Global FDI flows to India down 31 pc in 2010: UNCTAD

Geneva, Jan 17 (PTI) Global foreign direct investment(FDI) flows into India dropped by over 31 per cent in 2010despite robust economic growth, according to the UnitedNations Conference on Trade and Development (UNCTAD).

However, China and other countries in South-East Asiacontinued to witness massive FDI flows, UNCTAD said in itsGlobal Investment Trends Monitor report issued today.

UNCTAD says global FDI flows remained almost stagnant in2010, increasing by 1 per cent to USD 1.122 trillion.

UNCTAD forecasts that global FDI flows are likely toremain between USD 1.3 trillion and USD 1.5 trillion in 2011.

FDI inflows into India amounted to just USD 23.7 billionlast year, as against USD 34.6 billion in 2009. "In India, wehave seen a sharp decline and we can''t explain why this hashappened," said the UNCTAD''s Investment and EnterpriseDivision Chief, James X Zhan, who prepared the investmentreport.

"We don''t have the analysis," he told PTI, maintainingthat the decline in global FDI flows into India was based onthe figures compiled by the central bank.

However, in sharp contrast, China received FDI worth USD274.6 billion last year, compared to USD 233 billion in 2009.

There is a "structural change," Zhan said in regard to thehigher FDI flows to China, which is receiving huge investmentson services and research and development activities.

Many Western companies have shifted their researchfacilities to China and there is rapid development in thehinterlands of the Communist country as well.

The sharp increase in global FDI flows to East andSouth-East Asian countries and Latin American nations in 2010marked the first time that developing countries outpaced richnations in attracting foreign investments.

China, Hong Kong and other South-East Asian countrieslike Indonesia, Malaysia, Singapore and Thailand were the mainbeneficiaries of the heightened FDI flows in the form ofmergers and acquisitions (M&As) and greenfield investment.

Part of the reason for the stagnant investment flows theworld-over was largely due to the poor performance of thedeveloped economies, especially European countries, which werethe worst-hit by the global financial turmoil.

The United States, which was the epicentre of the globaleconomic meltdown in 2008, is gradually recovering from thecrisis, with FDI flows increasing by 40% last year to USD186.1 billion from USD 129.9 billion in 2009.

"The quarterly fluctuations during 2010 indicate that theworldwide FDI recovery is still hesitant," said the report.

Several risk factors such as the slow global economicrecovery, investment protectionism, rising sovereign debt andcontinued volatility in the currency markets are likely toslow down the pace of foreign direct investment across theglobe in 2011, it said.