(De)globalization monitor: Should I stay or should I go? : India, ASEAN and the fragmentation of FDI

This report investigates the fragmentation of foreign direct investment (FDI) in India and ASEAN in the context of evolving geopolitical dynamics and global economic shifts. By delineating four distinct phases of globalization, the analysis reveals how systemic shocks and geopolitical tensions have reshaped global FDI flows since the early 2000s. Employing the Ideal Point Distance (IPD) methodology, the study highlights India's gradual geopolitical realignment toward the United States and ASEAN's consistent proximity to China, with emerging signs of convergence toward the US. Further, analysis using the Herfindahl-Hirschman Index (HHI) reveals a trend of increasing FDI diversification in both regions, with ASEAN surpassing India in attracting reallocated global FDI. These findings underscore the interplay between geopolitical alignment and economic pragmatism in shaping investment patterns. The report concludes that while geopolitical factors significantly influence FDI fragmentation, economic diversification and regional integration are equally critical. Further research should explore alternative measures of geopolitical alignment and assess the effects on FDI in India and ASEAN amid intensifying global fragmentation.