A U.S. one dollar banknote and Indian ten rupee banknotes (Photographer: Dhiraj Singh/Bloomberg)

India Attracted $22 Billion Of FDI Flows In First Half Of 2018: UN Report

India attracted $22 billion of FDI flows in the first half of 2018, according to a UN report, which states that the global foreign direct investments dropped 41 percent in the same period due to tax reforms carried out by the Trump administration.

The UN Conference on Trade and Development in its ‘Investment Trends Monitor’ report said in South Asia, India attracted $22 billion of FDI flows, contributing to the sub-region’s 13 percent rise in FDI in the first half of the year.

The report, however, said with the investments, India just about managed to make it to the top 10 host economies receiving the most FDI during the period.

China was the largest recipient of FDI, attracting an estimated $70 billion in inflows in the first half of the year, followed by the U.K. with $65.5 billion, the U.S. with $46.5 billion, The Netherlands at $44.8 billion, Australia with $36.1 billion, Singapore got $34.7 billion and Brazil received $25.5 billion, it said.

Global foreign direct investments fell 41 percent in the first half of 2018, to an estimated $470 billion from $794 billion in the same period of 2017, mainly due to large repatriations by the U.S. parent companies of accumulated foreign earnings from their affiliates aboard following tax reforms, the report said.

Overall, the global financial picture is “gloomy”, said James Zhan, UNCTAD’s director, division on investment and enterprise.

The decline in global FDI is mainly owing to recent tax reforms implemented by U.S. President Donald Trump’s administration that led to big firms in the U.S. to bring home earnings from abroad, principally from Western European countries.

Other factors have contributed to this year’s “huge difference in repatriation” of overseas profits by the U.S. multinationals, Zhan said.

These include uncertainty about the detail and impact of tax reform and the potential impact of unresolved international trade disputes; such as the tit-for-tat tariffs imposed by the U.S. and China, Zhan said.

In contrast to the overall decline in foreign investments, the report highlights a 42 percent increase in so-called “greenfield” projects to $454 billion.

These initiatives can involve building operations in a foreign country from scratch and they are seen as an indicator of future trends, Zhan said, adding investments in this sector had been at “relatively low levels” in the same period last year.

The report said while the fall in foreign direct investments had happened mainly in richer nations, including Ireland (down $81 billion) and Switzerland (down $77 billion), developing economies saw FDI flows declining “only slightly” in the first half of the year by 4 percent to $310 billion compared with 2017.

This includes developing Asia—down 4 percent—to $220 billion in the same period, driven mostly by a 16 percent decline in investment in East Asia.