Outward investments in manufacturing slows

Outward investments in manufacturing slows

Outward investments in manufacturing slows

India’s outward overseas direct investments (ODI) have undergone considerable change not only in terms of magnitude but also in terms of geographical spread and sectoral composition, according to an Exim Bank study released this week. 

“ODI has been playing an increasingly important role in enhancing the global competitiveness of Indian firms by providing access to strategic assets, technology, skills, natural resources and market,” the Exim Bank study titled ‘Outward Direct Investment from India: Trends, Objectives & Policy Perspectives’ noted, saying that the future growth of Indian companies will be influenced by the share that they can garner in the world market, not only by producing in the country and exporting, but also by acquiring overseas assets. 

These include intangibles like brands and goodwill to establish overseas presence and upgrade their competitive strength in the overseas markets. Quoting RBI data, the Exim Bank study said that a significant amount of outward investment from India has been going to countries like Mauritius, Singapore, British Virgin Islands and the Netherlands. The study notes that while in themselves, these countries are neither large enough nor have significant domestic markets to warrant the amount of investments witnessed over the years by Indian entities, they do provide considerable amount of tax benefits which make them attractive destinations for onward routing of investments into third countries. 

“The ultimate destination of investments is not captured in the RBI data, and hence, may not accurately reflect the extent of linkages between India and the rest of the world in terms of actual outward investments,” the study pointed out. In the last one decade, India’s outward investments increased from $1 billion in 2001-02 to $30.9 billion in 2011-12.

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