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Minor Project Report
Minor Project Report
Minor Project Report
On
TRENDS OF FDI PRE AND POST PANDEMIC
Submitted Toward the Partial Fulfilment of the Requirement for the
Award of the Degree of
Assistant Professor
Submitted To Submitted By
Dr. Pallavi Thacker Hardik Modanwal
BBA Core
21100120350128
2021-24
University of Lucknow
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ACKNOWLEDGEMENT
I would like to express my deepest appreciation to Dr. Nazia Zamal, whose guidance and
support from the initial to the final level enabled me to develop an understanding of the
subject. Her willingness to give her time so generously has been very much appreciated.
I am also grateful to my peers and family for their wise counsel and sympathetic ear. You
are all so much a part of my work and life that I can't imagine not having you by my side.
Lastly, I would like to thank the faculty and the department for their insights and feedback
which were invaluable to the completion of this project.
(Signature of Student)
Name: - Hardik Modanwal
Roll No: - 2110012035128
Semester: - 5th
Department: - BBA Core
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Institute of Management Sciences
University of Lucknow (New Campus) Lucknow.
Table of Contents
Title Page
Acknowledgment
6 Methodology 24-25
8 Conclusion 39-42
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CHAPTER 1
INTRODUCTION
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Trends of FDI pre and post pandemic
The landscape of Foreign Direct Investment (FDI) has undergone significant shifts due to the
COVID-19 pandemic. Pre-pandemic, global FDI was already on a downward trend, which was
exacerbated by the onset of the pandemic. The health crisis led to a contraction in FDI flows,
particularly impacting developing countries. Post-pandemic, there has been a surge in FDI
flows, with an uneven recovery across different regions.
Introduction:-
Before the COVID-19 pandemic, the global economy was experiencing a period of moderate
growth, with advancements in technology, trade, and investment driving expansion across
various sectors. However, there were signs of slowing momentum in some regions and
challenges such as trade tensions, policy uncertainty, and financial vulnerabilities.
• Growth Trends: The world economy was expanding, albeit at a slower pace compared
to the post-financial crisis recovery period. Emerging markets and developing
economies contributed significantly to global growth, although there were disparities
in performance within these groups.
• Trade and Investment: International trade and investment flows were substantial, but
there were concerns about protectionist policies and trade disputes, particularly
between major economies like the United States and China.
• Financial Markets: Financial markets were relatively stable, but there were
underlying risks related to high debt levels, asset price volatility, and potential
disruptions from geopolitical tensions.
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• Sustainable Development: Efforts to achieve sustainable development goals were
ongoing, with increasing attention on environmental sustainability, social inclusion,
and economic resilience.
Importance of FDI:-
Foreign Direct Investment (FDI) is a crucial indicator of economic health and investor
confidence for several reasons:
• Technology Transfer: It often involves the transfer of technology and know-how from
developed to developing countries, enhancing the latter’s technological capabilities.
• Employment and Skill Development: FDI creates jobs and fosters skill development
in the host country, contributing to human capital improvement.
• Financial Stability: FDI inflows provide financial stability and can help countries to
avoid accumulating foreign debt.
Objective:-
The purpose of the project is to analyse the trends of Foreign Direct Investment (FDI) before
and after the pandemic, focusing on how the global health crisis has affected international
investment flows.
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• Examine Pre-Pandemic FDI Trends: Understand the level, growth, and distribution
of FDI globally and across regions before the COVID-19 outbreak.
• Assess Pandemic’s Impact on FDI: Evaluate the immediate and long-term effects of
the pandemic on FDI, including the sharp contraction in investment flows during
2020/21.
• Identify Sectoral Shifts: Investigate changes in FDI across different sectors, noting
the decline in manufacturing and the rise in environmental technologies and services.
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CHAPTER 2
8
Pre-Pandemic FDI Trends
Historical Data:-
A brief overview of the global Foreign Direct Investment (FDI) flows and trends within
specific regions and countries over the last decade:
• 2012: Global FDI inflows were significant, with the United States and China being the
top recipients.
