Foreign direct investment (FDI) inflows into India fell to $28.1 billion in 2023 from $49.3 billion in 2022 with the country slipping seven notches to rank 15 in the World Investment Ranking in 2023, the United Nations Conference on Trade and Development (UNCTAD) said Thursday.
In its World Investment Report 2024, the Geneva-based organisation said FDI in developing Asia fell 8% to $621 billion. The US remained the top FDI recipient, followed by China. Brazil, Canada, Germany and Mexico moved up the ranks.
Global FDI fell 2% to $1.3 trillion in 2023 amid an economic slowdown and rising geopolitical tensions. FDI flows to developing countries dropped 7% to $867 billion. Tight financing conditions led to a 26% fall in international project finance deals, critical for infrastructure investment.
“Among the top 20 host economies, the largest absolute drops were registered in France, Australia, China, the US and India, in that order,” it said.
As per the report, the decline in flows to West Asia was moderate, whereas South and Central Asia registered sizeable declines, especially in India and Kazakhstan. While the US was the top destination for both greenfield projects and international project finance deals, India and the UK also appear in the top five destinations for both kinds of FDI.
FDI equity inflows into India shrank 3.49% on-year in FY23 to $44.42 billion from $46.03 billion in FY22, according to data released by the commerce and industry ministry last month, with Singapore being the top source of foreign inflows last fiscal followed by Mauritius and the US.
India moved up the ranks in terms of outflows and ranked 20th in 2023 up from 23 in the previous year. The FDI outflows increased to $15 billion from $13 billion in 2022.
Looking at the 20 largest economies by outward FDI flows, those in Asia now account for almost half with the relative ranks of India and Taiwan both rising in 2023, UNCTAD said in the report.
Among companies, UNCTAD listed that Shell expanded operations in view of the energy transition, exemplified by its acquisition of Sprng Energy (India), which develops and operates renewable energy facilities, for about $1.5 billion.
Electronics major Hon Hai reduced its greenfield projects in China from 23 to six, while Samsung reduced its from nine to one.
“Both companies have started investing in new manufacturing facilities in their home markets and in other countries such as Viet Nam, India and Mexico—in order of investment size,” it said.
As in the case of incentives, though most measures were cross-sectoral, sector specific liberalization initiatives concerned primarily services. India permitted foreign lawyers and law firms to “practice foreign law within the country” (i.e. to advise clients on the international elements of mergers and acquisitions or appear as arbitrators), it said. Sustainable investment
As per the report, developing economies are becoming increasingly active in sustainable finance policymaking. They accounted for 60% of new policy measures in 2023, a record high.
“They are actively developing national strategies and frameworks for sustainable finance,” it said, adding that in 2023, seven of them, including Argentina, Brazil, China, India and Mexico, rolled out national strategies or frameworks on sustainable finance.
Similarly, Bangladesh, China, India, Singapore and Thailand released policies to support the banking industry in integrating sustainable development considerations into operations, covering sustainable deposits, sustainable loans and green credits.
Transparency measures related to investment included primarily the consolidation of investment-related provisions (for instance, in Fiji and Uzbekistan), the issuance of guidelines on investment legislation (notably in China and India), according to the body.
