The outward foreign direct investment flows from India, particularly in manufacturing and information technology services, have increased since late 1990s even though the country's firms were investing abroad for many years, a new United Nations report has said.
India's outward FDI stock has grown from $0.6 billion in 1996 to $5.1 billion in 2003, taking India to the 14th place in terms of outward FDI stock among developing economies, United Nations Conference on Trade and Development said in a report.
Its annual average outward FDI flows during 2001-2003 reached $1.1 billion, which were comparable to those of Malaysia and almost double those of Greece. Most of India's FDI is in manufacturing but it has begun to grow rapidly in IT services, particularly through mergers and acquisitions.
"The increasing competitiveness of Indian firms and their interest to expand globally, particularly in IT-related services and pharmaceuticals, are driving its outward FDI growth," said Karl P Sauvant, director of UNCTAD's investment division.
Access to markets, natural resources, distribution networks, foreign technologies and strategic assets like brand names, are the main motivations. The liberalisation of government policies and relaxation of regulations on foreign direct investment abroad have also helped, the report said.
Indian outward FDI, it said, is expected to grow, in particular in IT and software services. India's membership in various regional integration arrangements also provides Indian firms with a favourable platform to strengthen their presence in these partner economies, it said.
