According to a UN report, India received USD 64 billion in FDI (Foreign Direct Investment) in 2020, making it the world’s fifth largest recipient of inflows. The COVID-19 second wave in the country weighs heavily on the country’s overall economic activities, but its strong fundamentals provide “optimism” for the medium term.
According to the UN Conference on Trade and Development’s (UNCTAD) World Investment Report 2021, worldwide FDI flows have been significantly impacted by the pandemic, falling by 35% in 2020 to USD 1 trillion from USD 1.5 trillion the previous year.
Lockdowns triggered by COVID-19 delayed current investment projects throughout the world, and the possibility of a recession prompted multinational corporations (MNEs) to reconsider future projects.
According to the study, FDI inflows into India grew by 27% to USD 64 billion in 2020 from USD 51 billion in 2019, boosted by acquisitions in the information and communication technology (ICT) industry, making India the world’s fifth largest FDI recipient.
The pandemic increased worldwide demand for digital infrastructure and services. As a result, the value of greenfield FDI project announcements targeting the ICT industry increased by more than 22% to USD 81 billion.
Among the major project announcements in the ICT industry was Amazon’s USD 2.8 billion investment in ICT infrastructure in India. According to the research, the second wave of the COVID-19 epidemic in India is having a significant impact on the country’s total economic activity.
According to the study, FDI in South Asia increased by 20% to USD 71 billion, owing mostly to robust M&A activity in India. “Amid India’s struggle to contain the COVID-19 outbreak, robust investment through acquisitions in ICT (software and hardware) and construction bolstered FDI,” the report said, adding that cross-border mergers and acquisitions increased by 83% to USD 27 billion, with major deals involving ICT, health, infrastructure, and energy. Large transactions included the USD 5.7 billion acquisition of Jio Platforms by Jaadhu, a Facebook subsidiary, the USD 3.7 billion acquisition of Tower Infrastructure Trust by Canada’s Brookfield Infrastructure and GIC (Singapore), and the USD 2.1 billion sale of Larsen & Toubro India’s electrical and automation division. Another megadeal, Unilever India’s USD 4.6 billion merger with GlaxoSmithKline Consumer Healthcare India, a subsidiary of GSK United Kingdom), also helped, it added.
South Asian FDI outflows decreased 12% to USD 12 billion, owing to a reduction in investment from India. In terms of FDI outflows, India placed 18th out of the world’s top 20 countries, with 12 billion dollars recorded from the nation in 2020, compared to 13 billion dollars in 2019.
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