After growth, India elbows out China on foreign investment

After logging a higher growth, India has emerged as the top-ranked nation in the flow of foreign direct investment in 2015, beating China on the very turf it has dominated for a few decades, says the think tank of the Financial Times.

"After a long period of trailing behind China, India is now racing past its rival. India was the highest ranked country by capital investment in 2015, with $63-billion worth of foreign direct investment (FDI) projects announced," says fDi Intelligence in its soon-to-be-released report.

"All this while China saw a 23 percent decline in capital investment and a 16 percent drop in FDI projects. India replaced China as the top destination for FDI by capital investments, following a year of high-value project announcements," it said in a preview.

"For so long trailing in China's wake, India is now the great global growth story."

Yet, said the report, China's new phase of development may well have the stronger global impact, since its highly ambitious initiative to revitalise the Silk Road and create bold new logistics to Europe can generate investment and boost connectivity betwen the two continents.

India replaced China as the top destination for foreign investment following a year of high-value project announcements and maintaining the current momentum will a monumental task faced by Prime Minister Narendra Modi government, said Courtney Fingar, editor-in-chief of fDi Magazine.

"longer term challenges must also be faced head on, including improving India’s infrastructure, reducing bureaucracy and tackling inequality. How well these are addressed will have significant effect on future continued competitiveness of India as an investment destination."

As regards China, she said, there were other concerns. Faced with plateauing growth and rising costs, the country is going through a transition to becoming a high-income country while at the same time solidifying its place as a world power. 

"As befits its new status as a global goliath, China is looking outward to solve some of its problems such as excess capacity due to slowing demand and this will not be without consequence to the rest of the world," she added.

The fDi report specifically mentioned the alleged dumping of Chinese steel distorting the global market, and countries such as the UK feeling the effects in a painful way. The report said many have blamed this for the Tatas' plans to sell off their UK steel units. 

As regards the global play, the report said greenfield investment were were on recovery phase.

"But it is a sketchy recovery and not an entirely a convincing one. The report reveals capital investment increased by 9 percent in 2015, to $713 billion, while the number of jobs created through foreign capital grew by 1 percent to 1.89 million," Fingar said.

"But the big foreign direct investment story of the past year is undeniably India."