When World Plunges in FDI, India Fares better

The Foreign Direct Investment (FDI) the world over saw a dip in 2020 with Covid 19 pandemic hitting hard but the good news is that India fared better with foreign investment increasing by 27 per cent to 64 billion dollars.

In India FDI rose, pushed up by acquisitions in the information and communication technology (ICT) industry, making it the fifth largest recipient in the world, said the UNCTAD’s World Investment Report 2021.

The report published this week said that although the region managed the health crisis mush better, the second Covid 19 wave in the country showed that significant uncertainties remain.

The UNCTAD said that the companies in India are South Asia’s largest investors. They had more than 90 per cent of outflows last year. The organisation also hoped that investments from India would stabilise in 2021. This hope relies on the country’s resumption of Free Trade Agreement talks with the European Union and its strong investment in Africa.

The report said that investment through acquisitions in ICT (software and hardware) and construction bolstered FDI in India. Cross-border M&As surged 83 per cent to 27 billion dollars, the report noted. This happened with major deals involving ICT, health, infrastructure and energy. Large transactions included the acquisition of Jio Platforms by Jaadhu (a subsidiary of Facebook (United States)) for 5.7 billion dollars, the acquisition of Tower Infrastructure Trust by Brookfield (Canada) and GIC (Singapore) for 3.7 billion dollars and the sale of the electrical and automation division of Larsen & Toubro India for 2.1 billion dollars. Unilever India’s merger with GlaxoSmithKline Consumer Healthcare India (a subsidiary of GSK United Kingdom) for 4.6 billion dollars also had helped the FDI keep firm.

With respect to FDI in Asia, the UNCTAD’s World Investment Report 2021 said that the region expected a growth with a 5 to 10 per cent increase year on year in 2021. It also said that Asia was the only region where Foreign Investment was resilient in 2020. The region benefitted from growing markets, an investment climate and extensive regional and global FDI linkages despite the difficulties posed by Covid 19 pandemic.

In the report, the UNCTAD says that India amended its FDI policy on civil aviation, permitting non-resident Indian nationals to own up to 100 per cent of Air India under the automatic route. This helped in FDI flows.

Moreover, the country opened investment in the coal mining industry to non-coal companies, liberalised the digital news media industry and defence sector. Foreign ownership is now allowed up to 26 per cent through the government approval route in the former industry and up to 74 per cent under the automatic route in the latter. India also increased the FDI ceiling in March on insurance companies from 49 per cent to up to 74 per cent.

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