India remains South Asia’s top FDI destination even as inflows dip 2%: UNCTAD report

Asia remains the world’s leading destination for inward foreign direct investment (FDI) with developing economies of the region attracting $605 billion in FDI in 2024, pointed out the latest edition of UN Trade and Development (UNCTAD)’s World Investment Report. The FDI into the region accounted for 40% of the world’s total FDI and 70% of inflows to developing economies. India, despite a slight fall, still receives the most foreign investment in South Asia, a sub-region which includes countries like Pakistan and Sri Lanka.

According to the report, FDI in China fell for a second year, by 29%. FDI flows increased 10% in ASEAN region to $225 billion, which marks a new record. It fell by 2% in India, despite a significant increase in announced green field projects, the report pointed out. FDI flows to West Asia remained at a high level, mainly because of strong inflows in the United Arab Emirates.

The green field project announcements in supply chain–intensive industries, including electronics, automotive, machinery and textiles, held steady in 2024. The semiconductor industry, affected by shortages earlier this decade and now by strong policy pressures for production relocation, again saw a few megaproject announcements. Of the 10 largest projects announced, 4 were in semiconductors – 3 of them in the United States and 1 in India, for a total capital outlay of $70 billion, the report said.

India led with a 28% increase in capital expenditures for announced projects reaching $110 billion. Azerbaijan, Bahrain, Qatar and Türkiye also showed strong growth.

In terms of cross-border mergers and acquisitions sales in developing Asia, the year 2024 saw a 57% drop to $25 billion, driven largely by a 49% decline in China and divestments in India – from which Disney partially exited – and the United Arab Emirates.

According to UNCTAD, developing countries attracted a total of $531 billion in green field projects during 2020–2024. The investment is highly concentrated, with 10 economies – India, Malaysia, Indonesia, Singapore, Vietnam, Mexico, China, Brazil, Saudi Arabia and Thailand, in that order – accounting for nearly 80% of the total. The United States remains the leading source of green field project investment in the digital economy in developing countries, providing 36 per cent of total investment in that period, the report said.

Overall, the report indicates that foreign investment remains volatile, fragmented and highly concentrated, with many countries - especially in the Global South - at risk of being left behind.