Increased investments in traditional manufacturing sectors among other investments have helped India surpass South Korea to become Asia's fourth largest FDI recipient in 2006, a UNCTAD report said.

Overall, FDI grew in 2006 for the third consecutive year to reach 1.2 trillion dollars, the UN Conference on Trade and Development (UNCTAD) said but warned that economic growth is likely to slow down this year because of high commodity prices and other factors.

China and India are challenging the dominance of Asia's newly industrializing economies as the main sources of FDI in the developing world, the report added.