BRICS take FDI centrestage

Updated: Jun 27 2013, 06:15am hrs
With a decent economic growth, the BRICS group comprising Brazil, Russia, India, China and South Africa has emerged as an attractive destination for FDI. Despite the sharp slowdown in growth in 2012, BRICS attracted FDI worth $268 billion, which was almost a fifth of the global FDI flow of $1.35 trillion, according to UNCTADs World Investment Report. On the strength of BRICS, developing nations for the first time increased their share in global FDI to 52% from just 25% a decade ago. Among the BRICS, China cornered the the bulk of the FDI of $121 billion, which was 9% of the global total while Brazil got $65 billion and Russia $51 billion. Indias share of FDI was $26 billion or just 2% of global total. This means there is a lot of potential for the country to lure foreign capital going by the potential growth rate and return on investment. In fact, higher FDI inflows have become imperative to attract $75 billion annually for the next few years to bridge a bloated current account deficit that shot up to an all-time record of 6.7% of GDP during third quarter of 2012-13.

While the proposed hike in FDI caps in sectors such as defence equipment, aviation, telecom and retail will help attract more foreign money, India has to improve its participation rate in the global value chain of transnational corporations. The global value chain participation rate of India is just 36% as compared with 82% for Singapore, 68% for Malaysia and 59% for China.

The BRICS has also emerged as a major source of FDI in other developing nations with outward investment of $145 billion or 10% of the global FDI flows as companies have expanded operations in not just Africa and Latin America but also in developed countries like the US, UK and Europe. In recent years, Indias outward FDI flows can be gauged from Tatas acquiring Corus for $11.79 billion and JLR for $2.3 billion while Bharti Airtel buying Zain Africa for $10.7 billion.

Raj Kumar Ray