FDI in India grew by 6% to USD42B in 2019
Foreign direct investment (FDI) in India grew by 6% to USD42 billion last year according to the United Nations Conference on Trade and Development (UNCTAD).
“Investment was strong in manufacturing, communication and financial services – the top three industry recipients”, according to the UNCTAD World Investment Report 2019 released in Geneva.
UNCTAD's Director of Investment and Enterprise James Zhan said the growth was because Prime Minister Narendra Modi's office and agency for it are “very dynamic in promoting investment”.
Zhan said that the offices were making efforts to attract a wide range of investment and “have been very effective; investment in India has been at a very high level, over USD40 billion annually.”
They have reached beyond the traditional multinational companies and are “targeting some wealth funds and pension funds for investing in the infrastructure in India”, he explained.
Zhan, who led the report team, said that an impetus for FDIs came from the new development of India abolishing approval procedures for foreign companies in areas like defence, telecommunications, and private security that want “to open branch offices under certain conditions in the country”.
The report said that the FDI during 2017 was USD40 billion and some of the growth was driven by mergers and acquisitions (M&A).
“The growth in cross-border M&As from USD23 billion in 2017 to USD33 billion in 2018 was primarily due to transactions in retail trade (USD16 billion), which includes e-commerce, and telecommunication (USD13 billion),” it said.
“Notable megadeals included the acquisition of Flipkart, India’s biggest ecommerce platform, by Walmart (United States). In addition, telecommunication deals involving Vodafone (United Kingdom) and American Tower (United States) amounted to USD2 billion” it said.
Looking ahead, UNCTAD said, “Announced greenfield investment in the country doubled to USD56 billion in 2018, with projects in a number of manufacturing industries, including automotive”.
The report said that there were 373 special economic zones (SEZ) in India, of which142 were still under development and 61 more were planned.
Of the 231 SEZs in operation, 60 percent of specialised in Information communications Technology (ICT)-related manufacturing and services, according to the report.
“India is now taking a more cautious approach to SEZ development, having eliminated incentives for developers in 2016 and currently phasing out direct tax benefits for tenants by 2020”, it said.
While India has over 200 new zones in the pipeline, the report said that “growth may lose momentum now that permits for a substantial number of zones have been retracted”.
While globally the FDI flows fell by 13 percent to USD1.3 trillion last year, they increased by two percent for developing countries as the developed countries took the hit.
The United States was the world's top recipient of FDI with USD252 billion and was followed by China, which got USD139 billion in FDI. Globally India ranks ninth as an FDI recipient.