Courtesy of Press Information Bureau

Recent news on foreign direct investment (FDI) into India has been rather grim. India’s central bank recently said that in the first two months of the fiscal year beginning April 1, 2012, FDI fell by 38 percent, dropping from $5.15 billion in the same period last year to a meager $3.2 billion this year. The news on foreign portfolio investment was equally grim – the net drain from the economy in this period was $1.4 billion, compared to a net inflow of $1.82 billion last year at this time.

By contrast, the official Twitter page of Prime Minister Manmohan Singh ran a series of cheery tweets on Monday.

“India is the 3rd most desirable destination for Foreign Direct Investment,” said one.

“FDI inflows to S Asia turned around as a result of higher inflows to India, the dominant FDI recipient in the region” said another tweet.

“FACT: ‘The two large emerging economies, China and India, saw inflows rise by nearly 8 percent and by 31 percent, respectively’,” another boasted.

The tweets cited the recently released World Investment Report 2012 by the United Nations Conference on Trade and Development (UNCTAD). We at India Ink initially found the discrepancy between the gloomy central bank statistics and the apparently good news in the U.N. report to be puzzling.

After closer examination the apparent contradiction is more easily understood. The official statistics relate to the actual level of investment in the months of April and May of this year.

The UNCTAD report, on the other hand, is based on much older statistics and a survey that asked a smattering of anonymous company executives from multinationals around the world where they might like to invest in the future. The FDI inflows the report cites are for 2011. The “desirable destination” ranking comes from a survey conducted by UNCTAD.

Based on a list of 174 “validated country responses,” India ranked third, after China and the United States, as the area that these companies would most like to invest in sometime between 2012 and 2014. This survey was conducted by e-mail and through a “dedicated Web site” between February and May of this year.

There is no indication of which official within each of these companies might have responded to the e-mail query or on the Web site: whether, for instance, someone in fact responsible for making an investment decision, or a public relations officer tasked with responding to the U.N. organization’s survey.

Either way, these responses represent a wish list of sorts, rather than any indication of a firm commitment to a future investment. Inflows did not turn around, although the number of anonymous company executives who wished they could invest in India did increase. (Maybe because actually investing here has become so tenuous after recent Finance Ministry proposals raised questions about retroactive taxation.)

How about the claim that inflows to South Asia turned around as a result of inflows to the dominant recipient, India? These figures also relate to the 2010-2011 fiscal year, and India’s dominance is easily explained. The grouping of countries, other than India, includes Afghanistan, Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and Iran, a country generally not considered a South Asian economy. India is by far the largest economy in its region, and Iran, which faces numerous sanctions due to its nuclear program, could hardly be expected to be a major recipient of foreign investment. It’s hardly surprising, therefore, that India should have received the lion’s share of foreign investment flowing into this region.

What’s the bottom line?

The hard statistics of actual FDI flows tell one tale, and a survey of a relatively small number of possible yet uncommitted investors tells another. We’ll leave it to you, the readers of India Ink, to decide which you find more relevant.

Vivek Dehejia is an economics professor at Carleton University in Ottawa, Canada, and a writer and commentator on India. You can follow him on Twitter @vdehejia.