India slipped six notches to the 14th spot in global rankings of countries that attracted highest foreign direct investment, says a United Nations report.
The FDI inflow dropped from $36billion to $25billion over the period, according to the UNCTAD’s World Investment Report, 2011. Analysts blamed it on negative sentiments created by the tax mess that Vodafone got into after coming to India in 2007.
India attracted less than one-fourth the FDI of China in 2010, said the report released by the United Nations Conference on Trade and Development (UNCTAD) on Tuesday.
China attracted higher FDI in 2010 compared to $95 billion a year ago. It also retained the second position after the United States, which attracted $228 billion in 2010 compared to $153 dollars in 2009.
“Investors are wary post Vodafone and the overturn of land-related deals is also instilling fear among investors,” said policy analyst Premila Nazareth.
Vodafone got into dispute with Indian authorities over capital gains tax after the London-based company acquired stake in Hutchison.
Despite slowing of labour-intensive manufacturing, China drew high FDI in high-technology industries and services. Half of the top 20 host economies for FDI were developing and transition economies.
Fall in FDI outflow notwithstanding, Japan’s net flows turned negative in 2010 to $1.25 bn. China pipped Japan in terms of FDI outflows. China improved its ranking from sixth to fifth, while Japan fell from fourth to seventh.
FDI outflows saw India make it to the top 20 investors list in 2010, compared to 21st position in 2009. The outflow increased from $15bn in 2009 to $16bn in 2010. The report, however, suggested that India should focus on non-equity mode (NEM) of foreign investment as well.
In terms of outflow through this route, India’s Piramal Healthcare figures among the top five players in contract manufacturing of services outsourcing in 2009, and Jubilant Life sciences appears in the top 10 list. Among IT-BPO, Tata Consultancy Services is at the 11th position and Wipro at 13th.
Global FDI inflows rose five per cent to $1.24 trillion in 2010, but were still 37 per cent below the 2007 peak and 15 per cent below the pre-crisis average.
UNCTAD, however, predicted that the recovery of FDI flows will continue in 2011 reaching a total of $1.4-$1.6 trillion, making a comeback to the pre-crisis average due to investment opportunities in emerging economies.
The sovereign debt crisis, fiscal and financial imbalances in some developed countries and rising inflation and signs of overheating in major emerging economies could derail the FDI recovery, it warned.