• 2021: There was a 64% growth in global FDI, reaching nearly $1.6 trillion.
• 2022: After a strong rebound in 2021, global FDI fell by 12% to $1.3 trillion.
• Asia: China and India have been prominent FDI destinations, with India securing the
third-highest FDI for new greenfield projects in 2022.
• Europe: Countries like the Netherlands and Cyprus have seen substantial FDI inflows.
• Americas: The United States consistently attracted the highest FDI inflows.
• United States: Maintained its position as the top FDI recipient over the decade.
• China: Stood as the second-largest recipient, although the gap with the US widened in
2022.
• India: Emerged as a key FDI destination, especially in greenfield projects.
Economic Policies:-
Before the pandemic, several economic policies were influencing Foreign Direct Investment
(FDI) trends globally:
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• Tax Incentives: Governments offered tax incentives to attract FDI, such as reduced
corporate tax rates for foreign investors and tax holidays.
• Stability and Governance: Political stability, transparent governance, and the rule of
law were key factors that influenced FDI, as they reduced risks associated with
investing in a foreign country.
Investor Sentiment:-
Investor sentiment before the pandemic played a significant role in shaping Foreign Direct
Investment (FDI) trends. Positive investor sentiment, driven by stable economic forecasts and
growth prospects, led to increased FDI flows.
• Economic Stability: Forecasts indicating steady global economic growth bolstered
investor confidence, encouraging investment across borders.
• Policy Environment: Predictable and investor-friendly policies, such as trade
liberalization and tax incentives, positively impacted sentiment.
• Market Potential: Reports highlighting emerging markets’ growth potential attracted
investors seeking higher returns on investment.
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CHAPTER 3
11
The Pandemic’s Impact on FDI
Immediate Effects:-
The initial shock to the global economy from the COVID-19 pandemic was profound and had
a significant impact on Foreign Direct Investment (FDI):
• Capital Outflows: The pandemic also triggered the largest capital outflow ever
recorded from developing countries, as investors sought to reduce risk exposure.
Sector-Specific Impact:-
The COVID-19 pandemic had a varied impact on different economic sectors, with some
experiencing severe downturns while others found new opportunities for growth. Here’s a
detailed analysis:
Service Sector:
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• Tourism and Hospitality: One of the hardest hits, with international travel bans and
lockdowns causing a near standstill.
• Retail: Physical stores faced closures, but there was a surge in e-commerce as
consumers shifted to online shopping.
Manufacturing:
• Supply Chain Disruptions: The sector faced significant challenges due to disruptions
in global supply chains, leading to production halts.
• Demand Fluctuations: Certain sub-sectors like pharmaceuticals saw increased
demand, while others like automotive experienced a decline.
Energy:
• Oil and Gas: Experienced a historic price crash due to a fall in demand and geopolitical
tensions.
• Renewables: Saw continued investment, as the focus on sustainability remained
strong.
Technology:
• IT Services: Benefited from the shift to remote work and digital services, with
increased demand for cloud computing and cybersecurity.
• Consumer Electronics: Faced mixed impacts, with disruptions in the supply chain but
also increased demand for personal devices.
Financial Services:
• Banking: Faced challenges due to low-interest rates and potential loan defaults, but
digital banking services grew.
• Insurance: Saw a rise in health and life insurance policies, while other areas like travel
insurance declined.
Healthcare:
• Pharmaceuticals and Biotech: Witnessed significant growth due to the urgent need
for COVID-19 treatments and vaccines.
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• Healthcare Providers: Experienced strain due to the high volume of COVID-19 cases
but also received increased investments.
Agriculture:
• Food Supply: Generally resilient, but faced logistical challenges and shifts in demand
patterns.
• Commodity Prices: Volatile, with initial drops due to uncertainty but later stabilized.
