FDI through mergers and acquisitions registers a growth of 65.7% in H1 2013
The foreign direct investment (FDI) in India has increased by 34.7% to US$ 13.6 billion during the first half of 2013 (January-June 2013) amid bulk of inflows coming from the merger and acquisitions an UNCTAD report stated. During January-June 2012, the country had received US$ 10.1 billion of FDI.These foreign fund inflows into India have increased the total figures for the South Asian Association for Regional Cooperation (SAARC). As the report stated "An increase in flows to the SAARC is accounted for mainly by the rise in flows to India."
In India FDI through mergers and acquisitions has registered a growth of 65.7% during the first half of 2013 to US$1.8 billion as against US$1.1 billion in January-June 2012.
However, the FDI in new projects has declined by 48.7% to US$ 8.8 billion during the period compared with US$17.2 billion in the corresponding period of previous year.
Among BRICS (Brazil, Russia, India, China and South Africa) members, India stood at fourth position, above South Africa, in terms of FDI inflows.
China (USD 67 billion) retained its second position after the UK, among the world's largest recipients of FDI in this period. Russia with USD 56 billion is at the fifth position, Brazil (USD 30 billion) at eighth. South Africa has received only USD 3.3 billion during January-June 2013.
The report said that global foreign direct investment (FDI) inflows were an estimated US$745 billion in the first half of 2013; 4% higher than the same period in 2012, with a diverging trend between developing and transition economies, and developed countries.
In the first half of 2013, flows to developed countries declined. However, this decline was more than offset by a rise in flows to developing and transition economies, which accounted for more than 60% of global FDI flows - a record share.
In developing and transition economies, the increase was driven by acquisitions in Central America and the Caribbean as well as record inflows into the Russian Federation. Although flows to developing Asia fell slightly, the region continues to absorb more than half of the FDI directed to developing economies as a group, and one quarter of global FDI flows.
The fall in developed countries is mainly accounted for by declines in the major host countries including the United States, France and Germany. The United Kingdom remains an exception, continuing its upward trend in FDI attraction, and becoming the world's largest recipient of FDI in this period.
Cross-border mergers and acquisitions (M&As) and large retained earnings kept in foreign affiliates were a driving force behind the current global FDI growth, rather than investment in new productive assets through greenfield investment projects.
UNCTAD estimated that FDI flows for 2013 will remain close to the 2012 level. Risks related to the Euro area, the transition to a slower growth pattern of some emerging markets, the so-called "fiscal cliff" in the United States and weaker consumer demand in developed countries could all potentially have an impact on FDI flows.
Looking further ahead to 2014, macroeconomic indicators, such as rising industrial production in recent months in many developed economies, point to an improving climate for FDI in which TNCs might convert some of their record cash holdings into new investments. The United States economy is making progress towards sustainable growth; consumer confidence is returning in Japan; and there are some recent improvements in Europe. All of these factors could provide a basis for some positive developments in FDI to developed economies. In contrast, the growth momentum in many developing economies has weakened due mainly to a loss of domestic activity momentum and the possible potential impact of the removal of monetary policy measures such as quantitative easing.
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