Last updated: Jun, 2020
Outbound investment from India have undergone a considerable change, not only in terms of magnitude but also in terms of geographical spread and sectorial composition. Analysis of the trends in direct investment over the last decade reveals that while investment flows, both inward and outward, were rather muted during the early part of the decade, they gained momentum during the latter half.
There has been a perceptible shift in Overseas Investment Destination (OID) in last decade or so. While in the first half, overseas investments were directed to resource rich countries such as Australia, UAE, and Sudan, in the latter half, OID was channelled into countries providing higher tax benefits such as Mauritius, Singapore, British Virgin Islands, and the Netherlands.
Indian firms invest in foreign shores primarily through mergers and acquisition (M&A). With rising M&A activity, companies will get direct access to newer and more extensive markets and better technologies, which would enable them to increase their customer base and achieve a global reach.
According to the data provided by Reserve Bank of India (RBI), India’s outward Foreign Direct Investment (OFDI) in equity, loan and guaranteed issue stood at US$ 12.91 billion in 2019-20.
Foreign investment of Indian companies grew 18 per cent y-o-y to US$ 2.69 billion in March 2019. In January 2020, domestic companies invested US$ 2.23 billion in their foreign arms.
Some of the major overseas investments by Indian companies were:
Overseas investment is one of the foremost steps to enter the global marketplace and in recent times, India has taken necessary steps to make its presence felt in the global arena. Investment outlook in some of the overseas market looks positive. For instance, the Indian industry is projected to increase its revenue from Africa. IT services, infrastructure, agriculture, pharmaceuticals and consumer goods are vital to India boosting Africa revenue to US$ 160 billion by 2025 as per McKinsey & Co.
In another development, the Ministry of External Affairs has initiated a move to set up a direct sea and air link between India and the Latin American region as Indian corporates plan significant investments in the mining, oil, IT and pharmaceutical sectors in that region.
Overseas investment by India companies is expected to increase, backed by stable market conditions and considerable impact of the investment on local economies.
Note: Conversion rate used on April 2020, Rs 1 = US$ 0.013123
References: Media Reports and Press Releases, Press Information Bureau (PIB), Reserve Bank of India (RBI), Directorate General of Foreign Trade (DGFT), 'Indian Roots, American Soil' by the Confederation of Indian Industry (CII)
Last Updated: July 24, 2020