Real Estate:
Transportation:
• Airlines: Suffered massive losses due to travel restrictions and safety concerns.
• Shipping and Logistics: Experienced increased demand due to the rise in e-commerce
and changes in trade patterns.
Policy Responses:
To mitigate the impact of the COVID-19 pandemic on Foreign Direct Investment (FDI),
governments worldwide implemented a range of policy measures:
• Monetary Easing:
Central banks lowered interest rates and provided liquidity to stabilize financial markets
and support economic activity.
• Fiscal Stimulus:
Governments introduced fiscal stimulus packages to boost demand, support businesses,
and maintain employment levels.
• Credit Guarantees:
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Credit guarantee schemes were launched to ensure that businesses, especially SMEs,
had access to necessary funding.
• Regulatory Forbearance:
Temporary relaxation of regulatory requirements helped businesses cope with the
immediate financial challenges.
• Investment Promotion:
Investment promotion agencies (IPAs) worked to facilitate business collaborations and
assist government efforts to combat the pandemic.
• Strategic Disinvestment:
Some governments accelerated the disinvestment of public sector enterprises to attract
private investment and improve efficiency.
• Infrastructure Development:
Initiatives like India’s PM Gati Shakti aimed at improving infrastructure to make the
country more attractive for FDI.
• Sector-Specific Incentives:
Production Linked Incentive (PLI) schemes were introduced to boost manufacturing
capabilities in specific sectors.
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CHAPTER 4
16
Post-Pandemic Recovery and Trends
Recovery Patterns:-
Post-pandemic, the recovery patterns in Foreign Direct Investment (FDI) flows have been
uneven across different regions, reflecting a complex interplay of factors such as economic
resilience, policy responses, and structural changes in global value chains.
• Overall Growth: After a sharp decline during the pandemic, global FDI flows began
to recover, with a 64% growth in 2021, reaching nearly $1.6 trillion1. However, in 2022,
there was a 12% fall to $1.3 trillion.
• Sectoral Shifts: There has been a significant shift from manufacturing to services, with
services-related investment within manufacturing industries nearly doubling due to
technological advances.
Regional Disparities:
• Asia: East and Southeast Asia saw a 25% growth acceleration, with China’s role as a
recipient country diminishing, indicating a transition from globally integrated
production networks to more domestically focused ones.
• Americas: Developed economies in this region recorded a substantial part of the total
recovery increase.
• Europe: Experienced a recovery to near pre-pandemic levels in Central and South
America, with upticks in several other regional economies across Africa and West and
Central Asia.
• Developed Economies: 75% of the total recovery increase was recorded in developed
economies, highlighting their stronger rebound.
• Developing Economies: FDI flows to developing countries are expected to drop more
than the global average, considering sectors severely impacted by the pandemic account
for a larger share of their FDI.
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Influencing Factors:
The investment landscape has undergone significant changes, particularly with shifts towards
digitalization and sustainability.
Digitalization:
Sustainability:
• Green Finance: There’s a growing focus on green finance, with investors seeking
opportunities that support environmental sustainability.
• ESG Criteria: Environmental, Social, and Governance (ESG) criteria are increasingly
influencing investment decisions, driving capital towards responsible businesses.
• Renewable Energy: Investment in renewable energy sources like wind and solar has
risen, reflecting a commitment to reducing carbon emissions.
• Sustainable Development Goals (SDGs): Investments are aligning with the UN
SDGs, aiming to address global challenges such as poverty, inequality, and climate
change.
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Future Projections:-
Based on current economic policies and global market conditions, projections for Foreign
Direct Investment (FDI) trends include:
• Tax Reforms: The introduction of a new global minimum corporate tax rate may
impact investment decisions, potentially leading to a redistribution of FDI flows.
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CHAPTER 5
20
India’s FDI Landscape
India’s Foreign Direct Investment (FDI) inflows experienced significant changes before and
after the pandemic:
• FDI inflows were on an upward trend, with net FDI into India rising appreciably from
USD 22 billion in FY14 to USD 31 billion in FY19.
