India is world's second-most sought destination for FDI

India will be the second-most popular destination for foreign direct investment in the globe over the next two years, says the World Investment Prospect Surveys 2010 –2012, published by the United Nations Conference on Trade and Development (Unctad).

China remains the “top investment destination” for FDI, followed by India, Brazil, the US and the Russian Federation. The report stated it was the first time the four BRIC countries all ranked in the top five for FDI inflows.

Predictably, developing Asia is seen as the most-sought place for FDI (with six countries in the top 15). There is still high interest in investing in North America and the EU-15.

The survey, aimed at the largest global non-financial transnational companies (TNCs), national investment promotion agencies and location experts, explores coming trends in global FDI over the next three years in the wake of the financial crisis.

Post 2008, the global flow of FDI contracted sharply, with TNC’s contracting their investments as a result of floundering profits and diminishing market opportunities.

Until as recently as mid-2010, FDI flows had not climbed back to the pre-crisis levels. Yet, the survey finds attitudes towards the business and investment environment improving, with only 36 per cent of respondents expressing pessimism, compared to 47 per cent in 2009.

The survey says a mere 13 per cent were actually optimistic about the prospects of the global business environment in 2010. Yet, this gloom seems to be short-term, with 62 per cent of respondents saying they thought things would look up in 2012. In fact, 58 per cent of TNCs are planning to increase their international investment expenditures in the next three years. This is welcome news, given that many developing economies depend on FDI inflows to ensure growth in their domestic markets.

Data released by other international organisations reflect the improved condition of global FDI after 2008. The International Monetary Fund reported that net inflows in emerging and developing economies were up to $294.1 billion in 2010, compared to $274.8 billion in 2009. The Economist Intelligence Unit predicts that while global flows will not match 2007 numbers ($2 trillion) until 2014, they will grow to $1.3 trillion in 2010. Unctad predicts a further increase to between $1.6 and $2 trillion in 2012.

Interestingly, developing economies have moved up the ranks in their capacity of serious investors. Half the 20 most promising investor countries were economies in transition – with China ranking second and India ranking sixth globally.