Reference :

• The United Nations Conference on Trade and Development (UNCTAD) released the World Investment Report 2025, focusing on global Foreign Direct Investment (FDI) trends, challenges, and policy recommendations.

Global FDI Trends:

• FDI declined by 11% in 2024, marking the second consecutive year of decline, reflecting a slowdown in productive capital flows.
• The total FDI inflows stood at $1.5 trillion, with the increase largely attributed to volatile financial flows through Europe, rather than real investments.
• FDI in developed countries, particularly Europe, saw a sharp decline. FDI in developing countries remained stable, but sectors like infrastructure, energy, technology, and job creation experienced stagnation or decline.

India-Specific Highlights:

Declining Role of FDI in India’s Growth:

• India climbed one spot to rank 15th globally in terms of FDI inflows in 2024.
• FDI inflows accounted for only 2.3% of India’s total capital formation in 2024, compared to 8.8% in 2020.
• FDI stock was 14% of India’s GDP in 2024, down from 17.9% in 2020.
• These figures indicate that FDI’s relative contribution to India’s economic growth is consistently declining.

Fall in FDI Inflows:

• India received $27.6 billion in FDI in 2024, which is 1.8% lower than in 2023, and less than half of the inflow seen in 2020.
• Despite the decline in FDI, India’s overall capital formation remained strong due to robust domestic and international investments from other sources.

Strength in Manufacturing and Greenfield Investment:

• • India and the United States saw significant growth in manufacturing projects. In India, semiconductor and basic metals projects played a key role.
• • Capital expenditure in greenfield projects in India rose by over 25% to $110 billion, representing about one-third of Asia’s total capital spending.
• • India was the leading FDI recipient in South Asia, accounting for nearly 80% of the region’s total FDI.

Decline in Cross-Border M&A Activity:

• • Cross-border mergers and acquisitions (M&A) saw a decline across India and developing Asia.
• • A major cause was a 49% drop in deal value in China, with India and UAE also contributing to the decline.
• • For instance, Walt Disney partially sold its Star India operations to Viacom18 in a $3 billion merger, forming a new Indian-owned joint venture.
• • Similarly, several foreign-owned pharmaceutical companies were sold to local firms.

About UNCTAD (United Nations Conference on Trade and Development):

• Established: 1964
• Headquarters: Geneva, Switzerland
• Type: Permanent intergovernmental body of the United Nations
• Parent Body: United Nations General Assembly (UNGA)

Key Publications by UNCTAD:

• World Investment Report
• Trade and Development Report
• Technology and Innovation Report
• Commodities and Development Report