Government Initiatives:-
The Indian government has launched several initiatives to make India an attractive
destination for Foreign Direct Investment (FDI), focusing on creating a conducive business
environment, simplifying regulations, and providing incentives:
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• Ease of Doing Business: Efforts to improve the ease of doing business rankings, such
as simplifying procedures, digitizing processes, and reducing compliance burdens.
• Liberalized FDI Policies: Relaxation of FDI norms in several sectors, including
defence, civil aviation, and retail, to attract more foreign investment.
• Infrastructure Development: Significant investments in infrastructure development,
including transportation, energy, and urban facilities, to support industrial growth.
Challenges:
Opportunities:
• Market Potential: India’s large and growing market offers vast potential for
consumer-oriented businesses.
• Digital Economy: Rapid growth in the digital economy presents opportunities for
investment in technology and services.
• Greenfield Projects: India secured the third-highest FDI for new greenfield projects
in 2022, indicating strong investor interest in starting fresh ventures.
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• Policy Reforms: Recent increases in FDI limits and removal of regulatory barriers
signal a more open investment climate.
• Infrastructure Push: Speedy development of infrastructure is improving connectivity
and logistics.
• Startup Ecosystem: The Startup India program and other initiatives are fostering a
vibrant startup ecosystem.
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CHAPTER 6
METHODOLOGY
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Methodology
Data Sources:-
• OECD: The Organisation for Economic Co-operation and Development offers detailed
FDI statistics, frequently asked questions, and methodological notes that can help
understand the intricacies of FDI data.
• RBI: The Reserve Bank of India publishes bulletins and reports that provide insights
into FDI inflows in India, including analyses of key factors influencing these inflows
and the evolution of FDI policy in the country.
These sources are valuable for their reliability, depth of coverage, and the authority they hold
in economic data reporting. They will be instrumental in understanding the FDI landscape and
its evolution over time.
Analysis Techniques:-
In data analysis, various techniques are employed to understand and interpret data. Two
fundamental methods are comparative analysis and descriptive analysis:
• Descriptive Analysis:
This method involves summarizing and describing the key features of a dataset. It provides
simple summaries about the sample and the measures. Through descriptive statistics, we
can present quantitative descriptions in a manageable form. It can include calculating the
mean, median, mode, and standard deviation, which help in understanding the central
tendency and variability of the data.
• Comparative Analysis:
This technique is used to compare two or more datasets or variables. It often involves
statistical methods to determine if there are significant differences between groups or over
time. Comparative analysis can include t-tests, ANOVA, or chi-square tests, which help in
understanding the relationships and differences among the studied subjects.
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CHAPTER 7
26
Data Analysis and Interpretation
Data Analysis:-
1.Gender
a) Male
b) Female
Male 45.9 17
Female 54.1 20
Gender
Male
Female 46% Male
54% Female
Prefer Not to Say
From the above table it is observed that the 54% of respondents are Female and 46% are
Male.
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2. Age Group
a) 18-25
b) 26-36
c) Above 36
18-25 97.4 38
26-36 2.6 1
Above 36 0 0
Age Group
26-36
3%
18-25
26-36
Above 36
18-25
97%
From the above table it is observed that the 97% of Respondents age is between 18-25, 3% are
between 26-36 and 0% for Above 36.
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3. Occupation
a) Student
b) Business
c) Professional
d) Other
Student 87.2 34
Business 5.1 2
Professional 2.6 1
Other 5.1 2
Occupation
Professional Other
2% 5%
Business
5%
Student
88%
Student
Business
Professional
Other
From the above table it is observed that the 88% of Respondents Occupation is Students, 5%
Business, 2% Professional and 5% are Others.
