Context: According to the latest ‘World Investment Report’ by UNCTAD, India jumped from 12th position in 2018 to 9th in 2019 on the list of the world’s top FDI recipients.
Key highlights of the report:
- Worldwide scenario
- The global FDI flows are forecast to decrease by up to 40% in 2020 from their 2019 value of $1.54 trillion.
- This would probably bring FDI below $1 trillion for the first time since 2005. In addition, FDI is projected to decrease by a further 5% to 10% in 2021 before initiating a recovery in 2022.
- However, the global FDI flows rose modestly in 2019, following sizable declines in 2017 and 2018.
- At $1.54 trillion, inflows were 3% up primarily as a result of higher flows to developed economies, as the impact of the 2017 tax reforms in the US waned.
- India specific findings
- The number of greenfield investment announcements in India declined by 4% in the first quarter, and M&As (mergers and acquisitions) contracted by 58%.
- FDI to India has been on a long-term growth trend. Positive, albeit lower, economic growth in the post-pandemic period and India’s large market will continue to attract market-seeking investments to the country
- The report noted that India’s most sought-after industries, including professional services and the digital sector, could see a faster rebound as global venture capital firms and technology companies continue to show interest in India’s market through acquisitions.
- According to the report, foreign direct investment (FDI) into India may shrink sharply in 2020 because of COVID-19 and the consequent lockdown, supply chain disruptions, and economic slowdown after jumping over 20% to $51 billion in 2019.
Impact of the COVID-19:
- According to the report, Investment flows are expected to slowly recover starting in 2022, led by global value chains restructuring for resilience, replenishment of capital stock, and recovery of the global economy.
- The Organization for Economic Cooperation and Development(OECD) has said the world economy may contract by 6% or 7.6% in 2020, depending on a single-hit or a double-hit scenario of the coronavirus pandemic, respectively.
- It expects India’s economy to contract by as much as 7.3% in FY21 if a second wave of coronavirus sweeps the country.
About World Investment Report
- It focuses on trends in foreign direct investment (FDI) worldwide, at the regional and country levels, and emerging measures to improve its contribution to development.
- Every issue of the Report has:
- Analysis of the trends in FDI during the previous year, with special emphasis on the development implications.
- Ranking of the largest transnational corporations in the world.
- In-depth analysis of a selected topic related to FDI.
- Policy analysis and recommendations.
- Statistical annex with data on FDI flows and stocks at the country level.
United Nations Conference on Trade and Development(UNCTAD)
- It is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
- Its headquarters are located in Geneva, Switzerland.
- UNCTAD is part of the UN Secretariat.
- It supports developing countries to access the benefits of a globalized economy more fairly and effectively.
- It reports to the UN General Assembly and the Economic and Social Council, but has its own membership, leadership, and budget.
- Reports published by UNCTAD are:
- Trade and Development Report
- World Investment Report
- Technology and Innovation Report
- Digital Economy Report