Distinguish between greenfield and brownfield investment. Why is greenfield FDI considered more developmental? Discuss with reference to recent trends.

Foreign Direct Investment (FDI) enters a host economy in one of two ways: it builds new capacity or it buys capacity that already exists. UNCTAD's Trade and Development Report 2026 places India first, with 5.7% of global greenfield investment in 2020–25 [1]. That makes the distinction relevant for policy. What counts is what the capital creates, not only how much of it arrives.

Greenfield vs Brownfield

Why greenfield FDI is more developmental

• Net capacity addition: new plants and machinery raise gross fixed capital formation. An acquisition only moves existing assets to a new owner.
• Employment: it creates new jobs during construction and operation, and builds supplier links with local MSMEs.
• Technology and skills: firms bring in current processes, as with chip plants approved under the India Semiconductor Mission.
• Stickier capital: factories are hard to sell off quickly, unlike equity stakes. In FY25, repatriation and disinvestment rose to $51.5 billion, so net FDI fell to about $0.4 billion even though gross inflows grew about 14% [2].
• Regional spread: new sites can be steered towards lagging regions and industrial corridors.
• Balance: brownfield investment also has value. It revives stressed assets and brings in managerial skill, so the two forms complement each other.

Recent trends

• India leads: India's 5.7% is ahead of Malaysia (4%), Indonesia (3.8%) and China (2.8%) [1]. This reflects China+1 supply-chain diversification.
• Strategic tilt: strategic sectors rose from 16% to 44% of global greenfield investment, and AI infrastructure took the largest share [1].
• Gaps: most of this strategic investment still goes to Europe and North America. The report also warns that higher prices are straining domestic consumption [1], which could weaken investment aimed at selling to Indian buyers.
• Rebound: net FDI recovered to $7.64 billion in April–September 2025 [2].

In short, greenfield FDI builds capacity, jobs and technology, while brownfield investment mainly changes who owns existing assets. India should turn its overall lead into a bigger share of strategic-sector investment through PLI schemes, the IndiaAI Mission and the Semiconductor Mission. It should also report new projects and investor exits separately, and keep inflation under control. Together these steps would align FDI with SDG 9 (industry, innovation and infrastructure).