India leads regional inflow of Foreign Direct Investment (FDI) in South Asia accounting for USD 34 billion investment during 2014 and the upward trend is likely to continue this year also, according to a UN report which placed China as the world’s largest FDI recipient.
“FDI inflows to the country (India) surged by 22 per cent to about USD 34 billion” improving its position to 9th top host country for FDI in 2014, over its rank of 15th in 2013, the UNCTAD’s World Investment Report 2015 says.
India is likely to maintain an upward trend in 2015 as economy recovery gains ground, the report adds.
FDI inflows to South Asia rose to USD 41 billion in 2014, primarily owing to good performance by India, it says.
“In terms of the sectoral composition of FDI flows, manufacturing is likely to gain strength, as policy efforts to revitalise the industrial sector are sustained, including, for instance, the ‘Make in India’ initiative launched in mid-2014,” the report says.
The top five recipients in South Asia of FDI inflows were India, followed by Iran, Pakistan and Bangladesh (USD 2 billion each) and Sri Lanka (USD 1 billion).
In the UN report, Asia is divided into three sub-regions: East and South East Asia, West Asia and South Asia.
According to the report, China became the world’s largest recipient of FDI (USD 129 billion) toppling the US (USD 92 billion).
However, “global FDI inflows fell by 16 per cent to USD 1.23 trillion in 2014, mostly because of the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks and new investments were also offset by some large divestments,” it says.
The groups of countries negotiating the Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership saw their combined share of global FDI inflows decline.
Asia overall bucked the global trend with historically high levels of inward FDI to developing economies at USD 681 billion marking a 2 per cent rise.
Among the top 10 FDI recipients in the world, five are developing economies.
India was also the biggest investor in outward FDI in South Asia with USD 9.8 billion marking an increase of 486 per cent over 2013. However, India does not figure in the first top 20 countries for FDI outflows.
“There was an abnormal decrease (in outward FDI investment in India) in 2013 because of macro economic uncertainties when some of the Indian MNCs divested. The figures are now back on track but still lower than figures (of outward FDI investment) in 2009, 2010 and 2011,” said Guoyong Liang, UNCTAD Asia head of the Investment Division.
The US had the largest outward flow of FDI (USD 337 billion) followed by Hong Kong-China (USD 142 billion) and China (USD 116 billion).