India among top 10 FDI recipients, attracts US$ 49 billion inflows in 2019: UN report

According to a UN report, in 2019, India was among the top 10 recipients of Foreign Direct Investment, attracting US$ 49 billion inflows, which is a 16 per cent increase from the previous year, driving the FDI growth in South Asia.

The Global Investment Trend Monitor report compiled by United Nations Conference on Trade and Development (UNCTAD) states that, in 2019, the global foreign direct investment remained flat at US$ 1.39 trillion, declining by one per cent from the revised US$ 1.41 trillion in 2018.

It said that the inflow is against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions.

More than half of the global FDI inflow is in developing economies with South Asia attracting US$ 60 billion which is a 10 per cent increase in FDI and "this growth was driven by India, with a 16 per cent increase in inflows to an estimated US$ 49 billion. The majority went into services industries, including information technology," the report said.

In 2019, India attracted an estimated US$ 49 billion of FDI, witnessing a rise of 16 per cent from the US$ 42 billion recorded in 2018, it said.

Though, there was decrease by six per cent in the FDI flows to developed countries remaining at a historically low level, with an estimated US$ 643 billion.

The FDI to the European Union (EU) decreased by 15 per cent to US$ 305 billion, whereas there was zero-growth of flows to United States, which received US$ 251 billion FDI in 2019, as compared to US$ 254 billion in 2018, the report said.

Irrespective of this, the largest recipient of FDI remained United States, followed by China with flows of US$ 140 billion and Singapore with US$ 110 billion. Though, China also witnessed zero-growth in its FDI inflows. Its FDI inflows in 2018 were US$ 139 billion and stood at US$ 140 billion in 2019. The FDI in the UK decreased by six per cent as Brexit unfolded.

According to the report, cross-border M&As declined by 40 per cent in 2019 to US$ 490 billion, which is the lowest level since 2014.

European M&A sales halved to US$ 190 billion due to sluggish Eurozone growth and Brexit. Deals targeting United States companies remained significant, accounting for 31 per cent of total M&As.

Services sector witnessed the deepest fall in global cross-border M&As sales with 56 per cent decline to US$ 207 billion, followed by manufacturing (a 19 per cent decline to US$ 249 billion) and primary sector (14 per cent decline to US$ 34 billion), the report said.

Sales of assets related to financial and insurance activities and chemicals declined sharply. There were lower number of mega deals in 2019, with only 30 mega deals above US$ 5 billion compared to 39 in 2018, it said.

UNCTAD expects the FDI flows to rise moderately in 2020, as current projections show the global economy to improve somewhat from its weakest performance since the global financial crisis in 2009.

The corporate profits are expected to remain high and signs of waning trade tensions arise. Though, there was decrease of announced greenfield projects by 22 per cent, which is an indicator of future trends, high geopolitical risks and concerns about a further shift towards protectionist policies temper expectations.

The report said that GDP growth, gross fixed capital formation and trade are expected to increase, both at the global level and, especially, in several large emerging markets.

These improvement in macroeconomic conditions could prompt MNEs to resume investments in productive assets, given also their easy access to cheap money, the fact that corporate profits are expected to remain solid in 2020, and hopes for waning trade tensions between the United States and China, it said.

It added that the significant risks persist, including high debt accumulation among emerging and developing economies, geopolitical risks and concerns about a further shift towards protectionist policies.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.