Cos look for global footprint by investing abroad: CARE

Total FDI investment made by India between April-January FY14 stood at $ 29,294 million

March 15, 2014 11:20 IST | India Infoline News Service
Investments abroad encourage economic co-operation between India and the host countries. They result in transfer of technology and skills, sharing research & development, access to the global market, employment generation and utilization raw materials available in India and other countries. Thus, integration of the Indian economy with the rest of the world is achieved through overseas investment.
Long seen as attractive destinations by foreign capital, India and Indian companies are increasingly looking at expanding their global footprint by investing overseas.
This Report analyses various aspects of foreign direct investment (FDI) made by India abroad. It also provides break up of various activities in which investments were made and which countries attracted these investments.
After moderate FDI investment between FY03 and FY04, FDI investments started gradually increasing owing to the relaxations in overseas investment policy post 2004. FDI investment by India picked up significantly in FY07 and peaked in FY09 with investment of $ 19,365 million abroad.
The gradual increase in outward investments also coincided with the time of financial crisis which first hit in 2007. Also, the overall foreign exchange reserve position provided comfort to progressive relaxation of the capital controls and simplification of the procedures for outbound investments from India. The year FY08 also witnessed appreciation of the currency with average exchange rate at Rs 40.24/$.
The trend in India’s outward FDI was moderately affected in FY10; a rebound was seen in FY11. However, past two years witnessed a decline in these investments from $17,195 million in FY11 to $11,097 million in FY12 to $7,134 million in FY13.
FDI investment is divided into three categories; equity, loans and guarantee issued. Most of the investments are made in the form of guarantee issued followed by equity and lastly in the form of loans. In terms of flow of dollars out of the country equity and debt would be relevant as a very small proportion of guarantees are invoked which necessitate the flow of dollars. Therefore, the outward investment would be around $ 10.2 bn so far.
Total FDI investment made by India between April–January FY14 stood at $ 29,294 million. Out of the total investment, $19,079 million were guarantee issued, which accounted for 65.1%. Investment in equity and loans stood at $ 7,007 million and $ 3,208 million with a share of 23.9% and 11% respectively.
Investment of $8,906 million was made towards Transport, storage & communication services while $7,560 million were invested in activities pertaining to manufacturing.
Investment made towards agriculture and mining stood at $4,826 million. This is significant as it does indicate that companies are looking outside India to leverage opportunity.
Activities such as wholesale, retail trade, restaurant and hotels ($2,903 mn), financial, insurance and business services ($2,351 mn), construction ($1,394 mn) and community, social and personal services ($1,298 mn) witnessed investment between $1,000 million-$3,000 million.
Significantly lower investments were made in electricity, gas and water and miscellaneous activities.

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