The UNCTAD on Wednesday placed India among the top four Asian FDI destinations and said it will get more foreign investment flows as global economy rebounds this year.
In its 2004 World Investment Report released in New Delhi, UNCTAD said world foreign direct investment flows have shifted from manufacturing to services, cornering nearly 70 per cent of the FDI.
The report showed that FDI inflows to India grew by 24 per cent to $4.26 billion dollars in 2003 over $3.44 billion in 2002, putting India among top 10 FDI destinations among developing economies and fourth among Asian nations.
Launching the report here, economic think-tank Research and Information System, Director General, Nagesh Kumar said: "These figures are underestimated as India is not following international definition of FDI. This could be $7 billion according to international norms."
He said as per international norms, FDI should include fresh inflows, reinvestments and borrowing by foreign subsidiaries from their parent companies, whereas India only takes into account new inflows.
According to the UNCTAD estimation, the declining trend of FDI flow worldwide will reverse in 2004 as world economies have shown some encouraging figures this year.
"Global inflows of FDI declined in 2003 for the third year in a row prompted by a fall in FDI flows to developed countries. Prospects for 2004, however, are promising," it said.
The structure of FDI flows has shifted increasingly from manufacturing to services which accounted for 60 per cent of foreign investment in 2002 at about $4 trillion.
Stressing the need to create international framework from the advantages of offshoring services, the report said the developed nations should give up their 'protectionist' approach and promote outsourcing to developing countries.
"Its a win win situation for all including those who are outsourcing giving them competitive advantage," Kumar said.
The World Investment Report said that GE Capital was saving 300 million dollars annually by outsourcing services from India while giving employment to 12,000 people.
Offshoring of software development, BPO and call center services has driven India's rapidly expanding service exports.
According to a NASSCOM report during the past decade the value of exports of software and services jumped from less than $0.5 billion to $12 billion in 2003-04.
Over the years, India has emerged as a source of outward FDI on an average of $1 billion annually, which may be higher if international norms of definition are adopted.
In the recent years some Indian companies including Tata and ONGC have acquired companies abroad or created overseas subsidiaries in their bid to become multinational companies.
On the worldwide FDI flows, UNCTAD said FDI flows to the United States, Central and Western Europe fell while developing countries as a whole showed an increasing trend.
Among the developing nations group, Africa, Asia and Pacific showed an increase in FDI flows while Latin America and Caribbean experienced a declining trend.
But least developed countries numbering about 50 received very little foreign investment, it said.
In Asia a major chunk of inward investment went to China which attracted $53.5 billion in 2003 due to a favourable taxation policy for foreign investors.
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