Indian foreign direct investment (FDI) outflows have increased substantially over the last decade, with India emerging as the 21st largest outward investor globally. Annual FDI outflows from India jumped fifty-fold after 2000, with Indian firms investing over $75 billion overseas. While Indian FDI was historically focused on developing countries, firms now invest across various sectors and countries. Major recipients of Indian FDI include manufacturing, IT/IT services, oil/gas, and acquisitions to gain new technologies, clients, and ensure energy and resource security for India's needs.

1. INDIA FDA OUT FLOWS REPORT
Abstract
One of the noteworthy dimensions of India’s increasing integration with the world
economy has been the increase in both gross Foreign Direct Investment (FDI)
inflows to and outflows from the country over the last decade. India has emerged
as the world's 21st largest outward investor, with an investment of over USD 75
billion across the world over the past decade. Annual FDI outflows have jumped
fifty-fold after 2000, and Indian firms have invested over USD 75 billion overseas
in the past decade, in some cases to attain global status by acquiring world-leading
firms. Indian firms now invest across a wide variety of sectors and countries,
departing from their historical focus on trading and textile investments in
developing countries. Following the 25 per cent crisis-induced drop in Indian
OFDI in 2009, Indian firms are once again increasing their overseas investment,
including through mergers and acquisitions (M&As) Investments by domestic
companies abroad dipped by over 36 per cent to about USD 10.3 billion during
2009-10 compared the previous fiscal, with a large chunk of it going into the
manufacturing sector.
Introduction

2. The first overseas Indian venture was a textile mill set up in Ethiopia in 1959 by
the Birla Group of companies, India’s second largest business conglomerate at the
time (Kudaisya 2003). The following year, the Birla Group set up an engineering
unit in Kenya. Sustained growth in Indian overseas investment could be seen
starting around the late 1970s when the industrial licensing system became much
more stringent as part of the government’s move to control big businesses. By
1983, there were 140 foreign investment projects in operation and another 88 in
various stages of implementation (Lall 1986). The total number of approved
projects had reached 229 by 1990 (Kumar 2007). Most of the foreign affiliates set
up during this period were small- or medium-scale ventures; total approved equity
during the period 1975–1990/1991 amounted to only $220 million. The second
wave of internationalization of Indian firms began from about 1995 and gathered
momentum as foreign exchange restrictions on capital transfers for overseas
acquisitions liberalized in successive stages from 2000 (nagaraj 2006). There was a
surge in outward investment from 2005. The number of approved projects
increased from 220 in 1990/1991 to 395 in 1999/2000 and to 1,595 in 2007/2008
(kumar 2008). total FDI outflow from India increased from about $25 million in
the early 1990s to nearly $14 billion in 2007. India’s share in total developing
economy FDI outflows remained below 0.5 percent throughout the 1990s, but
increased continuously since, reaching nearly 6.0% in 2007. India remains a net

3. FDI recipient, even though the gap between outflows and inflows has been sharply
narrowing over the past few years. In 1990, annual outflows, on average, amounted
to 7 percent of inflows. This increased from about 30 percent to 60 percent
between 2000–2005 and 2005-2007.
A majority of India's outbound FDI flows has been as a consequence of a quest for
raw materials since India is a raw material scarce country. For example, Tata Steel
has been active to secure coal assets in Indonesia with superior grade coal due to
lack of high quality coal in the country coupled with a highly regulated
industry where private players are not allowed. A lot of India's FDI outflows
in recent times have been in acquisitions in the IT and IT services sectors.
Indian enterprises have developed expertise and capabilities in IT services which th
ey want to leverage and enter global markets.This is because of opportunities to ac
quire newer clients at lower costs as a consequence of a booming local stock marke
t and low P/Es in economies abroad.
For example HCL Technologies completed the acquisition of Axon for 440 million
pounds. India's FDI flows in recent times has been to acquire crude oil assets
in a bid to secure the energy needs of the country through ONGC Videsh Ltd., a pa
rtnership between ONGC and Mittal Steel.

4. Manufacturing has seen a consistent growth over the last five years. This has espec
ially been driven by sectors such as automotive components and machine tools whi
ch are export oriented and acquire firms for access to technology and
clients, especially in markets such as Europe where client contracts are long term a
nd it is otherwise difficult to get access. The Non financial services and Trading se
ctors have seen wide fluctuations in outward flows.
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