Outward Foreign Direct Investment from India

Abstract

Outward foreign direct investment from India has grown fast since 2005-06 owing to inward and outward FDI policy liberalisation in India.This Paper analyses the trends in outward foreign direct investment from India.It also discusses the up-coming issues in context of India's outward foreign direct investment.At the same time, it analyses empirically the determinants of geographical destination of India's outward foreign direct investment.The outward foreign direct investment flows from India rose from US$ 678 million in 2000-01 to US$ 13989 million in 2013-14.Till 2005-06, outward FDI from India has mainly been by way of equities and loans.From 2006-07, funding of overseas FDI by issue of guarantee has also become an important way for Indian companies.The sectoral pattern of outward FDI shows that it has been mainly invested in services and manufacturing sector.The recent trend is showing that outward FDI form India is increasingly flowing to developed countries.Outward FDI from India to developed countries have been mainly through mergers and acquisitions, while the mode of entry to developing economies has mainly been through green-field investments.The real GDP growth in host countries and an efficient governance system in host countries seem the main driver of outward foreign direct investment from India. .It seems that inflation rate in host economy is not considered at all while deciding the location of outward foreign direct investment from India.