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India receives $ 64 billion FDI in 2020: UN report

Delhi: 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’s overall economic activities, but that it is strong fundamentals provide ‘optimism’ for the medium term.

The World Investment Report 2021 by the United Nations Conference on Trade and Development (UNCTAD), said that global FDI flows were severely affected by the pandemic and that they fell by 35 percent to $ 1 trillion in 2020 from $ 1.5 trillion 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 companies (MNOs) to reevaluate new projects.

According to the report, FDI increased by 27 percent in 2020 to $ 64 billion in 2020 from $ 51 billion in 2019, increased by acquisitions in the information and communication technology (ICT) industry, making the country the fifth largest FDI recipient in the world. make.

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.

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 said, adding that the outbreak in India is the most important matter. investment destinations such as Maharashtra, which is home to one of the largest car manufacturing groups (Mumbai-Pune-Nasik-Aurangabad) and Karnataka (home of the Bengaluru Technology Center), which from April 2021 will again come to a standstill 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 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.

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Strong M & As

According to the report, FDI in South Asia rose by 20 percent to $ 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 strengthened,” he said, adding that M & As is crossing the border with 83 percent rose to $ 27 billion, with major deals in ICT, health, infrastructure and energy.

Major deals include the acquisition of Jio Platforms by Jaadhu, a $ 5.7 billion subsidiary of Facebook, the acquisition of Tower Infrastructure Trust by Canadian Brookfield Infrastructure and GIC (Singapore) for $ 3.7 billion, and the sale of the electrical and automation division of Larsen & Toubro India for $ 2.1 billion. Another megadeal – Unilever India’s merger with GlaxoSmithKline Consumer Healthcare India, a $ 4.6 billion subsidiary of GSK UK – also contributed.

FDI inflows into Asia

The inflow of foreign currency into 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 global inflows to 54 percent. In China, FDI rose 6 percent to $ 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.