The United Nations Conference on Trade and Development (UNCTAD) on Thursday said India would emerge as the third largest recipient of foreign direct investment (FDI) for the three-year period ending 2012.
“If the situation continues to improve, India is likely to be among the most promising investor-home countries in 2010-12 as well as the third highest economy for FDI in 2010-12,” UNCTAD says in its World Investment Report 2010.
India remained in the list of top ten countries in 2009 to have the highest FDIs in the world. In 2009, the country received FDI worth $34.6 billion, while the outward FDI was $14.9 billion, the report, released on Thursday, says.
The UNCTAD report says the global FDI flows began to bottom out in the later half of 2009 and has shown a modest recovery in the first half of 2010 with South Asia being the first to bounce back from the recent downturn.
“FDI flows worldwide are expected to recover slightly this year... FDI flows to South Asia have experienced their largest decline since 2001, but they were the first to bottom out from the current downturn,” the report says.
Increasing intra-regional FDI has become an effective vehicle for industrial upgrading in the South Asia region, providing opportunities to countries at different stages of development, UNCTAD said and noted that “inflows from developed countries contracted the most, while intraregional FDI gained ground.”
Further, the report says the outward flow of FDI from the region, which had declined, is likely to recover riding on cross border mergers and acquisitions (M&As). “FDI outflows are expected to rebound in 2010, sustained by M&A opportunities associated with Indian and Chinese firms' persistent pursuit of natural resources and markets,” it says. Besides, UNCTAD said recent forecasts suggest that the global economy has exited recession and returned to growth. “The world economy is expected to grow by 3 per cent in 2010,” according to the report.
It also forecasts that central banks are expected to maintain low interest rates till the end of 2010 and commodity price increases are likely to remain modest.
The report also focuses on climate change and in particular the role of transnational corporations in supporting the transition of developing countries to a low-carbon economy. Low-carbon FDI is significant and its potential huge, says UNCTAD. In three key low-carbon business areas alone, FDI flows are estimated to have been $90 billion in 2009. “A quarter of the greenfield investments in alternative or renewable power generation were in the developing economies including India and Pakistan,” the report says.
