India Among Top 10 FDI Recipients, Attracts $49 Billion Inflows In 2019: UN Report
India was among the top 10 recipients of Foreign Direct Investment in 2019, attracting $49 billion in inflows, a 16 percent increase from the previous year, driving the FDI growth in South Asia, according to a United Nations report released on Monday.
The Global Investment Trend Monitor report compiled by United Nations Conference on Trade and Development states that the global foreign direct investment remained flat in 2019 at $1.39 trillion, a 1 percent decline from a revised $1.41 trillion in 2018.
This is against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions, it said.
Developing economies continue to absorb more than half of global FDI flows. South Asia recorded a 10 percent increase in FDI to $60 billion and "this growth was driven by India, with a 16 percent increase in inflows to an estimated $49 billion. The majority went into services industries, including information technology," the report said.
India attracted an estimated $49 billion of FDI in 2019, a 16 percent increase from the $42 billion recorded in 2018, it said.
The FDI flows to developed countries remained at a historically low level, decreasing by a further 6 percent to an estimated $643 billion.
The FDI to the European Union fell by 15 percent to $305 billion, while there was zero-growth of flows to the U.S., which received $251 billion FDI in 2019, as compared to $254 billion in 2018, the report said.
Despite this, the U.S. remained the largest recipient of FDI, followed by China with flows of $140 billion and Singapore with $110 billion.
China also saw zero-growth in FDI inflows. Its FDI inflows in 2018 were $139 billion and stood at $140 billion in 2019. The FDI in the U.K. was down 6 percent as Brexit unfolded.
The report added that cross-border mergers and acquisitions decreased by 40 percent in 2019 to $490 billion the lowest level since 2014.
Slowed down by sluggish Eurozone growth and Brexit, European M&A sales halved to $190 billion. Deals targeting the U.S. companies remained significant accounting for 31 percent of total M&As.
The fall in global cross-border M&As sales was deepest in the services sector (a 56 percent decline to $207 billion), followed by manufacturing (a 19 percent decline to $249 billion) and primary sector (14 percent decline to $34 billion), the report said.
In particular, sales of assets related to financial and insurance activities and chemicals fell sharply. The decline in M&A values was driven also by a lower number of megadeals. In 2019, there were 30 megadeals above $5 billion compared to 39 in 2018, it said.
Looking ahead, UNCTAD expects the FDI flows to rise moderately in 2020, as current projections show the global economy to improve somewhat from its weakest performance since the global financial crisis in 2009.
Corporate profits are expected to remain high and signs of waning trade tensions emerge. However, the decrease of announced greenfield projects by 22 percent an indicator of future trends, high geopolitical risks and concerns about a further shift towards protectionist policies temper expectations.
The report said that gross domestic product growth, gross fixed capital formation and trade are projected to rise, both at the global level and, especially, in several large emerging markets.
Such an improvement in macroeconomic conditions could prompt multinational enterprises to resume investments in productive assets, given also their easy access to cheap money, the fact that corporate profits are expected to remain solid in 2020, and hopes for waning trade tensions between the U.S. and China, it said.
However, significant risks persist, including high debt accumulation among emerging and developing economies, geopolitical risks and concerns about a further shift towards protectionist policies, it added.