India could prove to be South Asia’s 'most resilient' economy over long term, says UN

A new report by the United Nations (UN) has projected a positive economic growth for India following the Covid-19 pandemic, saying that the country's large market will continue to attract investments.

According to the research, inward foreign direct investment (FDI) flows to the South and South-West Asia subregion slightly decreased by two percent last year to $66 billion, from $67 billion in 2018. It said, however, that the growth was mainly driven by India, which accounted for 77 percent of the total inflows to the subregion and received $51 billion in 2019, up 20 percent from the previous year.

Investment into India has evolved from information technology services for multinational enterprises (MNEs) to a thriving local digital ecosystem where many domestic players – particularly in e-commerce – have attracted considerable international investment.

In the short term, both inflows and outflows from and to the subregion are expected to decline. The UN said that in the first three quarters of 2020, the value of greenfield FDI inflows declined by 43 percent compared to the same period last year, signaling a reversal of the growth trend in the subregion.

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“However, India's economy could prove the most resilient in the subregion over the long term. FDI inflows have been steadily increasing and positive, albeit lower, economic growth after the pandemic and India's large market will continue to attract market-seeking investment,” said the report.

The country's fast-growing telecom and digital spaces in particular could see a faster rebound, as global venture capital firms and technology companies continue to show interest in the country's market through acquisitions, it added.

According to the UN, Facebook and Google's investment in India’s Jio Platforms in 2020, worth $5.7 billion and $4.5 billion respectively, were testaments to that trend.

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“Estimates suggest that by 2025, core digital sectors such as IT and business process management, digital communication services, and electronics manufacturing could double in size.

“In addition, the pandemic has only further increased the tendency of many sectors such as agriculture, education, energy, financial services, logistics to digitalize, as Covid-19 has pushed many individual and companies to adopt digital solutions and processes,” said the report.

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