Indian firms have been investing abroad for many years. But it is only since the late-1990s that outward FDI flows have risen rapidly, albeit from low levels. Its outward FDI stock has grown from $0.6 billion in 1996 to $5.1 billion in 2003, taking India to 14th place in terms of outward FDI stock among developing economies. Its annual average outward FDI flows during 2001-2003 reached $1.1 billion, which were comparable to those of Malaysia and almost double those of Greece. Most Indian FDI is in manufacturing, but FDI in IT services has begun to grow rapidly, particularly through mergers and acquisitions. "The increasing competitiveness of Indian firms and their interest to expand globally, particularly in IT-related services and pharmaceuticals, are driving its outward FDI growth" said Karl P. Sauvant, Director of UNCTAD´s Investment Division. Access to markets, natural resources, distribution networks, foreign technologies and strategic assets like brand names, are the main motivations. The liberalization of government policies and relaxation of regulations on FDI abroad have also helped.
Indian outward FDI is expected to grow, in particular in IT and software services. India’s membership in various regional integration arrangements also provides Indian firms with a favourable platform to strengthen their presence in these partner economies. Not least, the encouragement and the significant liberalization of policies by the Government of India will continue to play an instrumental role in the expansion of Indian firms abroad.
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INDIA´S OUTWARD FDI: A GIANT AWAKENING?
