FDI inflows into India to slip as TNCs rework investment plans

Foreign direct investment (FDI) in India may erode sharply from the record $42 billion in 2008 with trans-national corporations (TNCs) going slow on expansion plans following the global financial meltdown, an UNCTAD report said.    

"...As some large TNCs are reconsidering their global expansion plans in response to the global financial crisis and economic recession, their investment projects in India may be affected," United Nations Conference on Trade and Development (UNCTAD) said in its World Investment Report 2009.    

UNCTAD said that the FDI surge in 2008 was owing to TNCs in many manufacturing and service industries expediting their market entry and expansion in India.However, the FDI flows in India has dipped to $6,256 million in the first quarter of 2009 from $14,197 million during the same period last year.    

According to UNCTAD's World Investment Report 2009, India is among the world's 15 largest FDI recipient in 2008.    

UNCTAD also said global FDI flows will shrink by 30 per cent in 2009 and recover only marginally during the next year.Globally, "FDI inflows will fall from about $1.7 trillion in 2008 to below $1.2 trillion in 2009.

Recovery is expected to be slow in 2010, reaching no more than $1.4 trillion, but gathering momentum in 2011 to approach $1.8 trillion," UNCTAD said.    

The report said that a major contributing factor to the decline in global FDI flows has been growing divestments by transnationals worldwide.    

However, the strong performance of China and India, even during the current crisis, has reshaped the landscape of FDI flows to the region as well as to the world at large, the report added.    

But according to UNCTAD's World Investment Prospects Survey 2009-11, India has slipped by one notch to third position as the most preferred foreign direct investment (FDI) country.    

"These two largest emerging economies (China and India) ranked numbers one and three, respectively, as the most preferred FDI locations," the survey had said.