FDI growth up 85% in ’08, highest globally
The Financial Express, May 22, 2009, Page 3
fe Bureau, New Delhi
India achieved a stunning 85.1% increase in foreign direct investment flows in 2008, the highest increase across all countries, even as global flows declined by 14.5%, says the findings of the Unctad study — Assessing the impact of the current financial and economic crisis on global FDI flows.
The study, which updates the organisation’s January assessment, estimates that the FDI investments into India went up from $25.1 billion in 2007 to $ 46.5 billion in 2008 even as global flows declined from $1.9 trillion to $1.7 trillion during the period. It also cautions of a further decrease in FDI flows in 2009 as the full consequences of the crisis on transnational corporations’ (TNCs) investment expenditures continues to unfold
Surprisingly FDI increased by a much slower 10% in China, pushing up the inflows from $83.5 billion in 2007 to $ 92.4 billion in 2008. What is, however, significant is that India’s FDI flows which was just a fraction of that of China just a few years back has now touched half the levels. More importantly that ratio of FDI to GDP in India would now exceed that of China, indicating its larger role in the Indian economy, as the size of the Chinese economy is around three times higher than that of India.
India’s achievement in mobilising FDI is all the more significant because the inflows into the developed countries have declined by 25.3% in 2008. In contrast the overall FDI flows to developing countries increased by 7.2% in 2008. The report warns that though developing and transition economies were quite resilient in 2008, during the downturn in global foreign direct investment (FDI) flows, they will be increasingly affected in 2009 as international investment continues to decline.
However it also noted that some large emerging economies, such as Brazil, China and India, still remain favourable locations for FDI, particularly market-seeking FDI. They maintained relatively high economic growth rates in 2008 compared with advanced economies. As prospects continue to deteriorate more markedly in developed countries, investors are likely to favour the relatively more profitable options available in the developing world.
The fall in global FDI in 2008-2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a reduction in access to financial resources, both internally — due to a decline in corporate profits — and externally - due to lower availability and higher costs of finance. Second, the propensity to invest has been diminished by negative economic prospects, especially in developed countries hit by the most severe recession of the post-war era.
The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and 2009 as compared to the previous year´s historic high. Practically all sectors have been affected by a decrease in cross-border M&As in 2008, with the exception of oil, mining, and agrifood businesses.
The Financial Express, May 22, 2009, Page 3
fe Bureau, New Delhi
India achieved a stunning 85.1% increase in foreign direct investment flows in 2008, the highest increase across all countries, even as global flows declined by 14.5%, says the findings of the Unctad study — Assessing the impact of the current financial and economic crisis on global FDI flows.
The study, which updates the organisation’s January assessment, estimates that the FDI investments into India went up from $25.1 billion in 2007 to $ 46.5 billion in 2008 even as global flows declined from $1.9 trillion to $1.7 trillion during the period. It also cautions of a further decrease in FDI flows in 2009 as the full consequences of the crisis on transnational corporations’ (TNCs) investment expenditures continues to unfold
Surprisingly FDI increased by a much slower 10% in China, pushing up the inflows from $83.5 billion in 2007 to $ 92.4 billion in 2008. What is, however, significant is that India’s FDI flows which was just a fraction of that of China just a few years back has now touched half the levels. More importantly that ratio of FDI to GDP in India would now exceed that of China, indicating its larger role in the Indian economy, as the size of the Chinese economy is around three times higher than that of India.
India’s achievement in mobilising FDI is all the more significant because the inflows into the developed countries have declined by 25.3% in 2008. In contrast the overall FDI flows to developing countries increased by 7.2% in 2008. The report warns that though developing and transition economies were quite resilient in 2008, during the downturn in global foreign direct investment (FDI) flows, they will be increasingly affected in 2009 as international investment continues to decline.
However it also noted that some large emerging economies, such as Brazil, China and India, still remain favourable locations for FDI, particularly market-seeking FDI. They maintained relatively high economic growth rates in 2008 compared with advanced economies. As prospects continue to deteriorate more markedly in developed countries, investors are likely to favour the relatively more profitable options available in the developing world.
The fall in global FDI in 2008-2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a reduction in access to financial resources, both internally — due to a decline in corporate profits — and externally - due to lower availability and higher costs of finance. Second, the propensity to invest has been diminished by negative economic prospects, especially in developed countries hit by the most severe recession of the post-war era.
The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and 2009 as compared to the previous year´s historic high. Practically all sectors have been affected by a decrease in cross-border M&As in 2008, with the exception of oil, mining, and agrifood businesses.
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