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

MORE MARKETS, LESS GOVERNMENT
factors, such as, a liberalized policy regime
and growing competitive pressures
in the domestic market, among others.
As the Indian firms look out for other
markets and better technologies, the
firms in the developed countries seem
to have offered both in case of several
industries. However, there is a clear
need for precaution in this regard, since
Indian firms borrowing from the global
financial markets for the overseas acquisitions
get exposed to the volatilities of
the global financial markets. In fact,
some of the major acquisitions by Indian
firms in the recent years have been predominantly
financed by debt from the
global financial markets. There is also a
strong need to reorient the motives of
the overseas acquisitions by Indian firms
towards the long-term development of
the country. In their overseas investments,
Indian firms should try to focus
more on resource-seeking activities,
such as exploration and development of
mineral and energy resources (the acquisition
of Sakhalin Oil fields in Russia
by ONGC is an example of this). We
may note here that China, in order to
sustain its rapid growth, has invested
the most in exploration of oil fields and
industrial raw materials. However, it
would be interesting to see how the recent
weakening of Dollar influences
policies governing overseas investment
as well as the capacities of Indian firms
in this regard.
End Notes
1
These results have been computed
from the UNCTAD FDI database accessed
from .
2
UNCTAD (2006) ‘World Investment
Report 2006–FDI from Developing
and Transition Economies: Implications
for Development’.
3
As has been argued by Kumar, Nagesh
(1995) ‘Industrialization, Liberalization
and Two Way Flows of Foreign
Direct Investments: The Case of India’,
Discussion Paper Series, No.
9504, INTECH- The United Nations
University, Netherlands.
4
In 1995, the task of supervision of
overseas investments was transferred
from Ministry of Commerce, Govt.
of India to the Reserve Bank of India
(RBI). This was intended to provide
a single window system for overseas
investment approvals.
5
Gopinath, Shyamala (2007) ‘Overseas
Investments by Indian companies
- Evolution of Policy and Trends,’
Key note address at the International
Conference on Indian cross-border
presence/acquisitions, Mumbai, January
19.
6
As per the Annual Policy Statement
for the Year 2007-08 by Dr. Y. Venugopal
Reddy, Governor, Reserve
Bank of India, May 14, 2007.
7
“RBI further liberalises Forex Rules’,
RBI Press Release, September
2007.
8
Nayyar, Deepak (2007) ‘The Internationalization
of Firms from India:
Investment, Mergers and Acquisitions’
, SLPTMD Working Paper Series,
No. 004, Department of International
Development, University
of Oxford.
9
As has been reported by the Department
of Economic Affairs, Ministry
of Finance, Government of India.
10
These limitations have been pointed
out by several analysts, for instance,
Nayyar (2007).
11
As has been observed by Nagesh Kumar
(1995).
12
Lall, S. (1983) The New Multinationals:
The Spread of Third World Enterprises,
New York: John Wiley
13
As reported by UNCTAD in World
Investment Report 2006.
14
UNCTAD (2004) ‘India’s Outward
FDI: A Giant Awakening?’,
UNCTAD/DITE/IIAB/2004/1,
20th October.
15
Pradhan, J. P. (2007) ‘Growth of Indian
Multinationals in the World
Economy: Implications for Development’,
Working Paper, No. 2007/04,
ISID, New Delhi.
16
Nagaraj, R. (2006) ‘Indian Investments
Abroad: What Explains the
Boom?, Economic and Political
Weekly, Vol. XLI, No. 46, pp.
4716-4718.
17
Pradhan, J. P. (2005) ‘Outward Foreign
Direct Investment from India:
Recent Trends and Patterns’, Working
Paper, No. 153, Gujarat
Institute of Development Research,
Ahmedabad.
18
As reported by UNCTAD in World
Investment Report 2006.
19
MAPE Advisory Group ( 2006)
“India Inc Going Abroad: Indian
Companies’ Foreign Acquisitions’,
background paper for the Seminar
hosted by the IIM Calcutta on
India Inc Going Abroad - Investing
and Managing Internationally,
Bangalore, April 19. There are two
other studies on acquisitions abroad
by Indian firms. First is by FICCI
in 2006 and, the second is by CMIE
in 2007.
THE INDIA ECONOMY REVIEW
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