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

REIMAGINING INDIA
2006-07 (April-October 2006), with the
largest amount of India’s outward FDI
going to the manufacturing sector at
$2403 million (40 percent)
followed by financial and nonfinancial
services sector (37 percent),
other activities (16 percent) and trading
sector (7 percent), respectively. Although
there has been a decline in the
share of manufacturing sector in India’s
total outward FDI, it still accounts for
While most of the investments from developing
|countries are into other developing countries and in
the service sector, outward FDI from India in the
recent years has been primarily in the developed
countries and in the manufacturing sector
more than half of the outflows of FDI
from the country. In terms of its geographical
and sectoral diversification of
outward FDI, India presents two sharp
contrasts with other developing countries.
While most of the investments
vice sector, outward FDI from India in
the recent years has been primarily in
the developed countries and in the manufacturing
sector. 16
4. Modes Of Outward FDI
From India
In the period preceding 1990s, most of
the outward FDI from India was in the
form of greenfield investments for establishing
new joint ventures or subsidiaries
overseas. Since late 1990s, however,
most of the outward FDI from the
country has been through Mergers and
Acquisitions (M&As) abroad, which was
possibly due to the fact that greater risks
and time could be associated with
greenfield investments abroad. We may
also note here that India’s overseas in-
from developing countries are into other
developing countries and in the servestment
was traditionally led by a small
group of family-owned large business
conglomerates, like Tatas, Birlas,
Thapars etc., which focused mainly on
the neighbouring developing countries.
Since 1990s, there has been an emergence
of a large number of non familyowned
as well as small and medium
sized Indian firms, which have chosen
outward investment as an important
strategy for ‘internationalization’. 17
As mentioned above, the expansion of
outward FDI from India over the last
decade has been led mainly by M&As
abroad. Indian companies have marked
their presence in several industries –
software and IT services, pharmaceuticals,
biotechnology, automotives, hotels
and hospitality, and other consumer
products. Although a significant part of
the Indian outward FDI stock is still in
manufacturing, overseas investment in
software and IT services (for instance,
those by Infosys, TCS and Wipro) has
grown rapidly. Pharmaceuticals companies
such as Dr. Reddy’s and Ranbaxy
Table 2: Sectoral Distribution Of Approved Outward FDI Flows From India (Million $)
Year
Manufacturing
Financial services
Non- financial
services
Trading
Others
Total
OFDI
Value
Share
(in%)
Value
Share
(in%)
Value
Share
(in%)
Value
Share
(in%)
Value
Share
(in%)
1999-00 548.8 31.2 4.3 0.2 1143.5 65.1 58.3 3.3 2.3 0.1 1757.2
2000-01 370.7 26.8 16.6 1.2 876.5 63.4 89.2 6.5 29.1 2.1 1382.1
2001-02 2210.9 73.1 48.6 1.6 565.5 18.7 139.2 4.6 61.3 2.0 3025.5
2002-03 1056.7 71.9 1.8 0.1 280.2 19.1 69.9 4.8 61.7 4.2 1470.3
2003-04 765.6 52.8 35.1 2.4 438.8 30.3 76.9 5.3 134.1 9.2 1450.5
2004-05 2026.4 72.3 9.2 0.3 548.2 19.5 69.1 2.5 151.3 5.4 2804.2
2005-06 1711.1 59.9 167.7 5.9 707.4 24.8 134.3 4.7 134.3 4.7 2854.8
2006-07* 2402.8 39.8 5.8 0.1 2250.0 37.3 390.8 6.5 985.6 16.3 6035.0
Total 11093.1 53.4 289.1 1.4 6810.1 32.8 1027.7 4.9 1559.7 7.5 20779.7
Source: Same as Table 1 above. Note: * April-October 2006.
112 THE IIPM THINK TANK