[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...
[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...
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MORE MARKETS, LESS GOVERNMENT<br />
factors, such as, a liberalized policy regime<br />
and growing competitive pressures<br />
in the domestic market, among others.<br />
As the Indian firms look out for other<br />
markets and better technologies, the<br />
firms in the developed countries seem<br />
to have offered both in case of several<br />
industries. However, there is a clear<br />
need for precaution in this regard, since<br />
Indian firms borrowing from the global<br />
financial markets for the overseas acquisitions<br />
get exposed to the volatilities of<br />
the global financial markets. In fact,<br />
some of the major acquisitions by Indian<br />
firms in the recent years have been predominantly<br />
financed by debt from the<br />
global financial markets. <strong>The</strong>re is also a<br />
strong need to reorient the motives of<br />
the overseas acquisitions by Indian firms<br />
towards the long-term development of<br />
the country. In their overseas investments,<br />
Indian firms should try to focus<br />
more on resource-seeking activities,<br />
such as exploration and development of<br />
mineral and energy resources (the acquisition<br />
of Sakhalin Oil fields in Russia<br />
by ONGC is an example of this). We<br />
may note here that China, in order to<br />
sustain its rapid growth, has invested<br />
the most in exploration of oil fields and<br />
industrial raw materials. However, it<br />
would be interesting to see how the recent<br />
weakening of Dollar influences<br />
policies governing overseas investment<br />
as well as the capacities of Indian firms<br />
in this regard.<br />
End Notes<br />
1<br />
<strong>The</strong>se results have been computed<br />
from the UNCTAD FDI database accessed<br />
from .<br />
2<br />
UNCTAD (2006) ‘World Investment<br />
Report 2006–FDI from Developing<br />
and Transition Economies: Implications<br />
for Development’.<br />
3<br />
As has been argued by Kumar, Nagesh<br />
(1995) ‘Industrialization, Liberalization<br />
and Two Way Flows of Foreign<br />
Direct Investments: <strong>The</strong> Case of India’,<br />
Discussion Paper Series, No.<br />
9504, INTECH- <strong>The</strong> United Nations<br />
University, Netherlands.<br />
4<br />
In 1995, the task of supervision of<br />
overseas investments was transferred<br />
from Ministry of Commerce, Govt.<br />
of India to the Reserve Bank of India<br />
(RBI). This was intended to provide<br />
a single window system for overseas<br />
investment approvals.<br />
5<br />
Gopinath, Shyamala (<strong>2007</strong>) ‘Overseas<br />
Investments by Indian companies<br />
- Evolution of Policy and Trends,’<br />
Key note address at the International<br />
Conference on Indian cross-border<br />
presence/acquisitions, Mumbai, January<br />
19.<br />
6<br />
As per the Annual Policy Statement<br />
for the Year <strong>2007</strong>-08 by Dr. Y. Venugopal<br />
Reddy, Governor, Reserve<br />
Bank of India, May 14, <strong>2007</strong>.<br />
7<br />
“RBI further liberalises Forex Rules’,<br />
RBI Press Release, September<br />
<strong>2007</strong>.<br />
8<br />
Nayyar, Deepak (<strong>2007</strong>) ‘<strong>The</strong> Internationalization<br />
of Firms from India:<br />
Investment, Mergers and Acquisitions’<br />
, SLPTMD Working Paper Series,<br />
No. 004, Department of International<br />
Development, University<br />
of Oxford.<br />
9<br />
As has been reported by the Department<br />
of Economic Affairs, Ministry<br />
of Finance, Government of India.<br />
10<br />
<strong>The</strong>se limitations have been pointed<br />
out by several analysts, for instance,<br />
Nayyar (<strong>2007</strong>).<br />
11<br />
As has been observed by Nagesh Kumar<br />
(1995).<br />
12<br />
Lall, S. (1983) <strong>The</strong> New Multinationals:<br />
<strong>The</strong> Spread of Third World Enterprises,<br />
New York: John Wiley<br />
13<br />
As reported by UNCTAD in World<br />
Investment Report 2006.<br />
14<br />
UNCTAD (2004) ‘India’s Outward<br />
FDI: A Giant Awakening?’,<br />
UNCTAD/DITE/IIAB/2004/1,<br />
20th October.<br />
15<br />
Pradhan, J. P. (<strong>2007</strong>) ‘Growth of Indian<br />
Multinationals in the World<br />
Economy: Implications for Development’,<br />
Working Paper, No. <strong>2007</strong>/04,<br />
ISID, New Delhi.<br />
16<br />
Nagaraj, R. (2006) ‘Indian Investments<br />
Abroad: What Explains the<br />
Boom?, Economic and Political<br />
Weekly, Vol. XLI, No. 46, pp.<br />
4716-4718.<br />
17<br />
Pradhan, J. P. (2005) ‘Outward Foreign<br />
Direct Investment from India:<br />
Recent Trends and Patterns’, Working<br />
Paper, No. 153, Gujarat<br />
Institute of Development Research,<br />
Ahmedabad.<br />
18<br />
As reported by UNCTAD in World<br />
Investment Report 2006.<br />
19<br />
MAPE Advisory Group ( 2006)<br />
“India Inc Going Abroad: Indian<br />
Companies’ Foreign Acquisitions’,<br />
background paper for the Seminar<br />
hosted by the IIM Calcutta on<br />
India Inc Going Abroad - Investing<br />
and Managing Internationally,<br />
Bangalore, April 19. <strong>The</strong>re are two<br />
other studies on acquisitions abroad<br />
by Indian firms. First is by FICCI<br />
in 2006 and, the second is by CMIE<br />
in <strong>2007</strong>.<br />
THE INDIA ECONOMY REVIEW<br />
115