How to Focus on FDI Can Recover From Covid-19?
The Covid-19 crises have brought light to the role of FDI agencies, who had to illustrate sharpness and reactiveness in supporting the requirement of the investors. According to the UNCTAD report, 77% of the national IPAs worldwide has offered Covid related information and services and a specialized platform. It is anticipated that FDI activity might fall up to 77% due to the economic crises caused by the pandemic. While it gives an idea that it is a bad knock for the global economy and it also represents that a lot of countries worldwide are looking for the right FDI opportunities.
Rethinking FDI
In the pandemic scenario, investors are exploring to maintain business as usual, a great emphasis should be given on offering on-time intelligence to policymakers, business leaders and entrepreneurs. While at the same time maintaining foreign investor confidence in the market. Multinational companies have observed successive and torrent effects of the Covid-19 pandemic. Demand and supply shock has stimulated a global recession, the global value chain has been adversely affected, governments are considering new rules affecting the foreign investors. The results were a sharp reduction in the global flow of the FDI. For many developing nations, FDI is playing a significant role as a source of finance with the potential to strengthen these nation’s economic flexibility during crises and enhance employment as well as economic transformation in the recovering phase. Given the importance of FDI for the development, the World Bank Group is conducting a quarterly survey for the foreign investors to observe the effects of the Covid-19 crises on their operations, expectations and investment plans.
According to the results from the second round of the pulse survey, declared in September displayed adverse effect of the pandemic became near-universal for MNE affiliates over the second quarter of 2020. Over 90 per cent reported an adverse effect during this period-although some have felt the less severe impact in the third quarter. More than 80 per cent of MNE observe that their net income has declined what they were expecting before covid-19.
The result was observed that the 80 MNE affiliates are operating in developing countries comprising of both low income and middle-income economies. The shrink in the FDI is hitting developing countries due to the Covid-19 pandemic. FDI inflow in the developing nations has dropped even more than the global average. Developing nations have become more susceptible to FDI over the last decades. The drop in FDI has resulted in an adverse effect on the supply chain. The developing nations are facing budget constraints and restrict on implementing rules which focus on the facilitation measures. As far as the FDI in India is concerned, it has raised drastically in nine months. India received maximum FDI from Singapore, India is attracting FDI through low wage income and ease of doing business. Computer software and hardware received maximum FDI due to the work-from-home scenario due to the Covid-19.
FDI in India is playing a significant role in generating employment in the country post-covid-19 pandemic and enhancing the economy of the country.