FDI flows to India drop 26% in 2021: UNCTAD

Global foreign direct investment flows showed a strong rebound in 2021, up 77% to an estimated $1.65 trn, from $929 bn in 2020, surpassing their pre-Covid level

Foreign Direct Investment (FDI) flows to India dropped 26 per cent in 2021 as compared with the previous year as large mergers and acquisitions deals recorded in 2020 were not repeated, the United Nations Conference on Trade and Development (UNCTAD) data showed.

"FDI flows to India were 26 per cent lower, mainly because large M & A deals recorded in 2020 were not repeated," according to UNCTAD's Investment Trends Monitor published on 19 January.

Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77 per cent to an estimated $1.65 trillion, from $929 billion in 2020, surpassing their pre-COVID-19 level.

"Recovery of investment flows to developing countries is encouraging, but stagnation of new investment in least developed countries in industries important for productive capacities, and key Sustainable Development Goals (SDG) sectors - such as electricity, food or health - is a major cause for concern," UNCTAD Secretary-General Rebeca Grynspan said in a statement.

Developed economies saw the biggest rise by far, with FDI reaching an estimated $777 billion in 2021 - three times the exceptionally low level in 2020, the report shows.

In Europe, more than 80 per cent of the increase in flows was due to large swings in conduit economies. Inflows in the United States more than doubled, with the increase entirely accounted for by a surge in cross-border mergers and acquisitions (M & As).

FDI flows in developing economies increased by 30 per cent to nearly $870 billion, with a growth acceleration in East and South-East Asia (+20 per cent), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and an uptick in West Asia.

Inflows in Africa also rose. Most recipients across the continent saw a moderate rise in FDI; the total for the region more than doubled, inflated by a single intra-firm financial transaction in South Africa in the second half of 2021.

Of the total increase in global FDI flows in 2021 ($718 billion), more than $500 billion, or almost three quarters, was recorded in developed economies. Developing economies, especially least developed countries (LDCs), saw more modest recovery growth.

China saw a record $179 billion of inflows - a 20 per cent increase - driven by strong services FDI, while Brazil saw FDI double to $58 billion from a low level in 2020, but inflows remained just below pre-pandemic levels.

The Association of Southeast Asian Nations (ASEAN) resumed its role as an engine of growth for FDI in Asia and globally, with inflows up 35 per cent and increases across most members.