Despite the China+1 narrative, India Fails to Gain From China's FDI Decline

It is not India but countries like the US, Canada, Mexico, Brazil, Poland, and Germany which gained the most from China’s loss by seeing their global share in FDI rise.

The Wire Staff

It is not India but countries like the US, Canada, Mexico, Brazil, Poland, and Germany which gained the most from China’s loss by seeing their global share in FDI rise.

despite the china 1 narrative india fails to gain from china s fdi decline

Representative image of dollar bills. Photo: Unsplash

New Delhi: Despite India's efforts to leverage the China-plus one strategy, its share of global foreign direct investment (FDI) inflows decreased from 3.5% in the first nine months of 2022 to 2.19% in the same period in 2023. This is a sharp drop of 54%, much steeper than the global FDI inflow decline of 26%.

According to Business Standard, FDI inflows to China have fallen dramatically from a share of 12.5% in the first nine months of 2022 to only 1.7% in the same period in 2023. However, the business daily reports, it is not India but countries like the US, Canada, Mexico, Brazil, Poland, and Germany which gained the most from China’s loss by seeing their global share rise.

The US, especially, saw a significant increase in FDI inflows in the first nine months of CY 2023, up from 24% in the previous year. It was, in fact, the top gainer, possibly due to its semiconductor investments and geopolitical tensions with China. The total approved FDI from Taiwan alone in 2023 stood at $11.25 billion.

Apart from the CHIPS Act, the geopolitical tensions between the US and China have drawn many companies from Taiwan and South Korea and other locations to set up manufacturing operations in the US to reduce their dependence on China, the report says, citing OECD data.

The situation was also flagged by a Kotak Institutional Equities report which noted that India is yet to land a substantial surge in FDI, despite the China +1 narrative and significant reforms.

While India has seen success in attracting FDI, particularly in industries like mobile manufacturing, its limited success in industries reliant on assembly line operations suggests a need for further development in the supply chain to attract more investment.

This article went live on April sixth, two thousand twenty four, at thirty minutes past three in the afternoon.

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