United Nations: India receives $ 64 billion in foreign direct investment in 2020, the fifth largest recipient of inflows in the world, according to a UN report which says the COVID-19 second wave in the country weighs heavily on the country its overall economic activities, but its strong fundamentals offer ‘optimism’ for the medium term.
The World Investment Report 2021 by the United Nations Conference on Trade and Development (UNCTAD), released on Monday, said that global FDI flows had been hit hard by the pandemic and that in 2020 they had fallen by 35 percent to $ 1 billion from $ 1.5 billion the previous year.
Lockouts caused by COVID-19 around the world have delayed existing investment projects, and the prospect of a recession has led multinational corporations (MNOs) to reevaluate new projects.
According to the report, FDI increased by 27 percent in 2020 to USD 64 billion in 2020, from USD 51 billion in 2019, which was increased by acquisitions in the information and communication technology industry (ICT), making the country the fifth largest FDI recipient in make world. .
The pandemic has increased the demand for digital infrastructure and services worldwide. This led to higher values of Greenfield FDI project announcements targeting the ICT industry, by more than 22 percent to $ 81 billion.
Major project announcements in the ICT industry have included a $ 2.8 billion investment by online retail giant Amazon in ICT infrastructure in India.
The report noted that the second wave of the COVID-19 outbreak in India weighs heavily on the country’s overall economic activities.
Announced green field projects in India shrank by 19 percent to $ 24 billion, ‘and the second wave in April 2021 will affect economic activity, which could lead to a greater contraction in 2021,’ he says, adding that the outbreak in India has hit hard has. major investment destinations such as Maharashtra, where one of the largest car manufacturing groups (Mumbai-Pune-Nasik-Aurangabad) and Karnataka (home of the Bengaluru Technology Center) are located, which will come to a standstill again from April 2021, exposing the country to production disruption and delays in investments.
‘Yet the strong fundamentals of India offer optimism for the medium term. FDI to India has had a long term growth trend and its market size will continue to attract market tempting investments. In addition, investments in the ICT industry are expected to continue to grow, ‘the report reads.
The country’s export – related manufacturing, a priority investment sector, will take longer to recover, but government facilitation could help. India’s manufacturing incentive scheme, designed to attract manufacturing and export-oriented investments in priority industries, including automotive and electronics, could boost investment in manufacturing.
According to the report, FDI in South Asia rose by 20 percent to USD 71 billion, mainly driven by strong M&As in India. “Amid India’s fight to bolster the COVID-19 outbreak, robust investment through acquisitions in ICT (software and hardware) and construction, FDI has stepped up,” he said, adding that M & As is crossing the border with 83 percent rose to $ 27 billion, with major deals involving ICT, health, infrastructure and energy. Major transactions include the acquisition of Jio Platforms by Jaadhu, a subsidiary of Facebook for USD 5.7 billion, the acquisition of Tower Infrastructure Trust by the Canadian Brookfield Infrastructure and GIC (Singapore) for USD 3.7 billion and the sale of the electrical and automation division of Larsen & Toubro India for USD 2.1 billion. Another megadeal – Unilever India’s merger with GlaxoSmithKline Consumer Healthcare India, a subsidiary of GSK UK) for USD 4.6 billion, also contributed.
FDI outflows from South Asia fell 12 percent to $ 12 billion, driven by a decline in investment from India. India was 18 of the world’s 20 best economies for foreign inflows, with $ 12 billion outflows from the country in 2020, compared to $ 13 billion in 2019.
“Investment from India is expected to stabilize in 2021, supported by the resumption of the country’s free trade agreement talks with the European Union (EU) and its strong investment in Africa,” the report said.
The report warns that although the Asian region has managed the health crisis relatively well, the recent second wave of COVID-19 in India shows that there are still major uncertainties.
‘It has a huge impact on the outlook for South Asia. A broader revival of the virus in Asia could significantly reduce global FDI by 2021, given the region’s significant contribution to the total, ‘the report said.
The inflow of foreign direct foreign exchange to developing Asia grew by 4 percent to $ 535 billion in 2020, making it the only region to record growth and increasing Asia’s share of world inflows to 54 percent. In China, FDI increased by 6 percent to USD 149 billion. While some of the largest economies in developing Asia, such as China and India, had foreign exchange growth in 2020, the rest showed a contraction.
The report added that the inflow of foreign direct foreign exchange into Asia is expected to increase in 2021, which is better than other developing regions with a forecast growth of 5-10 percent.
Signs of trade and industrial production recovering in the second half of 2020 are a strong basis for growth in foreign exchange investment in 2021. Nevertheless, there is a significant downside risk for the numerous economies in the region struggling with successive waves COVID- 19 cases and where fiscal capacity for recovery expenditure is limited. “Economies in East and Southeast Asia and India will continue to attract foreign investment in high-tech industries, given their market size and their advanced digital and technological ecosystem,” the report said.