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Reasons for Indian Companies
to invest overseas

Main industries that engage in outward FDI

European Market

Services provided by invest-India

Reasons for Indian Companies to invest overseas

The outward FDI of developing and transition companies has risen tremendously over the last few years. For India the absolute terms of FDI have risen, but compared to the GDP of India there is still a lot of potential for more outward FDI, according to the World Investment Report 2006 by the United Nations Conference on Trade and Development. The main reasons according to this report for Indian companies to engage in outward FDI are:

Market related factors, more and more companies are looking for a niche market for their product, and especially the IT-sector finds a growing market abroad.

More companies realize that they operate in a global economy and not in a domestic one. Therefore specialization from abroad are used to improve the way of doing business of the company.

Supportive host-governments. Most host-governments are very supportive towards incoming FDI because it adds to their economy.

There is a growing concern about running short of key resources and inputs for the company’s economic expansion

The next table shows the inflow and outflow of FDI for various countries in South, East and South-East Asia and Oceania in 2005

Range

FDI Inflows

FDI Outflows

Over $ 50 billion

China

$ 10-$ 49 billion

Hong Kong ( China ) and Singapore

Hong Kong ( China ) and China

$ 1.0- $ 9.9 billion

India , Republic of Korea, Indonesia, Malaysia, Thailand, Pakistan, Vietnam, Taiwan Province of China and Philippines

India , Taiwan Province of China , Singapore , Republic of Korea , Indonesia and Malaysia

$ 0.1- $ 0.9 billion

Macao ( China ), Bangladesh , Cambodia , Myanmar , Brunei , Darussalam , Sri Lanka , Mongolia , Marshall Islands and New Caledonia .

Less than $ 0.1 billion

French Polynesia, Papua New Guinea, Lao People’s Democratic Republic, Kiribati, Vanuatu, Maldives, Tuvalu, Nepal, Tonga, Palau, Timor-Lest, Nauru, Afghanistan, Bhutan, Tokelau, Solomon Islands, Samoa and Fiji

Pakistan, Sri Lanka, Fiji, Bangladesh, New Caledonia, Cambodia, Papua New Guinea, Vanuatu, Cook Islands, Maldives and Macao (China)

Source: UNCTAD, FDI/TNC Database