As of January 7, 2025, both India and South Korea are experiencing notable trends in Foreign Direct Investment (FDI), albeit in contrasting directions. In India, net FDI inflows have plummeted to $14.5 billion during the April-October 2024 period, the lowest level in 12 years. This decline is attributed to a significant increase in outflows, which rose to $34.1 billion, as Indian companies increasingly invest abroad. Despite gross inflows remaining strong at $48.6 billion, the overall sentiment reflects a cautious approach from foreign investors amidst geopolitical uncertainties and slowing domestic growth. [4ac953ef]
In stark contrast, South Korea has reported record FDI pledges of $34.57 billion in 2024, marking a 5.7% increase from the previous year. However, actual FDI inflows fell by 24.2% to $14.7 billion. The manufacturing sector attracted nearly $14.5 billion, up 21.6%, while services drew $17.8 billion, a modest increase of 0.3%. Notably, FDI pledges from Japan surged by 375% and from China by 266%, while U.S. investment decreased by 14.6% to $5.2 billion. The Ministry of Trade, Industry and Energy highlighted that these record pledges occurred despite challenging economic conditions. [8e0688c4]
The contrasting FDI landscapes in India and South Korea underscore the complexities of global investment dynamics. While India grapples with declining net FDI and Foreign Portfolio Investment (FPI), which dropped to just ₹427 crore in 2024, South Korea is witnessing a surge in pledges, particularly from its Asian neighbors. [4ac953ef][d2a7b5f2]
In India, the decline in FDI has been linked to high interest rates in the U.S. and a weakening rupee, with analysts noting that the phenomenon of 'US exceptionalism' has diverted investments away from India. Financial analyst Ajay Bagga emphasized that global economic uncertainties are influencing investor sentiment. [9ea6ece2]
Despite the challenges in attracting foreign investment, domestic institutional investors (DIIs) in India have been actively buying into the market, investing ₹37,559 crore in November and ₹107,254 crore in October 2024. This trend has helped cushion the impact of FPI withdrawals. [2f3d5d74]
As the economic landscape evolves, market experts predict that while India's FDI may remain under pressure, South Korea's record pledges could signify a shift in regional investment patterns, particularly as global conditions improve and potential U.S. Federal Reserve rate cuts loom. [4baedea9][db31cf75]