GS Paper - 3 (Economy)

Foreign Direct Investment (FDI) flows to India in 2021 were 26 per cent lower, mainly because large M&A deals recorded in 2020 were not repeated, the UN trade body has said. The UN Conference on Trade and Development (UNCTAD) Investment Trends Monitor published said.

What the report said

  1. The global foreign direct investment flows showed a strong rebound in 2021, growing 77 per cent to an estimated USD 1.65 trillion, from USD 929 billion in 2020, surpassing their pre-COVID-19 level.
  2. Recovery of investment flows to developing countries is encouraging, but the stagnation of new investment in the least developed countries in industries important for productive capacities, and key Sustainable Development Goals (SDG) sectors – such as electricity, food or health – is a major cause for concern.
  3. The report said developed economies saw the biggest rise by far, with FDI reaching an estimated USD 777 billion in 2021 – three times the exceptionally low level in 2020.
  4. FDI flows in developing economies increased by 30 per cent to nearly USD 870 billion, with a growth acceleration in East and South-East Asia (+20 percent), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and an uptick in West Asia.
  5. FDI flows to South Asia decreased 24 per cent to USD 54 billion in 2021 from USD 71 billion in 2020.
  6. Flows to India were 26 per cent lower, mainly because large M&A deals recorded in 2020 were not repeated.
  7. The World Investment Report by UNCTAD released in June last year had said that amid the pandemic, India received USD 64 billion in foreign direct investment in 2020, the fifth-largest recipient of inflows in the world.
  8. FDI to India increased 27 per cent to USD 64 billion in 2020 from USD 51 billion in 2019, pushed up by acquisitions in the information and communication technology (ICT) industry.
  9. The report had noted that the second wave of the COVID-19 outbreak in India weighed heavily on the country’s overall economic activities.