India replaces China as top FDI destination in 2015

India replaces China in FDI

Following a year of high-value project announcements specifically across the coal, oil and natural gas and renewable energy sectors, India has replaced China as top destination for foreign direct investment by attracting $63 billion worth FDI projects in 2015. “In 2015, India was for the first time the leading country in the world for FDI, overtaking the US (which had $59.6 billion of greenfield FDI) and China ($56.6 billion),” according to a fDi Intelligence report, a division of The Financial Times. The motives cited by companies investing in India and China are quite similar in nature. For both countries, companies identify domestic market growth potential and proximity to markets as the main two reasons for investing, the report said. Major companies such as Foxconn and SunEdison have agreed to invest in projects valued at $5 billion and $4 billion, respectively, in India in 2015.

For the first time in many years, China was a laggard on regional FDI growth rather than an engine: it saw a 23 per cent decline in capital investment and a 16 per cent drop in FDI projects due to plateauing economic growth and rising costs. In a comparison between Indian and Chinese states, Gujarat emerged as the top ranked state in terms of FDI — attracting $12.4 billion of capital investment in 2015, according to the report. Maharashtra has been one of the strongest performers across the years attracting $8.3 billion, respectively, in 2015.

The RBI, on April 11, said that FDI in the country increased to $42 billion during April-February in 2015-16, up 27.45% from the inflows in the corresponding period of the previous financial year. The biggest change in greenfield FDI in 2015 was the near tripling of greenfield FDI into India, with an estimated $63 billion. The rapid growth of greenfield FDI in India shows that while economic development organisations try to attract FDI for the contribution greenfield FDI can make to employment and GDP, FDI is strongly attracted to high-growth economies.

In a tweet, Minister of State for Finance Jayant Sinha said: “India emerges on top in attracting FDI”.

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