FDI OUTLOOK FOR 2024
The United Nations Conference on Trade and Development (UNCTAD) has released its Global Investment Trends Monitor for 2024, highlighting important developments in global Foreign Direct Investment (FDI).
The report reveals a decline in global FDI and the challenges this poses for sectors like renewable energy and infrastructure, which are key to achieving the Sustainable Development Goals (SDGs). The report also offers a look ahead at the expected trends in global investment for 2025.
Global Foreign Direct Investment (FDI) Trends in 2024
Global FDI Overview
- Global FDI flows saw an 8% decline in 2024, despite a slight 11% rise to approximately USD 1.4 trillion.
- The drop is primarily attributed to the exclusion of FDI flows passing through conduit economies like Ireland, Luxembourg, the Netherlands, Switzerland, and the UK, which are often used for tax avoidance.
- When excluding these conduit economies, global FDI actually decreased by 8%.
FDI in Developed Economies
- FDI flows into developed countries surged by 43%, but this was largely due to multinational transactions passing through conduit nations.
- Excluding these, FDI in developed economies fell by 15%, signaling underlying weaknesses.
- Europe witnessed a 45% drop in FDI (excluding conduit economies), while North America saw a 13% rise.
- The value of greenfield projects in developed economies rose by 15%, especially driven by semiconductor megaprojects, although the number of greenfield project announcements dropped by 10%.
FDI in Developing Economies
- Developing nations experienced a 2% decline in FDI in 2024, following a 6% fall in 2023.
- Africa saw an impressive 84% rise in FDI to USD 94 billion, driven by large-scale investments in Egypt.
- Asia saw a 7% decline in FDI, with China facing a 29% decrease. However, ASEAN experienced a 2% rise, and India’s FDI grew by 13%.
- In Latin America, the Caribbean, and Africa, the number of greenfield investment projects also decreased, especially in Africa and Asia, which saw significant reductions in the number of projects.

Sector-Specific Trends: FDI and SDG Investments
SDG-Related Investments
- Investment in sectors crucial for the SDGs, like infrastructure, renewable energy, and sanitation, saw an 11% decline in 2024.
- The slowdown in renewable energy financing was notable, with international deals down by 16%, while domestic financing dropped sharply by 60%.
- Such declines may affect key SDGs, such as clean energy (SDG 7), infrastructure (SDG 9), and clean water (SDG 6).
Renewable Energy and Infrastructure
- Investments in renewable energy were particularly affected, with a noticeable reduction in both international and domestic financing for green projects.
- This decline could potentially delay progress toward the global sustainability agenda, which relies on massive investments in infrastructure and green energy projects.
FDI Outlook for 2025: Prospects and Expectations
Moderate FDI Growth Forecast
- Global FDI is expected to grow moderately in 2025. The US and European Union are likely to see stronger growth due to increased investments.
- Investments from the US have slowed as the focus shifts to domestic projects, while China’s overseas investments are on the rise.
- Global supply chain shifts may benefit regions such as ASEAN, Eastern Europe, West Asia, North Africa, and Central America.
- India is expected to see moderate FDI growth, driven by improved financing conditions and reforms.
Key Influencing Factors
- The future of FDI growth will depend on factors like GDP growth, global trade dynamics, inflation, market volatility, and geopolitical stability.
- Policy changes, technological advancements, and the role of private equity and sovereign wealth funds will play a significant role in shaping FDI flows.
Sectoral Trends
- There is expected growth in investments in sectors like AI, cloud computing, cybersecurity, and renewable energy technologies, such as green hydrogen and electric vehicles.
- The green energy transition and digital technologies are expected to attract a significant share of global investments.
Foreign Direct Investment (FDI) in India
Types of FDI
Greenfield Investment: Involves establishing new operations from scratch, offering more control and flexibility.
Brownfield Investment: Involves mergers, acquisitions, or joint ventures to expand existing operations, with a lower level of control compared to greenfield investments.
Regulatory Framework in India
- India’s FDI regulations are governed by the Foreign Exchange Management Act (FEMA), 1999, under the Ministry of Commerce and Industry.
- FDI is prohibited in certain sectors such as atomic energy, gambling, and tobacco.
Recent FDI Trends in India
- FDI inflows into India crossed USD 1 trillion between 2000 and September 2024, with a cumulative increase of 119% in the past decade.
- In the period from 2014 to 2024, India attracted USD 667.4 billion in FDI.
Opportunities and Challenges for FDI in India
Opportunities for FDI
- Large Market and Growth: India’s population of 1.4 billion offers high demand for both basic and high-end goods.
- Favorable Demographics: With over 65% of the population under 35, India offers a young, skilled, and affordable labor force.
- Government Policies: Initiatives like “Make in India,” “Atmanirbhar Bharat,” and pro-business reforms have improved the ease of doing business in India.
- Strategic Location: India’s position as a gateway to South Asia, the Middle East, and Southeast Asia adds to its appeal as an investment destination.
Challenges in Attracting FDI
- Regulatory and Bureaucratic Challenges: Complex tax systems, inconsistent policies, and delays in approvals create hurdles for investors.
- Infrastructure Deficiencies: Inadequate infrastructure in rural and suburban areas limits the ease of doing business.
- Labor Laws: Rigid labor laws and low labor market flexibility can deter businesses from investing in India.
Expectations from Foreign Investors in India
- Technology Transfer: India seeks foreign expertise and technology, especially in areas such as manufacturing, healthcare, and renewable energy.
- Job Creation: Investors are expected to contribute to employment generation, particularly for India’s large, young workforce.
- Sustainable Investments: India encourages investments that contribute to sustainable growth, supporting initiatives aligned with climate goals and the National Action Plan on Climate Change.
Conclusion
India’s vast market, growing economy, and young workforce present substantial opportunities for FDI. Although government initiatives have created a favorable investment climate, challenges such as regulatory complexity and infrastructure gaps remain. Foreign investors are expected to contribute not just financially but also in terms of technology transfer and job creation, which are crucial for India’s continued development and alignment with global sustainability goals.
Mains Question:
- “Analyze the impact of declining Foreign Direct Investment (FDI) on sustainable development goals (SDGs), with specific reference to sectors like infrastructure and renewable energy.” (150 WORDS)