Foreign Direct Investment inflows to India declined USD 19 billion to USD 45 billion in 2021 but the country still remained among the top 10 global economies for FDI last year, the United Nations said on Thursday.
According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, flows of foreign direct investment recovered to pre-pandemic levels last year, hitting nearly USD 1.6 trillion. However, the prospects for this year are grimmer as global FDI in 2022 and beyond will be affected by the security and humanitarian crises caused by the Ukraine war, by macroeconomic shocks set off by the conflict, by energy and food price hikes, and by increased investor uncertainty.
India, which had received USD 64 billion in FDI in 2020, recorded a decline in FDI inflows in 2021 at USD 45 billion. But India was still among the top 10 economies for FDI inflows in 2021, ranking 7th after the US, China, Hong Kong, Singapore, Canada and Brazil. South Africa, Russia and Mexico rounded up the top 10 economies for FDI inflows in 2021.
“Flows to India declined to USD 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 report said, adding that the largest number of 23 projects was in renewables.
Large projects include the construction of a steel and cement plant in India for USD 13.5 billion by Arcelormittal Nippon Steel (Japan) and the construction of a new car manufacturing facility by Suzuki Motor (Japan) for USD 2.4 billion.
Outward FDI from South Asia, mainly from India, rose by 43 per cent to USD 16 billion.
The report noted that the war in Ukraine will have far-reaching consequences for international investment in economic development and the Sustainable Development Goals (SDGs) in all countries. It comes as a fragile world economy was just beginning an uneven recovery from the effects of the pandemic.
The report said the direct effects of the war on investment flows to and from Russia and Ukraine include the halting of existing investment projects and the cancellation of announced projects, an exodus of multinational enterprises (MNEs) from Russia, widespread loss of asset values and sanctions virtually precluding outflows.
It added that to date, MNEs from China and India account for a negligible share of FDI stock in Russia (less than 1 per cent), although their share in ongoing projects is larger.
The report said despite successive waves of COVID-19, FDI in developing Asia rose for the third consecutive year to an all-time high of USD 619 billion, underscoring the resilience of the region. It is the largest recipient region of FDI in the world, accounting for 40 per cent of global inflows.