Foreign direct investment (FDI) inflows to South Asia rose to US $41 billion in 2014, primarily owing to good performance by India, said the UNCTAD's World Investment Report 2015.
FDI inflows in India rose 22% to US $34 billion in 2014, and the upward trend is likely to continue against the backdrop of a push to manufacturing as part of the 'Make In India' initiative, a UN report said today.
Foreign direct investment (FDI) inflows to South Asia rose to US $41 billion in 2014, primarily owing to good performance by India, said the UNCTAD's World Investment Report 2015. "FDI inflows to India are likely to maintain an upward trend in 2015 as economic recovery gains ground... In terms of the sectoral composition of FDI inflows, manufacturing is likely to gain strength, as policy efforts to revitalise the industrial sector are sustained, including, for example, the 'Make in India' initiative launched in mid-2014," it said.
The increase in the fund flows to India comes at a time when the global FDI fell 16% to US $1.23 trillion in 2014. Releasing the report here, Policy Analyst and UNCTAD Consultant Premila Nazareth Satyanand said, "Once again, we (India) are in top 10 countries. In 2008, we went out of top 10... We are doing better than others. India is in higher bracket this year."
Satyanand added: "India ranked 6th among the most promising investor economies. It ranked 3rd among top 10 prospective home economies. We are very much in people's mind." However, she said, "when we look at FDI outflow, India is not among the top 10 countries". Satyanand noted that detailing of FDI statistics is very rudimentary in India and called for its state-wise reporting.
The report said the drop can be explained by the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks. New investments were also offset by some large divestments.
However, among the top 10 FDI recipients in the world, half are developing economies -- Brazil, China, Hong Kong (China), India and Singapore. UNCTAD further said that in the manufacturing sector in South Asia, FDI success stories have come up, with India's automotive industry showing how large-scale inflows can reshape the trajectory of industrial progress in low-income countries.
A vital cog of the Indian economy, the automotive industry has been identified as one of the key industries where India has the potential of becoming a world leader. According to government data, accumulated FDI inflows to the auto industry between April 2000 and November 2014 stood at US $11.4 billion.
The country accounted for the majority of greenfield investment projects announced by global automakers and first-tier parts suppliers in South Asia during 2013–14, including 12 projects of above US$100 million.
The report further said FDI inflows to Pakistan increased 31% to US $1.7 billion driven by rising Chinese FDI flows into services.
"Furthermore, the country will benefit significantly from the China-Pakistan Industrial Corridor and associated Chinese investment in infrastructure and manufacturing in the overall context of implementing the 'One Belt, One Road' strategy," it added. According to agreements signed between the two governments in April 2015, Chinese companies will invest about US$45.6 billion in Pakistan over the next few years - US$33.8 billion in electricity and US$11.8 billion in transport infrastructure, the report said.
In Sri Lanka, FDI flows from China also rose (China has become the largest source of FDI to the country in recent years). "Moreover, if the implementation of the China-led 21st Century Maritime Silk Route Economic Belt gains ground, an increasing amount of Chinese investment will flow to Sri Lanka, particularly in large infrastructure projects," it said.
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