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US dollars — File Photo
Global FDI inflows declined by 8 per cent  in the first half as the world economy suffered new setbacks between April and June.— File Photo

NEW DELHI: Foreign direct investment (FDI) inflows into India in the first half of 2012 contracted 42.8 per cent to $10.4 billion, according to the global investment trend monitor of the United Nations Conference on Trade and Development (UNCTAD).

Global FDI inflows declined by 8 per cent  in the first half as the world economy suffered new setbacks between April and June. The decline in inflows was mainly caused by a decline of $37 billion in inflows into the US and a $23 billion fall in inflows into BRIC countries (Brazil, Russia, India and China), the report said.

UNCTAD secretary-general Supachai Panitchpakdi in a statement said the current trends of investment flows to developing countries, particularly to Asia, are worrisome and the task of channelling FDI into key development sectors such as infrastructure, agriculture and green economy remains daunting.

The report, however, said the fact that the global decline was limited to 8 per cent  reflected the stable reinvested earnings component of FDI, indicating that transnational companies’ (TNC) earnings overseas continued to be strong. UNCTAD’s longer term projections still show a moderate rise. “However, the risk of further macroeconomic shocks in 2013 can impact FDI inflows negatively,” it said.

Compared with the full-year forecast of FDI inflows published in July, UNCTAD now projects that FDI flows will, at best, level off in 2012 at slightly below $1.6 trillion.

“The slow and bumpy recovery of the global economy, weak global demand and elevated risks related to regulatory policy changes continue to reinforce the wait-and-see attitude of many TNCs towards investment abroad,” it said.

Developing countries without transition economies for the first time absorbed half of global FDI inflows due to the steep fall in flows to the US and a moderate decline in flows to the European Union, the report said. Despite a decline in FDI inflows, China became the world’s largest recipient in the first half of 2012.

FDI flows showed an uneven pattern among regions. Among developing economies, while flows to Asia declined, those to Latin America and Africa rose. Among developed countries, the rise in flows to Europe and other developed countries was not enough to compensate for the decline in flows to North America

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