[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

Deepika Wadhwa,
Research Scholar,
Centre for Economic Studies
and Planning, Jawaharlal
Nehru University, New Delhi
Overseas Investment By Indian Firms:
Recent Trends and Patterns
"Today, one of the engines powering the remarkable
growth in India is entrepreneurship. After
being shackled for a number of decades, the
wings of India's large class of talented private
entrepreneurs have been fully freed. After a few
tentative fl utters in the early 1990s, they are
now showing their true worth. Many indigenous
start-ups are becoming global success stories
and Indian business has done unexpectedly
well in the last decade and a half – largely as a
result of more effi cient use of resources, men
and machines."
-Kamal Nath
Minister of Commerce & Industry at
United States-India Business Council
(USIBC) Annual Summit, June 27, 2007
1. Introduction
Last two decades have witnessed liberalisation
and globalisation of many developing
economies across the world.
One of the key outcomes of this process
has been enhanced mobility of capital
across different countries. This has resulted
in a significant increase in the
outward Foreign Direct Investment
(FDI) flows not only from the developed
countries but also from several developing
and transition economies, especially
since the early 1990s. The value of
outward FDI flows from the developing
and transition economies increased
from $ 12 billion in 1990 to $193 billion
in 2006 (which accounted for about 16
percent of the world total outward FDI
flows). Likewise, the value of the outward
FDI stock of developing and transition
economies went up from only $146
billion in 1990 to $881 billion in 2000,
reaching $1.7 trillion in 2006 (14 percent
of the world total outward FDI stock).
In case of India too, the FDI outflows
have assumed significant proportions
(in absolute terms) only since the early
1990s. India’s total outward FDI stock
rose from $124 million in 1990 to (almost)
$13 billion in 2006; still it was
ranked only 16th among the developing
countries in terms of the total outward
FDI stock. Likewise, India’s outward
FDI flows increased from a meagre $6
million in 1990 to $9.7 billion in 2006. 1
India’s ranking in the Outward FDI
Performance Index (of UNCTAD) has
improved over these years, from 82 in
1990 to 56 in 2006. The ‘internationalization’
of Indian firms is also reflected
in the growing number of Indian companies
investing abroad, which has increased
from 187 in the early 1990s to
1700 by the early years of the present
decade. 2
In this backdrop, the present paper
deals with some of the important aspects
of overseas investment by Indian
firms over the last decade. The second
section of the paper presents a brief account
of the changing policy framework
in India with regard to outward FDI.
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