By R. Suryamurthy
India continued to lead as South Asia’s top destination for foreign direct investment (FDI) in 2024, even as overall FDI inflows into developing Asia slipped by 3%, according to the World Investment Report 2025 released by the United Nations Conference on Trade and Development (UNCTAD).
Despite persistent global economic headwinds, tighter financing conditions, and a slowdown in major infrastructure investments, developing Asia held firm as the world’s largest FDI recipient, attracting $605 billion — representing 40% of global FDI and 70% of total inflows to developing economies. However, UNCTAD highlighted a growing imbalance in investment trends across the region, with countries experiencing sharply divergent sectoral and national performance.
In South Asia, FDI inflows remained stable overall. India, while recording a marginal decline in total FDI, continued to attract the bulk of investment into the subregion. UNCTAD attributed India’s relative resilience to strong momentum in greenfield investment — where companies build new facilities from scratch — particularly in technology-led sectors.
India topped the region in greenfield capital expenditure announcements, which rose 28% year-on-year to $110 billion in 2024. This performance stood in contrast to the broader developing Asian trend, where greenfield FDI value fell 23%.
The report cited growing foreign interest in India’s semiconductor, electronics, and software industries, driven by policy incentives, global supply chain realignment, and expanding domestic demand. These sectors helped offset declining investments in traditional industries like energy and utilities.
“India’s sustained greenfield growth highlights investor confidence in its long-term potential, especially in high-tech and digital sectors,” the report noted.
India Among Emerging Investment Hotspots
India was named among the top emerging hotspots for greenfield FDI, alongside Türkiye, Azerbaijan, Bahrain, and Qatar. These countries benefited from policy reforms, economic diversification, and investor-friendly regulatory environments.
UNCTAD called for urgent global reforms to redirect capital to where it is most needed. “Redirecting capital — especially to high-growth, underfunded economies like India — will require a rethinking of global investment rules, blended finance, and support for digital and green transitions,” it said.
As India navigates global headwinds, its steady FDI performance in 2024 offers cautious optimism — but sustaining the momentum will depend on continued institutional reforms, political stability, and accelerated infrastructure and digital capacity-building.
Divergent Trends Across Asia
Southeast Asia was another bright spot, with the 10-member ASEAN bloc seeing FDI inflows jump 10% to $225 billion, the second-highest on record. Indonesia, Malaysia, Singapore, Thailand, and Viet Nam led the surge, fuelled by continued supply chain diversification and digital infrastructure expansion.
Meanwhile, China — long the top developing-world destination for FDI — experienced a sharp 29% drop in inflows, hit by slowing economic growth and regulatory tightening in its tech sector. Cross-border mergers and acquisitions (M&A) in China also declined, contributing to a 57% fall in overall M&A activity across developing Asia.
FDI in Central Asia fell significantly, driven by a sharp contraction in Kazakhstan. In West Asia, the United Arab Emirates posted a rebound in investment, but other Gulf states such as Saudi Arabia and Qatar recorded declines.
Infrastructure, SDG Sectors See Investment Retreat
UNCTAD also flagged a steep decline in international project finance (IPF), a key source of funding for infrastructure in emerging economies. In developing Asia, the number of IPF deals dropped 27%, while total value plummeted 43%.
Sectors aligned with the Sustainable Development Goals (SDGs) — such as renewable energy, transport, and water — saw investment fall by more than 30%, raising concerns about long-term development financing gaps.
