Coronavirus may eat into global FDI flow, predicts UNCTAD - Pragnya IAS Academy - News Analysis.

Coronavirus may eat into global FDI flow, predicts UNCTAD.

FDI flows across the world will witness a sharp decline of 5-15 per cent.

Foreign direct investment (FDI) flows across the world will witness a sharp decline of five to 15 per cent because of the global novel coronavirus (COVID-19) outbreak, according to a report. The United Nations Conference on Trade and Development (UNCTAD) — in its assessment published on March 4, 2020 — said the decline would be restricted to five per cent if the outbreak was controlled.

However, the fallout would be much more if the outbreak was not reigned in, according to the report.
The severity of the outbreak in a country would determine the impact on its FDI flows, the report said. FDI inflows would be impacted because of supply chain disruptions.
More than 109 nations were affected by the outbreak as of March 9, 2020, according to the Johns Hopkins Coronavirus Resource Center. South Korea, Italy and Iran were the worst hit after China.
The number of infected went up to 40 in India, after one more case was reported in Kerala on March 9.
The impact on business because of the COVID-19 outbreak would also be felt by more than two-thirds of the top 100 multinational enterprises (MNEs), who issued statements to this effect, according to the report.
The average earning revisions for MNEs would be minus 16 per cent in the developed world and minus six per cent in the developing world, according to the report.
Asia would bear the brunt of this because global value chains centred around China, South Korea and Japan would cause the biggest disruptions, the report said.
Energy, technology, telecommunication services sectors will also be affected by the outbreak, according to the report.
The impact on ongoing greenfield projects (those starting from scratch) would be limited, according to the report. However, announcements of new projects would be delayed.
Mergers and acquisitions will also witness slowdowns, according to the report.
“Market-seeking investment and FDI projects in extractive industries could be delayed worldwide as a result of negative demand shocks,” the report said, giving the example of carmaker Toyota, which reported a 70 per cent drop in sales in China.
The impact was already visible in major markets beyond China, especially in industries such as tourism and retail, the report said.
Major disruptions were earlier reported by the International Monetary Fund (IMF) and other consultancy groups.
China’s economic growth would be affected in the first three months of 2020 even if disruptions from the outbreak end, Kristalina Georgieva, the managing director of IMF, wrote in her blog on February 2020.
Global gross domestic product growth would decline by 2.3 per cent from 2.5 per cent, according to an estimate by consultancy group Oxford Economics in February 2020.


The above Article can also be read using the link below:

Coronavirus may eat into global FDI flow, predicts UNCTAD.

India to be among top 20 countries for FDI inflows this year: UN body - Pragnya IAS Academy - News Analysis.

India to be among top 20 countries for FDI inflows this year: UN body.

• In 2018, foreign investment by India was flat at $11 billion
• IPAs rank the US and China as the most likely sources of foreign investment to their countries
Once a small player, India may break into the league of top 20 countries for outbound foreign direct investment (FDI) as early as the end 2019, according to a survey of investment promotion agencies (IPAs) by United Nations Conference on Trade and Investment (UNCTAD). In 2018, foreign investment by India was flat at $11 billion.

"India and the United Arab Emirates, not traditionally in the top 20 outward investor countries, were also considered among the top 10 most important sources of FDI for the 2019 to 2021 period," UNCTAD said in its latest World Investment Report.
India’s FDI outflows more than doubled in 2017 to $11.3 billion, mostly led by public sector enterprise Oil and Natural Gas Corp. Ltd (ONGC) which bought a 15% stake in an offshore field in Namibia from Tullow Oil - founded in Ireland and headquartered in the United Kingdom.
IPAs rank the US and China – in a joint first place – as the most likely sources of foreign investment to their countries. Three large European economies – the UK, Germany and France – were considered the next most important sources of FDI.
After declining 9% in 2017, FDI inflows into India rose 6% in 2018 to $42 billion, according to the report. However, India’s rank as a source country for FDI fell one notch to 10th position, as Spain raced ahead of India.
Notable megadeals in 2018 included the acquisition of Flipkart, India’s biggest e-commerce platform, by US-headquartered Walmart. In addition, telecommunication deals involving Vodafone (United Kingdom) and American Tower (United States) amounted to $2 billion.
Announced greenfield investment into India doubled to $56 billion in 2018, with projects in a number of manufacturing industries, including automotive. (Source: Livemint)


The above Article can also be read using the link below:

India to be among top 20 countries for FDI inflows this year: UN body

New e-commerce rules regressive, will hit FDI in India - Pragnya IAS Academy - News Analysis.

New e-commerce rules regressive, will hit FDI in India.

Flipkart and US-based Amazon -- the two largest players in the burgeoning Indian e-commerce sector -- are expected to be hit the hardest once the new norms come into effect from February 2019.

Expressing concern over India tightening restrictions on foreign e-commerce companies operating in the country, leading American industry advocacy groups have said that such a move would have a long-term negative impact on the foreign direct investment as well as consumers.

