UNCTAD’s World Investment Report 2011

There have been several reports in the recent past about the continuing slide in FDI inflows into India. This has been confirmed by UNCTAD’s World Investment Report issued yesterday in which India’s ranking on FDI inflows has slipped to 14th in the world from 8th place last year. The report states the following reasons:

FDI to South Asia declined to $32 billion, reflecting a 31 per cent slide in inflows to India and a 14 per cent drop in Pakistan, the two largest recipients of FDI in the subcontinent. In India, the setback in attracting FDI was partly due to macroeconomic concerns, such as a high current account deficit and inflation, as well as to delays in the approval of large FDI projects; these factors are hindering the Indian Government’s efforts to boost investment, including the planned $1.5 trillion investment in infrastructure between 2007 and 2017.

Analysts also attribute the fall in FDI to other reasons such as extensive powers conferred upon Indian authorities to tax cross-border M&A as witnessed in the Vodafone case. Further, restrictions in significant aspects of the FDI policy, including the unavailability of foreign investment in several sectors, may also have precipitated the fall, although the Government has been constantly relaxing the regime, for example in the latest consolidated FDI Circular. However, the statistics seem to show that more needs to be done.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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