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4. Income per Month
a) 15,000-30,000
b) Above 30,000
15,000-30,000 83.9 26
Above 30,000
16%
15,000-30,000
Above 30,000
15,000-30,000
84%
From the above table it is observed that the 84% Respondents Income per Month is between
15,000-30,000 and 16% of them is Above 30,000.
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5. What is your level of familiarity with Foreign Direct Investment (FDI)?
b) Somewhat familiar
c) Moderately familiar
d) Very familiar
e) Extremely familiar
Familiarity
Extremely familiar
5%
Very familiar
23% Not familiar at all
Not familiar at all
44% Somewhat familiar
Moderately Moderately familiar
familiar
Very familiar
8%
Extremely familiar
Somewhat familiar
20%
From the above table it is observed that the 43.6% of respondents are Not familiar at all,
20.5% are Somewhat familiar, 7.7% are Moderately familiar, 23.1% are Very familiar and
5.1% are Extremely familiar.
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6. How do you rate the impact of the COVID-19 pandemic on global FDI
flows?
a) No impact
b) Minor impact
c) Moderate Impact
d) Significant Impact
e) Extreme Impact
IMPACT
Extreme Impact
13% No Imoact
23%
No Imoact
Significant Impact
20% Minor Impact
Minor Impact
Moderate Impact
13%
Significant Impact
Extreme Impact
Moderate Impact
31%
From the above table it is observed that the 23.1% of respondents thinks there is No Impact on
Global FDI Flow because of Covid-19, 12.8 are Minor Impact, 30.8 are Moderate Impact, 20.5
are Significant Impact and 12.8 are Extreme Impact.
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7. Which sector do you think experienced the most significant FDI growth
during the pandemic?
a) Technology
b) Healthcare
c) Manufacturing
d) Retail
e) Real Estate
SECTOR
Retail
Manufacturing 5%
13% Technology
31%
Technology
Healthcare
Manufacturing
Retail
Real Estate
Healthcare
51%
From the above table it is observed that the 30.8% respondents think Technology experienced
the most significant FDI growth during pandemic, 51.3% Healthcare, 12.8% Manufacturing,
5.1% Retail and 0% to Real Estate.
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8. Post-pandemic, which region do you believe is most attractive for FDI?
a) North America
b) Europe
c) Asia
d) Africa
e) South America
REGION
South America
11%
North America
24%
Africa
5%
North America
Europe Europe
5%
Asia
Africa
South America
Asia
55%
From the above table it is observed that the 23.7% respondents think North America is most
attractive for FDI after pandemic, 5.3% Europe, 55.3% Asia, 5.3% Africa and 10.5% South
America.
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9. To what extent do you agree with the following statement: “The
pandemic has permanently altered the landscape of FDI.”
a) Strongly Disagree
b) Disagree
c) Neutral
d) Agree
e) Strongly Agree
STATEMENT
Strongly Agree
2%
Strongly Disagree
Agree 16%
29%
Disagree Strongly Disagree
13%
Disagree
Neutral
Agree
Strongly Agree
Neutral
40%
From the above table it is observed that the 15.8% respondents are Strongly Disagree with the
statement, 13.2% Disagree, 39.5% Neutral, 28.9% Agree and 2.6% are Strongly Agree.
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10. Which of the following measures do you think can effectively boost FDI
in the post-pandemic era?
a) Tax incentives
b) Regulatory reforms
c) Infrastructure development
d) Trade agreements
MEASURES
Digital
transformation Tax incentives
initiatives 22%
16%
Tax incentives
Regulatory reforms
Regulatory reforms
Trade Agreement Infrastructure Development
16%
30%
Trade Agreement
Digital transformation initiatives
Infrastructure
Development
16%
From the above table it is observed that the 21.6% respondents think Tax incentives boost FDI
after pandemic era, 16.2% Regulatory reforms, 16.2% Infrastructure development, 29.7%
Trade agreements and 16.2% Digital transformation initiatives.
