Global FDI Flows to India Down 31% in 2010: UNCTAD .

GENEVA: Global foreign direct investment (FDI) flows into India dropped by over 31 per cent in 2010 despite robust economic growth, according to the United Nations Conference on Trade and Development (UNCTAD).

However, China and other countries in South-East Asia continued to witness massive FDI flows, UNCTAD said in its Global Investment Trends Monitor report issued on Monday.

UNCTAD says global FDI flows remained almost stagnant in 2010, increasing by 1 per cent to USD 1.122 trillion.

UNCTAD forecasts that global FDI flows are likely to remain between USD 1.3 trillion and USD 1.5 trillion in 2011.

FDI inflows into India amounted to just USD 23.7 billion last year, as against USD 34.6 billion in 2009. "In India, we have seen a sharp decline and we can't explain why this has happened," said the UNCTAD's investment and enterprise division chief, James X Zhan, who prepared the investment report.

"We don't have the analysis," he said, maintaining that the decline in global FDI flows into India was based on the figures compiled by the central bank.

However, in sharp contrast, China received FDI worth USD 274.6 billion last year, compared to USD 233 billion in 2009. There is a "structural change," Zhan said in regard to the higher FDI flows to China, which is receiving huge investments on services and research and development activities.

Many Western companies have shifted their research facilities to China and there is rapid development in the hinterlands of the Communist country as well.

The sharp increase in global FDI flows to East and South-East Asian countries and Latin American nations in 2010 marked the first time that developing countries outpaced rich nations in attracting foreign investments.

China, Hong Kong and other South-East Asian countries like Indonesia, Malaysia, Singapore and Thailand were the main beneficiaries of the heightened FDI flows in the form of mergers and acquisitions (M&As) and greenfield investment.

Part of the reason for the stagnant investment flows the world-over was largely due to the poor performance of the developed economies, especially European countries, which were the worst-hit by the global financial turmoil.

The United States, which was the epicentre of the global economic meltdown in 2008, is gradually recovering from the crisis, with FDI flows increasing by 40% last year to USD 186.1 billion from USD 129.9 billion in 2009.

"The quarterly fluctuations during 2010 indicate that the worldwide FDI recovery is still hesitant," said the report.

Several risk factors such as the slow global economic recovery, investment protectionism, rising sovereign debt and continued volatility in the currency markets are likely to slow down the pace of foreign direct investment across the globe in 2011, it said.

Source : timesofindia.indiatimes.com