India Remains a Lucrative Destination for FDI despite COVID-19 Crisis : UNCTAD

The global economy is damaged, thanks to COVID-19. Even the global flows of foreign direct investment (FDI) will be under severe pressure this year, reveals United Nations Conference on Trade and Development (UNCTAD). These vital resources are expected to fall sharply from 2019 levels of $1.5 trillion. According to WNCTAD’s World Investment Report 2020, with FDI flowing to the 83 structurally weak, vulnerable and small economics will be particularly exposed to the negative effects of the coronavirus pandemic, accentuating the marginalization of these countries in global flows. The FDI flow is further projected to decrease by five-10 percent in 2021, while it may recover in 2022 amid a highly uncertain outlook.

“The pandemic amplifies the structural weaknesses of these economies, leading to projections of a major decline in FDI in 2020 and 2021,” said UNCTAD’s director of investment and enterprise, James Zhan. “All indicators of resilience are low and all indicators of vulnerability are high in this group of countries, despite all the

heterogeneity of size, relative level of development and geographical location,” he cautioned.

Positive albeit lower economic growth in the post-pandemic period and Indias large market will continue to attract market-seeking investments to the county

The report further says that the FDI to developing economies in Asia is hit hard and is projected to decline by up to 45 percent in 2020. Further the number of announced greenfield investment in the first quarter of 2020 dropped by 37 percent, while the number of M&A fell short by 35 percent in April 2020. However, the FDI flows to South Asia increased by 10 percent to $57 billion, largely driven by a 20 percent increase in investment in India to $51 billion, which is the largest South Asian FDI recipient. A large part of this investment flowed into the information and communication technology and the construction industries. “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 county,” UNCTAD adds.

On the other hand, outward investment from Asia declined by 19 percent to $328 billion which includes major economies like Hong Kong, The Republic of Korea, Saudi Arabia and Thailand. But India and Singapore are among the few economies that reported an increase in outward investment.