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11. During the pandemic, which factor do you believe influenced FDI the
most?
a) Government Policies
b) Economic Stability
d) Technological Advancement
FACTORS
Supply Chain
Government
advancement Policies
Technological10% 11%
Advancement Economic Stability
10% 17%
Government Policies
Economic Stability
Health and safety concerns
Technological Advancement
Supply Chain advancement
Health and safety
concerns
52%
From the above table it is observed that the 29.7% respondents believe Government Policies
Influenced FDI the most, 13.5% Economic Stability, 40.5% Health and safety concerns, 8.1%
Technological Advancement and 8.1% Supply Chanin advancement.
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12. What is your opinion on the recovery rate of FDI post-pandemic?
a) Very Slow
b) Slow
c) Moderate
d) Fast
e) Very Fast
OPINIONS
Very Fast
Very Slow
3%
13%
Fast Slow
27% 3%
Very Slow
Slow
Moderate
Fast
Very Fast
Moderate
54%
From the above table it is observed that the 13.5% respondents’ opinion on the recovery rate
of FDI post-pandemic is Very Slow, 2.7% Slow, 54.1% Moderate, 27% Fast and 2.7% Very
Fast.
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CHAPTER 8
CONCLUSION
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Conclusion
Summary:-
The key findings of the analysis on FDI trends before and after the pandemic can be
summarized as follows:
• Pre-Pandemic Growth: Before the pandemic, global FDI was experiencing moderate
growth, with emerging markets playing a significant role in attracting investment.
• Pandemic Impact: The onset of COVID-19 led to a sharp decline in FDI flows due to
economic disruptions, supply chain issues, and demand contraction.
• Sectoral Shifts: The pandemic affected sectors differently, with tourism and
hospitality severely hit, while digital services and healthcare saw growth.
• Policy Responses: Governments worldwide implemented various measures, including
fiscal stimulus and monetary easing, to mitigate the impact on FDI.
• Recovery Patterns: Post-pandemic recovery in FDI has been uneven, with developed
economies generally rebounding faster than developing ones.
• Digitalization and Sustainability: There has been a notable shift towards investments
in digital infrastructure and sustainable technologies.
• India’s FDI Landscape: India saw an increase in FDI inflows post-pandemic,
supported by government initiatives like Make in India and Digital India.
• Challenges and Opportunities: India faces challenges such as regulatory hurdles and
infrastructure needs, but opportunities in digital and green economies present potential
for growth.
Implications:-
The implications of the analysed FDI trends for policymakers and investors are significant:
For Policymakers:
• Economic Strategy: They must consider the shift towards digitalization and
sustainability, ensuring policies support these sectors.
• Resilience Building: The pandemic highlighted the need for economic resilience,
prompting the need for policies that can withstand global shocks.
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• Investment Attraction: Creating a stable and transparent regulatory environment
remains crucial to attract and retain FDI.
• Infrastructure Development: Continued focus on improving infrastructure can
enhance the investment appeal of a country.
For Investors:
Recommendations:-
Based on the analysis of FDI trends before and after the pandemic, here are some
recommendations for policymakers and investors:
For Policymakers:
For Investors:
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• Focus on Resilience: Look for investment opportunities in sectors that have shown
resilience during the pandemic, such as healthcare and technology.
• Leverage Digital Trends: Capitalize on the acceleration of digitalization by investing
in emerging technologies and digital services.
• Prioritize Sustainability: Consider ESG factors in investment decisions to align with
the shift towards sustainable development.
• Explore Emerging Markets: Evaluate the potential of emerging markets, which may
offer higher growth prospects post-pandemic.
• Diversify Investments: Diversify portfolios to spread risk and take advantage of
different growth patterns across sectors and regions.
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CHAPTER 9
43
Bibliography and References
Here is a compiled list of all the sources cited throughout the project:
These sources have been instrumental in providing the data and insights necessary for the
analysis conducted in this project. They offer a wealth of information for further exploration
and understanding of FDI trends and their implications.
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