India Data Talk: In June 2011, the Reserve Bank of India (RBI) released the Foreign Direct Investment (FDI) outflow dataset by monthly basis with July 2007 as the starting time point. The FDI outflow dataset details the overseas investments by Indian companies and parties as reported by authorized dealers. It comprises investments in equities, loans, and guarantees issued by Indian firms to their joint ventures or wholly owned subsidiaries. The dataset is disaggregated by destination, especially for main destination countries such as the United States, United Kingdom, Singapore, Mauritius, the Netherlands, and British Virgin Islands. The disaggregation is also available by sector, with the manufacturing sector reporting the largest share in India’s FDI outflow for the 2010-2011 fiscal year.
India’s Foreign Direct Investment Outflow
Chart provided by: CEIC Data
The FDI outflow dataset has come at a time when the domestic economy itself is grappling with slowdown concerns in an environment of high inflation and rising interest rates. FDI by Indian companies halved in July 2011 compared to June 2011, declining from USD 5.48 billion to USD 2.69 billion. Indian firms invested USD 393.31 million in equities, offered USD 464.7 million in loans, and issued USD 1.84 billion in financial guarantees outside of India in July 2011, down from USD 641.37 million, USD 937.04 million, and USD 3.9 billion, respectively, in June. The FDI outflow in the second quarter of 2011 stalled at USD 10.57 billion, a level much lower than the USD 18.26 billion recorded in the same quarter a year ago. The slump in FDI outflow was partially attributable to the persistent economic uncertainties around the world, particularly in the U.S. and Europe.
Things look differently on an annual basis, because the recent declines in FDI have yet been reflected in the latest annual figures that ended in March 2011. After dipping to USD 17.1 billion and USD 18 billion in the two fiscal years following the 2008 global financial crisis, India’s FDI outflows soared to USD 43.9 billion in the 2010-2011 fiscal year. Compared to the figures for the components of FDI outflows to a year ago, equities increased 38% to USD 9.4 billion, loans rose 103% to 7.3 billion, and financial guarantees jumped 258% to USD 27.2 billion in the 2010-2011 fiscal year.
According to a report from Columbia University in September 2010, India has emerged as the world’s 21st largest outward investor, possessing the power in acquire some of the world’s leading companies. Substantial improvements in the country’s economic performance and the competitiveness of its firms and their strategies, along with ongoing liberalisation in economic and overseas investment policies, have contributed to the solid standing of India’s FDI outflows.
Chan Yee Lui – CEIC Analyst