India bucks global decline in FDI; grows 13% against world's 42% fall in 2020
Joe C Mathew January 25, 2021
India bucked the global foreign direct investment (FDI) flow trend by growing 13 per cent as global FDI collapsed in 2020, falling by 42 per cent to an estimated $859 billion from $1.5 trillion in 2019, the 38th Global Investment Trends Monitor released by United Nations Conference on Trade and Development (UNCTAD) says. FDI finished 2020 more than 30 per cent below the trough after the global financial crisis in 2009 and back at a level last seen in the 1990s, it further mentions.
The decline was concentrated in developed countries, where FDI flows fell by 69 per cent to an estimated $229 billion. Flows to Europe dried up completely to - $4 billion, including large negative flows in several countries. A sharp decrease was also recorded in the United States (-49 per cent) to $134 billion, the report said. FDI in India rose by 13 per cent, boosted by investments in the digital sector in 2020, the report says.
The decline in developing economies was relatively measured at (-)12 per cent to an estimated $616 billion. The share of developing economies in global FDI reached 72 per cent - the highest share on record. China topped the ranking of the largest FDI recipients.
The fall in FDI flows across developing regions was uneven, with (-)37 per cent in Latin America and the Caribbean, (-)18 per cent in Africa and (-)4 per cent in developing countries in Asia. East Asia was the largest host region, accounting for one-third of global FDI in 2020. FDI to transition economies declined by 77 per cent to $13 billion.
The report forecasts that the FDI trend is expected to remain weak in 2021. "Data on an announcement basis, an indicator of forward trends, provides a mixed picture and point at continued downward pressure. Sharply lower greenfield project announcements ((-)35 per cent in 2020) suggest a turnaround in industrial sectors is not yet in sight; Upticks in the fourth quarter of 2020 dampened earlier declines in newly announced international project finance deals ((-)2 per cent for the full year)," the report says.
Risks related to the latest wave of the pandemic, the pace of the roll-out of vaccination programmes and economic support packages, fragile macroeconomic situations in major emerging markets, and uncertainty about the global policy environment for investment will all continue to affect FDI in 2021, it adds.