While India firmly hedges it bets on a high growth rate, the world is far from seeing it as the next global investement destination, warns a new report released on Tuesday by the United Nations conference on trade and investment (UNCTAD).

India has dropped six places in the global trade body's 2010 rankings of highest foreign direct investment (FDI) compared to the 2009 list.

“India's ranking has dropped to 14th place in 2010 from 8th position in 2009. India attracted FDI worth $25 billion last year, much lower than the inflows of $36 billion seen in 2009,” says the world investment annual report 2011.

“Unless we solve the land acquisition problem in India, FDI is not coming to areas where big land is required,” said policy analyst Premila Nazareth who released the report.

Nazareth also blamed corruption for the drop in foreign investment headed India's way. “For instance, the first come first serve basis kind of policies breed corruption,” Nazareth told reporters hinting at the 2G spectrum allocation. She said it is a worrying sign for India in terms of investment in the country.

“Once there is policy coherence in place, higher investment is going to take place,” said Biswajit Dhar, director general, research and information system for developing countries (RISDC).

The report also said, “FDI to South Asia declined to $32 billion, reflecting a 31 percent slide in inflows to India and a 14 percent drop in flows to Pakistan. But inflows to Bangladesh increased by nearly 30 percent to $913 million.”

While inflows to India slowed down, FDI in China has increased in 2010. “FDI to East Asia rose to $188 billion, thanks to double-digit growth in inflows to China and Hong Kong. Inflows to China climbed by 11 percent to $106 billion,” the report added.

The report said that for the first time, developing and transition economies together attracted more than half of global FDIs.

The report also talked about global FDI remaining below the peak in 2007, before the global financial crisis. “Global FDI rose five percent in 2010, though still 37 percent below 2007 peak,” the report noted.

However, the report mentioned a silver lining predicting further growth in 2011. “The recovery of FDI flows will continue in 2011 and will reach a total of some $ 1.4 to $1.6 trillion, thus returning to the pre-crisis average. Thereafter, flows are forecast to rise to $1.7 trillion in 2012 and $1.9 trillion in 2013,” it held.

It also added that the FDI flows are still not immune to uncertainties. “Risk factors such as the unpredictability of global economic governance, a possible widespread sovereign debt crisis, and fiscal and financial sector imbalances in some developed countries, as well as rising inflation and signs of overheating in major emerging economies, may yet derail the FDI recovery," the report said.

Read the report