The country is expected to witness a sharp decline in foreign direct investment (FDI) in 2020 because of the coronavirus pandemic and the economic slowdown, according to the United Nations Conference on Trade and Development (UNCTAD).

The World Investment Report 2020 by the UNCTAD said that India was the ninth largest recipient of FDI in 2019, with $51 billion of inflows during the year, an increase from the $42 billion received in 2018, when India ranked 12 among the top 20 host economies in the world.

In the “developing Asia” region, India was among the top five host economies for FDI. The report said that global FDI flows are forecast to decrease by up to 40 per cent in 2020, from their 2019 value of $1.54 trillion. This would be for the first time since 2005 that global FDI inflows would fall below the $1-trillion mark. Foreign direct investment to developing economies in Asia is projected to decline by up to 45 per cent in 2020.

“In India, the number of greenfield investment announcements declined by 4 per cent in the first quarter, and merger & acquisitions contracted by 58 per cent .”

Direct tax kitty

Gross direct tax collection declined 31 per cent to Rs 1,37,825 crore till June 15 of the current fiscal as advance tax mop-up plunged 76 per cent, an official said on Tuesday. The Budget for 2020-21 had estimated a 12 per cent rise in gross tax collections at Rs 24.23 lakh crore.

“Total advance collection fell a massive 76.05 per cent to Rs 11,714 crore so far in the June quarter from Rs 48,917 crore in the corresponding three-months in FY20,” an income tax official said.

According to the official, advance corporate tax collection plummeted 79 per cent to Rs 8,286 crore in the first quarter from Rs 39,405 crore a year ago.

Advance personal income tax collection declined 64 per cent to Rs 3,428 crore from Rs 9,512 crore a year ago.

This has pulled down "gross direct tax collection by a full 31 per cent to Rs 1,37,825 crore in the first quarter of FY21, down from Rs 1,99,755 crore in the June 2019 quarter," the official said.

In South Asia, FDI is also expected to contract sharply in 2020. "In India, the biggest FDI host in the subregion, with more than 70 per cent of inward stock, the number of greenfield investment announcements declined by four per cent in the first quarter, and Merger & Acquisitions contracted by 58."

However, the country's economy could prove the most resilient in the region. FDI to India has been on a long-term growth trend. Positive, albeit lower, economic growth in the post-pandemic period and India's large market will continue to attract market-seeking investments to the country," the report said.

It added that the magnitude of the logistical challenges during both the lockdown and the recovery remain a big downside risk for FDI in the medium term for India.