India slips on global FDI chart from 8th to 14th slot

NEW DELHI: India slipped from being the 8th largest recipient of foreign direct investment (FDI) in 2009 to the 14th largest in 2010, according to a UN report released on Tuesday. This happened because FDI flows into India dipped from $36 bn in 2009 to $25 bn last year even as global FDI flows recovered from the post-meltdown $1.19 trillion to $1.24 trillion.

The World Investment Report 2011, brought out by the United Nations Conference on Trade and Development ( UNCTAD), expressed the hope that global FDI flows would recover to near pre-crisis levels this year and projected them to touch somewhere between $1.4 trillion and $1.6 trillion. That would still be below the $1.74 trillion recorded in 2008.

However, the WIR warned that the global business environment remains uncertain. Risk factors such as a possible widespread sovereign debt crisis, fiscal and financial sector imbalances in some developed countries as well as inflation and signs of overheating in major emerging market economies could derail the projected FDI recovery, the report said.

In 2010, the report said, the US continued to be the largest recipient of FDI with $228 bn, followed by mainland China with $106 bn and Hong Kong with $69 bn. More than half of all global FDI inflows were into developing countries and transition economies. However, FDI in services in general and financial services in particular slumped during 2010.

FDI to South Asia declined to $32 bn, reflecting a 31% slide in inflows to India and a 14% drop in flows to Pakistan. By contrast, inflows to Bangladesh, "a rising low-cost production location", increased by nearly 30% to $913 million, the report said.

The WIR noted that cross border non-equity modes (NEMs) are increasingly shaping global value chains. NEMS include contract manufacturing, services outsourcing, contract farming, franchising and management contracts, among others. NEMs of international production generated at least $2 trillion in sales globally in 2010 and are growing rapidly, shaping world trade and investment patterns, the report noted.