India Inc is getting experimental with every passing day and as a result, is increasingly looking to invest abroad to accomplish its motives of resource-hunt or market-hunt or technology-hunt. Investments from India are no longer chasing just stressed assets in the US and Europe or for that matter mining resources in Australia but are largely placing focus on green-field projects around a larger geography encompassing the middle east, Africa, and south east Asia. Similarly, it's not just the Tatas, Ambanis and the Ruias, who are scouting for opportunities in foreign lands, corporate groups of all sizes are also exploring options outside to get greater access to the global markets.
Mr Pranab Mukherjee, the Finance Minister, has reported that while Mauritius is a hot destination for Indian corporate investing abroad, the US and Singapore also hold strategic importance for the same. The United Arab Emirates (UAE) is an upcoming market for Indian outflows.
Government Initiatives
Indian Government is making all efforts to make the country open its wings in the global sky. With economy retaining its growth even in the toughest of the times, India is looked upon as a strategic international player and an important source of funds for the rest of the world.
Indian entrepreneurs consider joint ventures and wholly-owned subsidiaries (WOS) as significant channels for promoting international business. The Indian Government also provisions for financial support to encourage exports including project exports from India. The overall foreign exchange reserve status has facilitated relaxed capital controls and simplified procedures for outbound investments from India; thanks to steady increment in capital inflows during the second half of 2000s.
Recently a delegation from Slovenia visited India and invited Indian investments in sectors such as mining, tourism and info tech. The 22-member business delegation intended to make ways to enhance the bilateral co-operation and signalled tax reliefs and direct subsidies for Indian direct investments. The bilateral trade between India and Slovenia is expected to double in the next three to four years.
Moreover, the Reserve Bank of India (RBI) has recently passed a notification as per which overseas direct investment by Indian Parties in Pakistan would be considered under the approval route henceforth. RBI would now make amendments to the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, to incorporate changes. Bilateral trade between India and Pakistan stood at about US$ 3 billion and is expected to reach US$ 6 billion by 2015.
Road Ahead
The Government, RBI, and Indian Corporate entities are constantly reviewing the policies and regulations including Home Country Measures (HCMs) to boost globalisation efforts through outward foreign direct investment (FDI) without having any negative effects on our domestic economy and its macro-economic stability.
India is expected to be the largest source of emerging market multination enterprises (MNEs) by 2024, according to a recent report by PricewaterhouseCoopers (PwC). By that time, India would be having 20 per cent more MNEs than China, and more than 2, 200 Indian firms are anticipated to invest overseas in the next fifteen years. In a nutshell, Indian MNEs are poised to carve a niche in business services and high-profile manufacturing sectors.
Exchange Rate Used: INR 1 = US$ 0.01847 as on February 20, 2013
References: Media Reports, Press Release, Reserve Bank of India website