FDI drops in India, rises in China
August 2, 2011

In a startling revelation, FDI inflows into China were four times the FDI inflows into India during 2010. Also, while China rose to fifth rank in global investment outflows, India notched up to 20th position.

According to the World Investment Report 2011,  released by United Nations Conference on Trade and Development (UNCTAD), India slipped 10 positions, attracting FDI worth US$25 billion last year, US$11 billion lower than the inflows of US$36 billion seen in 2009. India’s lower FDI attraction pulled the rest of South Asia down too. FDI to South Asia declined to US$32 billion, reflecting a 31 percent slide in inflows to India and a 14 percent drop in flows to Pakistan. In contrast to this, inflows to Bangladesh increased by nearly 30 percent to $913 million.

This in comparison with India,  China stole second place in FDI inflows securing US$106 billion during 2010, just behind the US which received US$228 billion. Hong Kong ranked third at US$69 billion, while Belgium was the fourth largest FDI inflow destination at US$62 billion.  According to the UNCTAD report, global FDI investment inflows rose 5 percent to US$1.24 trillion in 2010. However, it added that FDI flows at the end of the year were over 15 percent below their pre-crisis average and nearly 37 percent below their peak in 2007.

Furthermore, although Indian companies made a slew of investments abroad – Tata Steel’s acquisition of UK-based Corus group worth US$11.8 billion and Hindalco Industries’s acquisition of U.S. firm Novelis worth US$5.8 billion. Tata Motors acquisition of UK-based Jaguar Cars for US$2.3 billion, Essar Steel Holdings buy over of  Canada’s Algoma Steel for US$1.6 billion and United Spirits acquisition Whyte & Mackay of UK for US$1.17 billion, India rose by one rank to 20th position, while China climbed up the world outward investment rankings to 5th, passing Japan and the United Kingdom. The top four investing nations and regions are now the United States, Germany, France and Hong Kong.

The report showed China’s ODI grew by 17 percent over the year to US$68 billion, but statistics by the Ministry of Commerce said China’s ODI in 2010 surged by 36.3 percent year-on-year to US$59 billion. Much of China’s ODI has gone to the Asia-Pacific region, with the remainder going to Latin America, Africa and the European Union. By 2009, 75.5 percent of China’s accumulative ODI went to Asia and 12.5 percent went to Latin America, according to the Ministry of Commerce.

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