FDI in India during COVID 19

Abstract

COVID-19 is threatening economic globalization. Global production networks are being disrupted on a never-before-seen scale as a result of simultaneous shocks to supply and demand caused by containment measures. The pandemic has highlighted how globally interconnected the flow of goods and services has become vulnerable, and countries are now reframing their international trade strategies to handle economic shocks post pandemic.

The drop in FDI will be especially hard on developing countries. FDI inflows to developing countries are expected to fall even more than the global average, given that sectors severely impacted by the pandemic account for a larger share of FDI inflows in developing countries. Also, over the last few decades, developing countries have become more dependent on FDI. Between 1985 and 2017, FDI inflows to developing countries increased from 14 billion to 690 billion US dollars (in current prices). This represents an increase in share of global FDI inflows from 25% to 46%. The rise in FDI to developing countries is being supported by an increase in offshoring and global fragmentation of economic activities, particularly in the manufacturing and services sectors. The drop in global FDI is thus closely related to disruptions in global supply chains, which we have also seen as a result of the COVID-19 pandemic. This paper is an attempt to review the impact of current pandemic on  FDI inflows in India.