In a statistic, that will bring cheer to the Modi government which is trying to kick start the investment cycle in the country, India after many years broke in to the top 10 FDI destinations of the world in 2014, according to UNCTAD in its World Investment Report 2015.
The last time India came in the top 10 list was in 2008. India ranked 9th in 2014, with FDI inflows of $34 billion, a 22 per cent rise. India was at the 15th position in the previous two years.
Developing countries on the rise:
However, India is the only BRIC (Brazil, Russia, India and China) country that hasn’t yet crossed the $50 billion-a-year FDI mark. UNCTAD said that until an MP is afraid to appear to encourage FDI or business in India, the high favourability ratings will not convert into high inflows and they will remain low.
China became the top recipient of FDI in 2014 with $129 billion inflows, followed by Hong Kong (China) that received $103 billion and the U.S. with $92 billion. While Russia was dropped out of top 10 as foreign investors exited its oil sector and other projects after Western countries slapped economic sanctions on it.
Another interesting trend is that among the top 10 FDI recipients in the world, half are developing economies – Brazil, China, Hong Kong (China), India and Singapore.
Make in India: Chins & India
Also, as a harbinger of changing times, the data suggests that for the first time FDI inflows in to China’s services sector were greater than into its manufacturing sector. This is significant to India as India wants to replace the manufacturing hub of the world.
Even as FDI inflows into the country increased, India dropped out of the top 20 countries in the outward FDI flows.
However, a worrying news is the surge in FDI investment by China in India’s neighbouring countries under its “One Belt, One Road” strategy. FDI inflows to Pakistan increased by 31 per cent to $1.7 billion as a result of rising Chinese FDI flows in services. Also under the China-Pakistan Industrial Corridor, Chinese companies will invest about $45.6 billion in Pakistan over the next few years — $33.8 billion in electricity and $11.8 billion in transport infrastructure.
Similarly, China has become the largest source of FDI in recent years, for Sri Lanka. A Chinese company has invested $500 million in Colombo International Container Terminals, the largest foreign investment project in Sri Lanka. Also, the China-Sri Lanka FTA will be signed in June 2015. And if the 21st Century Maritime Silk Route Economic Belt is implemented, Sri Lanka will see a surge in FDI inflows in to its infrastructure.
The report also found that developing countries lost $100 billion in tax revenues owing to investors routing FDI through tax havens such as Mauritius, and has made a strong case for multilateral action to address the issue.