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FDI into India may go into freefall in 2020; here’s what to hit foreign investment inflows

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Foreign direct investment (FDI) inflows into India may fall steeply in 2020 even as the Narendra Modi government has steps up efforts to attract more foreign investments to give a fillip to business opportunities and employment in the country. The United Nations Conference on Trade and Development (UNCTAD) has warned that the impact of the coronavirus pandemic, lockdown measures, supply chain disruptions, and economic slowdown may hamper India’s ability to attract foreign investments in the current year. The steep fall in India’s foreign investment inflows may occur despite the country seeing FDI inflows of $51 billion in 2019, which was a rise of 20 per cent on-year.

Among the nations receiving maximum FDI inflows, India improved its position from 12th in 2018 to 9th in 2019, according to the latest World Investment Report 2020 by UNCTAD. However, between January and March 2020, the number of greenfield investment announcements fell by 4 per cent and M&As shrank by 58 per cent, the report added.

Earlier this month, Moody’s downgraded India’s sovereign rating to Baa3 and also threatened the country to further downgrade ratings to junk status if the economic condition doesn’t improve. Downgraded ratings may make it difficult for India to attract foreign investments, hence the IMD world competitiveness report has suggested the Modi government to fix short-term problems and improve the credibility of the government itself.

On the brighter side, UNCTAD said India’s economy could prove the most resilient in the South Asia region as FDI inflows into India have been on a long-term growth trend. Also, the large Indian market and the growth in the Indian economy despite the global economy facing a recession may keep up the investors’ spirit.

Meanwhile, out of the overall FDI inflows into India in FY20, the serives sector received the maximum FDI inflows of $7.8 billion, which was a rise of 17 per cent on-year. Computer software and hardware sector received the second-highest investment of $7.6 billion, rising 10 per cent on-year. Trading, telecommunication, hotels & tourism, and the automobile industry attracted the most FDIs after the services sector and computer hardware & software sector.

Source: The Financial Express

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