WORLD INVESTMENT REPORT 2024 AND INDIA

 

The UN Conference on Trade and Development (UNCTAD) World Investment report 2024 observed that  in a world grappling with global and regional crises the delicate balance of Foreign Direct Investment (FDI) hangs precariously. The Report serves as a stark reminder that Investment is the lifeblood of sustainable development. In this context 2024  Report specifically focus on the importance of investment facilitation and the digital governance for  future  growth of investment in general and private sector investment in particular. Theoretically FDI refers to investment made by a company or individual abroad to protect its business interest by controlling the ownership and operation of the firm or venture. FDI can take different forms ranging from  acquiring shares, establishing subsidiaries or joint ventures, providing loans and technology transfers.etc.  The major components of FDI are equity capital , reinvested earnings and  intra company loans. It is also expected to bring the fuel that leads  to achieve the target of sustainable development goals by 2030.However data showed that FDI in 2023 declined marginally by 2% to US $ 1.3 trillion. Decline in global  FDI was necessitated by factors like uncertain state of economy, economic fracturing trends in both developed and developing countries ,cross border mergers and acquisitions and depressed international project finance. Global FDI flows were more than 10% lower  in 2023.In 2023 FDI flows to developing countries fell by 7%to $867 billion primarily due to a 8% decline in developing Asia, 3% fall in Africa, 1% in Latin America, America and Carribbean. However it is observed that the overall stagnation in FDI growth was largely due to sluggish growth in manufacturing sector. However growth achieved  more in services-centric and asset light investment during this period needs to be acknowledged. 

As per WIR 2024 Inward FDI stock for USA in the year 2000 was US$ 2783235 million which increased to$3422293 million in  2010,$10383947 million in 2022 and $12817063in 2023 whereas China's FDI inflows recorded were 193348 million$ in 2000,$ 586882 million in2010,$ 3496380 in 2022 and $ 3659633 million  in 2023.As far as India is concerned we recorded FDI inflows of $ 16339 million in 2000 $205580  million in2010,$  510703 million in 2022 and $5536930 million in 2023 . On the other hand India's FDI outflows which stood at$1733 million in 2000 increased to$ $96901 in 2010,further to  $ 222628 million in2022 and$23596 million in2023, as against Chinese outward FDI flows of $27768 million in 2000 $317211 million in 2010,$ 2754810 million in 2022 and $ 2939100 in 2023. USA recorded FDI outflows of $ $ 2694014 million in 2000, $48079587 million in 2010,$7982833  million in 2022 and $ 9433926million in 2023. It has  been observed that India's share in global FDI fell to 2.1% in 2023 from 6.5% recorded in 2000.Similarly her global ranking slipped to 16 th position in 2023.from 8th in 20222.Our FDI flows as a percentage of GDP dwindled continously  for the last  three years from 3.06% in Fy 2020-21 to 1.9%  in 2023-24.Ind-Ra research study also indicated that FDI as a percentage of India's Gross Fixed Capital Formation decreased from 11.22% in in 2020-21 to 6.45% in 2023-24. Foreign funds inflows remained concentrated in a few states located in Southern and  Northern parts of thecountry.Out of the total FDI flows to India during the period October 2019 to March 2024 about half (49.5%) flowed exclusively to two states namely Maharashtra  and Gujarat.  Four  Southern states namely-Karnataka  Tamil Nadu, Andhra Pradesh and Telengana attracted 30.3% of total inflows during the same period.Quite surprisingly Eastern India despite being rich in mineral wealth fails to attract  adequate FDI investments except Jharkand (11%) and west Bengal(0.7 %). Moreover the FDI inflows in India are sectorally skewed with service sector dominating by whopping 40.9  % during the period financial year 2014-2015 to 2023-2024.FDI has mainly flowed into sectors like trading, telecommunications, banking, insurance, Information technology, Business outsourcing,hotels and tourism, partly through Global  capability  centers (GCC).On the contrary manufacturing sector accounted for only 25% of the total FDI inflows during the period 2014-15 to 2023-24 despite incentives like PLI scheme etc

Digital business and investment facilitation tools are laid down as stepping stones to broader  digital  government. Digital business and investment facilitation are expected to significantly support inclusive and sustainable development. Reports indicated that Investment facilitation plays an increasingly vibrant role in both national and international Investment scenario.Studies also indicated that  Investment facilitation measures recorded high level of investment growth of 39% globally in 2023 comprising of 45% in developed economies and 38% in developing economies. Investment facilitation measures are mainly divided into 3 categories 1.Transparency aimed at improving the clarity and accessibility of laws and procedures pertaining to investment 2.Facilitation measures and 3.Facilitation Services. Transparency  measures also included the introduction of information portals for foreign investors .Streamlining measures encompasses initiatives designed to enhance the procedural efficiency of investment measures like single window operation, for instance as in Egypt, information portals for foreign investors in countries like Jordan and Mexico etc.and existing large number  of national and international Investment policies. 

The foregoing brief discussion on World Investment Report 2024 broadly indicate that the prospects for more foreign direct investment in future is relatively bleak in the short period,  particularly under the prevailing conditions of geopolitical and global uncertainties. The conditions adversely affecting are  both at  global demand level and possibility for occurrence of global supply chain disruptions. Measures suggested by the Report for developing Digital business and investment facilitation and digital Government are positive for enhancing procedural efficiency, transparency and facilitation services. But in countries like India where large stock of  unemployed exist and wherein  the ease of doing  FDI facilitation may accelerate private/ corporate sector investments. Accordingly it is obvious that  GDP is bound to grow but without generating any significant employment opportunities to the unemployed.