Earlier this week, the government announced changes to the foreign direct investment policy for the ecommerce sector, which would end discounts and cashback offers that online platforms with foreign investment were offering.
Flipkart and US-based Amazon -- the two largest players in the burgeoning Indian e-commerce sector -- are expected to be hit the hardest once the new norms come into effect from February 2019.
"The new e-commerce restrictions announced by the government of India on December 26 are a cause for concern. While we are still trying to understand the full implications, we fear that these restrictions will have a far-reaching negative impact both on US investments and on Indian consumers, said Nisha Desai Biswal, president of US India Chambers of Commerce (USAIC), a wing of the US Chambers of Commerce.
The former Assistant Secretary of State for South and Central Asia said the US-India Business Council (USIBC) said that a February 1 deadline is too rushed and does not allow sufficient time for companies to analyse the policy and to comply.
We urge the government to delay implementation and allow time for comment before the policy goes into effect, Biswal said.
Mukesh Aghi, president of US India Strategic and Partnership Forum (USISPF) said "this is not in the best interest of the Indian consumers".
"Coming out with such a major policy change overnight without any consultative process eats into the predictability and reliability factor that all US companies are looking into India for any foreign direct investment," he said.
I wish there was a little more consultative process, because you have companies like Walmart, which has put in $16 billion and they are in the process of putting more money to streamline their investment, it makes our job more difficult because how do I go and tell them please invest more and the policy would not change overnight, said Aghi, who has been working with US companies to make large scale investment in India.
"I at the moment embarked on a campaign convincing US company manufacturing in China to move it to India. How do I tell them, hey policies overnight would not change, he said, adding that with such policy pronouncements, India can't have a transparent, predictable environment which is a must for any foreign company to invest.
Referring to Union Commerce and Industries Minister Suresh Prabhu's remarks that he wants to focus on bringing $100 billion FDI to India, Aghi said the first thing is to have a predictability in a regulatory environment. (Source: The Business Standard)


The above Article can also be read using the link below:

New e-commerce rules regressive, will hit FDI in India.

India top recipient of Commonwealth FDI, says a new report - Pragnya IAS Academy - News Analysis

India top recipient of Commonwealth FDI, says a new report.

Between 2005 and 2016, India remained the top recipient of greenfield FDI from the Commonwealth, more than doubling the amount it received over 10 years, says report.

India has emerged as the top recipient of foreign direct investment (FDI) from within the Commonwealth and is the second-most lucrative source of investment within the 53-member organisation after the UK, according to a new trade review.

The trade review released in the lead up to the Commonwealth Heads of Government Meeting (CHOGM) next week. ‘Commonwealth Trade Review 2018: Strengthening the Commonwealth Advantage’, compiled by the Commonwealth secretariat, also found that India has moved into the top five providers of intra-Commonwealth services trade, surpassing Canada, and alongside Australia, Singapore and the UK.
“Between 2005 and 2016, India remained the top recipient of greenfield FDI from the Commonwealth, more than doubling the amount it received over 10 years...India is the leading country for attracting greenfield FDI, not only from the Commonwealth but also from the world. In 2015, it overtook China for the first time as the biggest destination for greenfield FDI,” the report notes.
Green-field investments occur when a parent company or government begins a new venture by constructing new facilities in a country outside where the firm is headquartered.
The trade review found that intra-Commonwealth exports of goods and services stood at $560 billion in 2016 and this trade, as a proportion of global trade, is rising and is now 20% of Commonwealth countries’ total trade with the world.
“This underlines the growing significance of Commonwealth markets for many member countries. With world trade growth forecast to rebound in 2017-18, the Commonwealth appears on track to achieve $700 billion in intra-Commonwealth trade in goods and services by 2020, while proactive policy measures can trigger even greater gains,” the report notes.
Intra-Commonwealth trade is projected to reach $700 billion by 2020, driven in large part by India’s economic growth. According to the findings, the “dramatic rise” in the increased prominence of intra-Commonwealth investment is driven by India, a country which also presents enormous potential across economic sectors from the application of digital technologies.
The 2015 ‘Commonwealth Trade Review’ had found that Commonwealth countries, on average, tend to trade around 20% more and generate 10% more investment with each other than with non-member countries. The 2018 review was undertaken to explore how Commonwealth members, individually and collectively, can strengthen this Commonwealth advantage in two ways: by harnessing new technologies, especially digitisation, to trigger new trade and investment opportunities; and by strengthening certain aspects of their domestic trade governance regime to reduce trade costs further.
“Trade and investment flows among our members are strong and continue to grow. Despite the unexpected contraction in world trade since our 2015 Trade Review, intra-Commonwealth trade in goods and services, and productive ‘greenfield’ investment, is growing fast and projected to exceed $1 trillion by 2020,” said Baroness Patricia Scotland, Commonwealth Secretary-General.
The review will feed into the Commonwealth Business Forum deliberations among business leaders and policy-makers from across the member countries, scheduled in London between 16-18 April. Among the Indian business leaders expected to participate include Rakesh Bharti Mittal, president designate, Confederation of Indian Industry (CII) and vice-chairman, Bharti Enterprises, for a panel on global economic growth; Ajay Piramal, chairman, Piramal Group, for a panel on business trust; and Ravi Parthasarathy, chairman, Infrastructure Leasing & Financial Services Limited, for a panel on Smart Cities.
The business forum, alongside parallel Youth, Women’s and People’s forums, will mark a precursor to the Commonwealth Heads of Government Meeting (CHOGM) in London and Windsor on April 19-20, to be attended by Prime Minister Narendra Modi. (Source: Livemint)


The above Article can also be read using the link below:

India top recipient of Commonwealth FDI, says a new report.