India’s FDI inflows rise, but still behind China, US

India News Bulletin Desk

India is the third top destination to attract investment from major international companies, after China (1st) and the US (2nd), the World Investment Report 2012 from the UN showed.

Coca Cola will invest $5bn (£3.2bn) in India over an 8-year period
Image: Wikimedia Commons (Enfo)
Foreign direct investment (FDI) inflows to India rose 30% to nearly $32bn in 2011.

But, China still remained the most-favourite destination for foreign investment. Other South-East Asian economies such as Indonesia and Thailand have risen markedly too to attract investment, the report from UNCTAD (United Nations Conference on Trade and Development) further found.

FDI inflows to China reached a record level of $124bn.

The nature of investment in China also changed with investment in the service sector surpassing investment in the manufacturing sector for the first time.

However, India has contributed in boosting the Foreign Direct Investment (FDI) inflows in South Asia in 2011.

After a slide in 2009-2010, foreign investment in South Asia is increasing with India accounting for more than four fifths of the region’s FDI, the report showed. FDI inflows in the region reached $39bn (approx. £25bn).

Political risks and obstacles to FDI in South Asia are some of the hurdles for more inflows. These challenges must be tackled in order to build an attractive investment climate, the report warned.

However, recent developments such as the improving relationship between India and Pakistan have highlighted new opportunities.

According to the report, FDI from developed economies (European Union (EU), North America and Japan) rose sharply by 25% to reach $1.24 trillion.

World Investment Report 2012
World Investment Report 2012
source: United Nations (UNCTAD)
Rising FDI to developing countries was driven by a 10% increase in Asia and a larger (16%) increase in Latin America and the Caribbean.

In contrast, flows to Africa continued their downward trend for a third consecutive year, but the decline was marginal, the report further stated.

India’s FDI outflows also rose 12% to reach $15bn. India remained the largest investor in LDCs (least developing countries), followed by China and South Africa.

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