In the fiscal year 2023, India saw a significant increase in Outward Direct Investment (ODI) by Indian firms, as well as a surge in inward Foreign Direct Investment (FDI), according to a census conducted by the Reserve Bank of India (RBI).
Foreign Direct Investment (FDI)
- FDI is a type of cross-border investment in which an investor from one country establishes a lasting interest in an enterprise in another country.
- FDI can take various forms, such as acquiring shares, establishing a subsidiary or a joint venture, or providing loans or technology transfers.
- FDI is considered to be a key driver of economic growth, as it can bring in capital, technology, skills, market access and employment opportunities to the host country.
Outward Direct Investment (ODI)
- An ODI is a business strategy in which a domestic firm expands its operations to a foreign country.
- Employing ODI is a natural progression for firms if their domestic markets become saturated and better business opportunities are available abroad.
- American, European, and Japanese firms have long made extensive investments outside their domestic markets.
- China has emerged as a large ODI player in recent years.
Key Highlights of the Outward Direct Investment Trends
Singapore Leads in ODI
- Singapore emerged as the largest beneficiary of Indian ODI in FY2023, receiving Rs 2.03 lakh crore, representing 22.3% of the total ODI, indicating the growing interest of Indian firms in the Singaporean market.
- Singapore serves as a crucial hub for Indian businesses expanding internationally.
- Singapore, the US, the UK, and the Netherlands were among the top destinations, receiving 60% of the total Rs 9.1 lakh crore invested during FY23.
Overall ODI Growth
- Indian firms’ total ODI rose by an impressive 19.46%, reaching Rs 9.11 lakh crore in FY2023, compared to Rs 7.62 lakh crore in 2022.
Tax Havens in the Mix
- Bermuda, Jersey and Cyprus are three jurisdictions known for tax benefits and are in the top ten countries that received Indian ODI.
- Bermuda, in particular, is renowned for its favourable tax policies, including no taxes on profits, income, dividends, or capital gains.
Highlights of Inward Foreign Direct Investment Trends
Total FDI Growth
- India witnessed a notable increase in FDI flows, with the total FDI inflow in FY2023 reaching Rs 49.93 lakh crore, compared to Rs 46.72 lakh crore in 2022.
US Tops Inward FDI
- The United States was the largest source of inward FDI in India in FY2023, bringing in Rs 8.58 lakh crore, accounting for 17.2% of the total share.
Other Major FDI Contributors
- Mauritius, the UK, and Singapore followed the US in contributing to India’s FDI. The top ten countries were responsible for over 90% of the total FDI inflows.