FDI in India rose by 13 per cent in 2020, as inflows declined in main economies attributable to pandemic: UN

New York, January 25

Foreign Direct Investment into India rose by 13 per cent in 2020, boosted by interest in the digital sector, and while fund flows “declined most strongly” in major economies such as the UK, the US and Russia due to the Covid pandemic, India and China “bucked the trend”, the UN has said.

An ‘investment trends monitor’ issued by the United Nations Conference on Trade and Development (UNCTAD) on Sunday said that global foreign direct investment (FDI) collapsed in 2020 by 42 per cent to an estimated USD 859 billion from USD 1.5 trillion in 2019.

Such a low level was last seen in the 1990s and is more than 30 per cent below the investment trough that followed the 2008-2009 global financial crisis.

The decline in FDI inflows was concentrated in developed countries, where fund flows fell by 69 per cent to an estimated USD 229 billion.

However, FDI in India rose by 13 per cent, boosted by investments in the digital sector.

“China was the world’s largest FDI recipient, with flows to the Asian giant rising by 4 per cent to USD 163 billion. India, another major emerging economy, also recorded positive growth (13 per cent), boosted by investments in the digital sector,” the report said.

It added that “in relative terms, FDI flows declined most strongly in the UK, Italy, Russia, Germany, Brazil and the US due to the dramatic impact of COVID-19. India and China bucked the trend”.

FDI in South Asia rose by 10 per cent to USD 65 billion. India’s 13 per cent rise in FDI saw the total foreign investments for 2020 touching USD 57 billion. The report noted that acquisitions in India’s digital economy was the largest contributor to this rise.

Cross-border merger and acquisition (M&A) sales grew 83 per cent to USD 27 billion, the report said, citing social networking giant Facebook’s acquisition of 9.9 per cent stake in Reliance Jio platforms, via a new entity, Jaadhu Holdings LLC Infrastructure. Similarly deals in the energy sector propped up M&A values in India, it said.

Further, India and Turkey are attracting record numbers of deals in information consulting and digital sectors, including e-commerce platforms, data processing services and digital payments.

Despite projections for the global economy to recover in 2021, the UNCTAD expects FDI flows to remain weak due to uncertainty over the evolution of the COVID-19 pandemic.

The organisation has projected a 5 per cent to 10 per cent FDI slide in 2021 in last year’s World Investment Report.

“The effects of the pandemic on investment will linger,” said James Zhan, Director of UNCTAD, investment division.

“Investors are likely to remain cautious in committing capital to new overseas productive assets,” Zhan said. PTI

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