India Inc's offshore investment surges 62% to $2.67 bn

Indian corporates are aggressively expanding their operations abroad in tune with their growing ambitions and zest to grab opportunities thrown up by globalisation.

The Indian outbound investments, which grew by 62.6 per cent in 2005-06 to $2.67 billion, are ample testimony to India Inc's growing global presence.

Overseas investments from India have grown three fold since 2000-01. The investments in 2004-05 stood at $1.64 billion, while they were just over $700 million in 2000-01.

Almost 60 per cent of the investments in 2005-06 went into the manufacturing sector, recording a nine-fold growth in the six-year period beginning 2000.

Overseas investments are being funded through a variety of sources like use of foreign exchange in India, capitalisation of exports, balances held in exchange earners' foreign currency accounts and swap of shares.

A part of overseas investment is also financed through funds raised abroad such as external commercial borrowings, foreign currency convertible bonds and ADRs/GDRs. Overseas investment also takes place through leveraged buyout by way of setting up special purpose vehicles (SPVs) abroad.

The Reserve Bank of India (RBI) has pointed out that overseas investments, which started off initially with the acquisition of foreign companies in the IT and related services sector, have now spread to other areas, particularly pharmaceuticals and petroleum.

Following the phased liberalisation in the regime for Indian investments overseas, investments in joint ventures and wholly-owned subsidiaries abroad have emerged as important avenues for promoting global business by Indian entrepreneurs.

These investments are also a source of increased exports of plant, machinery and goods from India.

The transfer of technology and skill, sharing results of research and development, access to wider global markets, promotion of brand image, generation of employment and utilisation of raw materials available in India and in the host country are other significant benefits arising out of such overseas investments.