Syllabus: GS3/Economy
Context
- As per the RBI, Outward foreign direct investment (OFDI) by domestic firms has seen a jump of nearly 17% to $37.68 billion in 2024.
About
- In 2023, total overseas direct investment stood at $32.29 billion.
- In the last calendar year, overseas FDI by local companies in the form of equity stood at $12.69 billion, a rise of 40% over the 2023.
- This is a positive sign that Indian companies are also going global.
Overseas Direct Investment
- Overseas Direct Investment (ODI) refers to an investment made by a company or individual in assets or businesses located in another country.
- It involves directly owning and controlling a foreign business or setting up operations such as subsidiaries, joint ventures, or branches in foreign markets.
- Key points about ODI:
- Control and Influence: A significant level of control or influence over the foreign business (usually at least 10% ownership).
- Purpose: To expand their operations, access new markets, benefit from resources, or diversify risks.
- Investment Forms: It can include investments in foreign companies, real estate, infrastructure projects, or other assets.
- Sectors for Investment by India: Hotels, construction, manufacturing, agriculture, mining and services.
- Countries for Investment: Singapore, US, UK, UAE, Saudi Arabia, Oman and Malaysia, among others.
Significance
- Transfer of technology and skill, sharing of results of research and development (R&D),
- access to wider global market,
- promotion of brand image,
- generation of employment and utilisation of raw materials available in India and in the host country,
- drivers of foreign trade and also a source of foreign exchange earnings.
Conclusion
- Joint ventures (JVs) and wholly owned subsidiaries (WOS) have become vital avenues for Indian businesses aiming to boost their global presence.
- The fact that Indian companies are investing in their own subsidiaries indicates that they are expanding outside.
- The Indian companies’ continued international reach are not only helping them expand globally but are also fostering deeper economic ties between India and other nations.
Source: IE
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