New Delhi: The UN trade body has said that foreign direct investment (FDI) inflows into India were down 26 per cent in 2021, mainly due to non-repeating of large M&A deals recorded in 2020.
The United Nations Conference on Trade and Development (UNCTAD) Investment Trends Monitor published on Wednesday that global foreign direct investment inflows showed a strong rebound in 2021, rising 77 percent to an estimated $1.65 trillion, up from $929 billion in 2020. , crossed his pre-covid. -19 level.
The recovery of investment flows to developing countries is encouraging, but the stagnation of new investment in industries critical to productive capacities and key Sustainable Development Goals (SDG) sectors such as electricity, food or health is a major factor in the least developed countries. To the concern, UNCTAD Secretary General Rebecca Grinspan said.
Developed economies saw the biggest growth ever, the report said, with FDI reaching an estimated $777 billion in 2021, three times the extraordinarily low level in 2020.
FDI inflows to developing economies increased 30 percent to about $870 billion, with growth acceleration in East and South-East Asia (+20 percent), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and a West Asia speed up.
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FDI inflows to South Asia declined by 24 per cent to $54 billion in 2021 from $71 billion in 2020.
FDI into the United States, the largest host economy, increased 114 percent to $323 billion, and the value of cross-border M&A nearly tripled to $285 billion.
Flows into India were down 26 per cent, mainly because large M&A deals that were entered in 2020 were not repeated, it said.
Driven by strong foreign direct investment in services, China saw a record $179 billion in inflows, an increase of 20 percent.
Of the total increase ($718 billion) in global FDI inflows in 2021, more than $500 billion, or nearly three quarters, was recorded in developed economies. The report said that the developing economies, especially the least developed countries (LDCs), saw marginal improvement.
The World Investment Report released by UNCTAD in June last year said that amid the pandemic, India received $64 billion in foreign direct investment in 2020, the fifth largest recipient of inflows in the world.
The report said FDI in India grew by 27 per cent to $64 billion in 2020 from $51 billion in 2019, driven by acquisitions in the information and communication technology (ICT) industry.
The report released last year said that the pandemic has increased the demand for digital infrastructure and services globally. This led to higher prices of greenfield FDI project announcements targeting the ICT industry, which grew more than 22 percent to $81 billion.
The report said that the second wave of the outbreak of Kovid-19 in India had a huge impact on the overall economic activity of the country.
Greenfield projects announced in India had contracted by 19 per cent to $24 billion, and the second wave in April 2021 hit economic activity, leading to a major contraction in 2021, it had said.
The latest Investment Trends Monitor said investor confidence is strong in the infrastructure sector backed by favorable long-term financing conditions, recovery stimulus packages and foreign investment programmes.
Conversely, investor confidence in the industry and global value chain remains weak. Greenfield investment project announcements were practically flat, and the number of new projects in the global value chain (GVC) – intensive industries such as electronics, fell further.
The report described the outlook for global FDI in 2022 as positive, but added that the rebound growth rate of 2021 is unlikely to be repeated.
The underlying trend – net of conduit flows, one-time transactions and intra-firm financial flows – will remain relatively muted as of 2021. International project finance in infrastructure sectors will continue to provide growth momentum, the report said.
James Zhan, director of investment and enterprise at UNCTAD, said new investment in manufacturing and GVC remains low, partly because the world is in the midst of the waves of the COVID-19 pandemic and due to escalating geopolitical tensions.
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