Effect of COVID-19 pandemic on the inflow of FDI into Indian economy

Abstract

Covid-19 has battered the global economy causing the worst recession since The Great Depression of the 1930s. By the end of 2020, the worlds GDP maybe about 7.5% lower than it would have been without the pandemic. Globally more than 15% of the young people who were in work before the Covid-19 have lost their jobs. Widespread lockdowns have caused changes that were already affecting the world economy in technology, finance and trade. With great deal of uncertainty in the transactional space, investors are now more cautious before making any making any significant transactions. Global FDI flows fell by more than 49% in the first half of 2020 and even under the most optimistic scenario after the economic support policy measures by the governments, the numbers don’t seem to be getting better. The developing countries are hit even worse because the sectors attracting the largest shares of FDI such as primary and manufacturing sectors are hit the worst. FDI being a critical driver of the economic growth could play an important role in supporting the economies during and after the crisis.