worst hit by the earnings repatriation, where flows fell by a quarter to $557 billion-levels last seen in 2004.

South Asia surges ahead

As global FDI inflows slump down, South Asia witnessed a growth of 3.5% to $54 billion in FDI inflows. "All subregions in developing Asia are expected to receive higher inflows. Prospects are underpinned by a doubling in value of announced greenfield projects in the region, suggesting continued growth potential for FDI," it said while sounding a note of caution on global uncertainties.

It said uncertainties stemming from global trade tensions could weigh on the mood in the region.
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