A report by United Nations Conference on Trade and Development (UNCTAD) on Wednesday said that India, United States and China continue to be the favourite FDI destinations in the world.
However, UNCTAD’s World Investment Report 2017 added that in India’s case, tax-related concerns remain a deterrent for some foreign investors.The report also said that foreign direct investment (FDI) inflows to developing Asia shrank by 15 per cent to USD 443 billion in 2016, the first decline since 2012. This affected three sub- regions, with only South Asia spared.However, UNCTAD’s World Investment Report 2017 said an improved economic outlook in major economies, such as ASEAN, China and India, will likely to boost investors’ confidence, propping up the region’s FDI prospects for 2017.
“The favourite FDI destinations remain the US, China and India,” UNCTAD said, adding “Although new liberalisation efforts continue to improve the investment climate in India, tax-related concerns remain a deterrent for some foreign investors”.
In South Asia, FDI inflows increased by 6 per cent to USD 54 billion. Flows to India were stagnant at USD 44 billion. FDI inflows to developing Asia are expected to increase by 15 per cent in 2017 to USD 515 billion, as an improved economic outlook in major Asian economies is likely to boost investor confidence. In major recipients such as China, India and Indonesia, renewed policy efforts to attract FDI could contribute to an increase of inflows in 2017, it said.
The foreign outflows from South Asia declined by 29 per cent to only USD 6 billion in 2016, as India’s outward FDI dropped by about one third, it added. Cross-border merger and acquisition deals have become increasingly important for foreign multinational enterprises to enter the rapidly-growing Indian market, the report said.
In 2016, there were a number of significant deals, including the USD 13 billion acquisition of Essar Oil by Rosneft (Russian Federation). The report noted that signing of a tax treaty by India and Mauritius in May 2016 “might have” contributed to reduced round-tripping FDI. It further noted that despite a historically high number of announced greenfield projects in 2015, FDI flows to India were largely flat at about USD 44 billion in 2016, up only 1 per cent from 2015.
