Trends, determinants and implications of foreign direct investment from India

Recent trends in global FDI outflows reveal that global FDI outflows witnessed a high growth during 2004–07. In line with the global trend, India's outward FDI proposals as also actual FDI outflows showed higher growth during the period 2004–05 to 2007–08, mainly due to progressive liberalization in India's overseas investment policy during these years. However, in an aftermath of global economic crisis and resultant slowdown in growth of world economy, world FDI outflows showed a decline in 2008. Accordingly, during 2008–09 India's outward FDI proposals as well as FDI outflows from India also recorded decline; and the fall in India's outflows was larger than that of the world in 2008. Moreover, in case of India, the proportion of ‘actual investment outflows ’to ‘cleared investment proposals ’also witnessed a decline. During 2008∼09, manufacturing remained the single largestsector in India's FDI outflows, and there was an increase in the shares of manufacturing and financial services, while a decline in the shares of non-financial services and· trading was· observed. As regards the outward FDI proposals, in India, most of the proposals during 200809 were cleared through automatic route, as it was in 2007–08.