India's FDI Increased By 26 Per Cent In 2014: UN

GENEVA: Notwithstanding the decline in global foreign direct investment inflows, India's FDI increased by 26 per cent in 2014 to an estimated $35 billion with maximum growth in the services sector, a UN report said.

China toppled the U.S. in 2014 as the world's largest recipient of FDI -- a position that the U.S. had been holding almost consistently since the 1980's -- though with a modest increase of 3 per cent, the latest 'Global Investment Trade Monitor' report released by United Nations Conference on Trade and Development said.

The propping up of FDI in China is mainly due to an increase in FDI in the service sector, even as FDI in manufacturing sector particularly from Japan and in industries sensitive to rising labour costs fell.

The manufacturing sector in terms of net cross border mergers and acquisitions (M&A) sales recorded a decrease for India from $4,604 million to $4,172 million, the report said.

FDI flows to India increased by 26 percent in 2014 to an estimated 35 billion, with maximum growth in services sector especially in electricity, gas, water, waste management and information and communication, the report said.

This figure is one of the highest in recent years, though in 2008 FDI peaked in India with $47 billion investment followed by $35.6 billion in 2009. James Zhan, Director of Investment and Enterprise, at UNCTAD said, "India is still a bright spot for FDI despite a global decline. It is at a significant historical high though not at the highest level of investment."

"If policy trends encourage liberalisation then we can expect more FDI in China despite a slowdown in economic growth," said Zhan referring to new draft for full foreign investment law that was proposed last week in Beijing. The top five FDI hosts in 2014 were China ($128 billion), followed by Hong Kong ($111 billion), the U.S. ($86 billion), Singapore ($81 billion) and Brazil ($62 billion).

"In 2014 global FDI inflows declined by 8 per cent to an estimated $1.26 trillion due to fragility of the global economy, policy uncertainty and geo-political risks," the report said. The drop in FDI in the U.S. has been primarily due to a fall in cross-border M&A sales, particularly due to the Verizon-Vodafone deal and stood at $10 billion in 2014 from $60 billion in 2013. It had exceeded $222 billion in 2008, the report said.

"Prospects look gloomy for the global economic situation and the road to investment growth is bumpy... FDI has been at one of the lowest levels since the financial crisis of 2008," said Zhan.

Overall, FDI flows to developed countries dropped by 14 per cent, flows to transition economies halved while developing economies saw FDI reaching a new high with a global share of 56 per cent, the report said.

Barring West Asia, East Asia, South East Asia and South Asia experienced increases in investment inflows. Cross-border M&As increased by 19 per cent and reached their highest levels since 2011 primarily due to restructuring deals and green-fields increased by 3 per cent in 2014.