FDI inflows into India decline to $40 billion in 2017 from $44 billion in 2016

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According to the World Investment Report released by the United Nations, Foreign Direct Investment (FDI) inflows into India declined to $40 billion in 2017 from $44 billion in 2016. However, outflows from India, which remain the main source of investment in various South Asian countries, doubled during this period.

FDI

The report noted that the FDI inflows into South Asia declined by 4% to $52 billion due to this sharp decline in inflows into India. According to the report, the overall global foreign direct investment for the year 2017 stood at $1.43 trillion, down 23% from $1.87 trillion in 2016. Outflows from India to other South Asian countries stood at $11 billion in 2017.

According to Mukhisa Kituyi, Secretary-General for the UN Conference on Trade and Development, policymakers across the world are currently facing challenges due to the slowdown in global value chains and downward pressure on FDI. These challenges are even worse in developing countries.

Among the major outflows from India, the report mentioned the investments made by India’s state-owned oil company ONGC in other countries around the world. The company invested in industry-related acquisitions in Russia and Namibia in the recent years. As of now, ONGC produces about 285 thousand barrels of oil and oil-equivalent gas per day through 39 projects in about 18 countries.

Cross-border acquisitions contributed to a large chunk of FDI inflows into India last year. Overall investments through acquisitions increased to $23 billion in 2017 from $8 billion in 2016. Singapore-based oil company Petrol Complex acquired a 49% stake in Essar Oil last year for about $13 billion. Significant investments were also made in Flipkart and Paytm from foreign investors.

The report projects a future growth outlook of 10% for FDIs in India by the end of this year. The reason for this ‘below the average’ FDI growth estimate has been attributed to risks and uncertainties associated with global trade around the world.

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