Foreign direct investment (FDI) inflows to India declined by 29 per cent to $26 billion in 2012 due to slow economic growth and high inflation, the United Nations Conference on Trade and Development (UNCTAD) has said.
“The Indian economy experienced its slowest growth in a decade in 2012, and also struggled with risks related to high inflation.
“As a result, investor confidence was affected, and FDI inflows into India declined significantly,” the UN agency’s The World Investment Report 2013’ said.
It, however, added that a number of other factors would influence FDI prospects in the country positively.
“Inflows to services are likely to grow, thanks to ongoing efforts to further open economic sectors such as retailing. Flows to manufacturing are expected to increase as well, as a number of major investing countries, including Japan and the Republic of Korea are establishing country or industry specific industrial zones in India,” it said.
Stating that the global FDI inflows fell by 18 per cent to $1.35 trillion in 2012, the report, said recovery to more vigorous investment levels would take longer than expected mainly because of global economic fragility and policy uncertainty.
As per UNCTAD forecast, FDI in 2013 will remain close to the level of 2012, with an upper range of $1.45 trillion.
The report finds that for the first time developing economies absorbed more FDI than developing countries, accounting for 52 per cent of global FDI flows.