New Delhi, June 20 According to a recent United Nations Conference on Trade and Development (UNCTAD) study, India’s foreign direct investment (FDI) inflows fell sharply by 43% to $28 billion in 2023. As a result of this significant reduction, India fell from eighth place in 2022 to fifteenth place in worldwide FDI rankings.
Despite the slump, India has remained a major player in greenfield projects and international project financing transactions. In 2023, India placed fourth in greenfield project announcements with 1,058 projects, trailing only the United States, the UAE, and the UK. India ranked second in foreign project transactions, with 163 deals, following only the United States, which had 334.
Global FDI Trends: Their Impact on India
The worldwide FDI landscape also declined, but by a lower 2%. The greatest significant decreases were observed in industrialized nations such as France, Australia, China, and the US. The worldwide minimum tax rate on corporate earnings had an impact on the financial operations of multinational corporations, which were largely to blame for these decreases.
In developing Asia, FDI inflows declined by 8% to $621 billion, with China, the world’s second-largest FDI receiver, seeing a rare dip. This regional trend also affected India and other West and Central Asian countries, highlighting a larger pattern of declining investment.
India’s Drive for Sustainable Finance and Policy Reforms
Despite these limitations, India has been aggressive in implementing regulations that improve investment facilitation and promote sustainable financing. One significant move was permitting international attorneys and legal firms to practice foreign law in the country. In addition, India, along with Bangladesh, China, Singapore, and Thailand, implemented rules to help the banking industry integrate sustainable development concerns, such as sustainable deposits, loans, and green credits.
The UNCTAD study emphasized India’s commitment to sustainable finance, citing the country’s creation of national plans and frameworks. This approach indicates a rising commitment to methodical policymaking for sustainable development.
Good Outlook for FDI Outflows and Future Prospects
On a positive side, India’s FDI outflows increased, moving up to 20th place in 2023 from 23rd the previous year. The outflow climbed from $13 billion to $15 billion, demonstrating an increasing presence of Indian assets overseas.
Looking ahead, the UNCTAD study indicated cautious optimism for 2024, predicting modest increase in FDI due to improved financial circumstances and concentrated efforts on investment facilitation. These efforts have played an important role in national policy as well as international accords.
| RANK (2023) | Country | No of company | FDI inflows 2022 (Billion dollars) | FDI inflows 2023 (Billion dollars) |
| 1 | U.S | 1 | 332 | 331 |
| 2 | China | 2 | 189 | 163 |
| 3 | Singapore | 3 | 141 | 160 |
| 4 | Hong Kong | 4 | 110 | 113 |
| 5 | Brazil | 6 | 73 | 66 |
| 6 | Canada | 9 | 46 | 50 |
| 7 | France | 5 | 76 | 42 |
| 8 | Germany | 17 | 27 | 37 |
| 9 | Mexico | 12 | 36 | 36 |
| 10 | Spain | 10 | 45 | 36 |
| 15 | INDIA | 8 | 49 | 28 |
Conclusion
The substantial drop in India’s FDI inflows in 2023 poses serious problems. However, the country’s good performance in greenfield projects and international project transactions demonstrates its ongoing appeal as an investment destination. By concentrating on long-term financing and policy changes, India may overcome these difficulties and perhaps increase FDI inflows in the years ahead. As global economic conditions change, India’s strategic efforts and commitment to sustainable development will be critical in determining its investment environment.
