Indian investments abroad: a growing and diversifying stream of rupees

Much like the emblematic pachyderm that clears paths through its dense jungle, India has been forecasted by the World Bank to be the elephant pulling the world’s economy in 2016 (1), and already was the fastest growing market in 2015 (2). This promise, combined with a set of governmental reforms, explains why the flows of foreign direct investments (FDI) to India is expected to grow by 45% this year (3). In 2015, India already ranked fifth in FDI inflows, after China, the U.S.A, the United Kingdom and Mexico.

Yet framing Hindustan solely as a target for investments would offer a very restrictive portrait, and have foreign entrepreneurs miss potential opportunities. This is because India has steadily and solidly established itself as a major investor country over the years, its rupees flowing into foreign markets primarily via mergers and acquisitions that procure Indian enterprises with fast access to well needed resources and technologies. While flows of FDI into India’s economy are still much larger than FDI outflows, the latter grew by 35.1% over the 2002-2014 period while the former “only” grew by 21% (4).

Indian investments abroad have considerably evolved: we try and offer below an overlook of such changes in terms of magnitude, geographical spread and sectorial composition.

India’s speedy rise as a foreign investor

Over the last three decades, Indian investments abroad have exploded. And numbers do not lie… or at least not those published by the United Nation’s Conference on Trade and Development (UNCTAD) in its 2015 handbook of statistics (document number TD/STAT.40) (5). The UNCTAD uses two different measures of FDI between countries.

First, the handbook refers to FDI inflows and outflows, which comprise “capital provided (either directly or through other related enterprises) by a foreign direct investor to a FDI enterprise, or capital received by a foreign direct investor from a FDI enterprise”. They include equity capital, reinvested earnings and intra-company loans. In 1980, India’s outward FDI flows amounted to a meager US$4 million. In 2014, they had reached US$9.848 billion. This is considerable, even though that number remains very inferior to the US$34.417 billion of inbound FDI flows from which India benefited in 2014. According to that measure, while FDI flows into India have been multiplied by 435 between 1980 and 2014, amounts flowing from India have swollen 2,462 times!

India's flows of FDI

This diagram was created based on the handbook released by the UNCTAD (document number TD/STAT.40) (6)

The second measure used by the UNCTAD is FDI stocks, which refers to “the value of the share of a corporation’s capital and reserves (including retained profits) attributable to a foreign parent enterprise, plus the net indebtedness of affiliates to the parent enterprises”. In order to be taken into consideration by that measure, the relevant corporation must be “an incorporated or unincorporated enterprise in which the direct investor, resident in another economy, owns 10 percent or more of the ordinary shares or voting power (or the equivalent)”.

In 1980 India’s outward FDI stocks were in the amount of US$78 million: they had reached close to US$130 billion in 2014. Although India’s inward FDI stocks remain larger, India’s rise as an investing powerhouse is still confirmed by these statistics: inwards FDI stocks have been multiplied 558 times between 1980 and 2014, while outwards FDI stocks have been multiplied by more than 1,661.

India's FDI Stocks

This diagram was created based on the numbers released by the UNCTAD (document number TD/STAT.40) (7)

Let us now follow the rupees up to their beneficiaries…

India’s diversifying outreach

Indian investments into foreign economies were traditionally driven by two factors. First, the need to secure resources available in larger quantity abroad (such oil and gas fields and various mines, including coal). Second, the fast acquisition of new technology through the purchase of foreign competitors, thereby saving years of research, development and marketing (8).

This is why a lot of Indian investments go to resource rich countries such as Australia, the United Arab Emirates, and Sudan. The same type of investments have more recently been funneled through tax efficient jurisdictions which then serve as offshore centers through which the acquisitions are funneled towards targets located in other countries. In 2014, FDI outflows were mostly directed towards the Netherlands (26 per cent), Singapore (14 per cent) and Mauritius (12 per cent) (9).

Still in 2014, 28% of FDI outflows were in the sectors of transportation, storage & communication services, while 24% were directed to manufacturing, 21% to agriculture and mining, 10% to wholesale, retail trade & restauration, and 8% to financial institution and business services (10).

The picture would not be complete without underlining Indian acquisitions of foreign acreage; Land Matrix ranks India among the largest purchaser of foreign land in the world, mostly in Africa and more generally in the Southern Hemisphere (11). For example, 70% of the land acquired in Ethiopia by foreigners since 2008 became Indian property. A lot of real estate is also acquired by Indian purchasers in Dubai, London and New York. In the Big Apple, Indians rank fourth among foreign purchasers after the Canadians, Chinese and Mexicans (12).

Surely, one may expect Canada to benefit from a faire share of Indian investments abroad. After all, both countries are members of the Commonwealth, and resources are aplenty and land in (frozen) abundance under the roots of the maple trees…

India’s investments in Canada

Yet one would only be partially right. Canada does benefit from Indian investments. Actually, India’s FDI into Canadian corporations even surpass by far Canada’s investments into Indian corporations.

Canada's FDI Stocks

This diagram was prepared based on statistics published by the Government of Canada as of April 2015 (13).

But according to these statistics, India ranked 16th among countries investing into Canadian corporations in 2014, representing only 0.5% of all such foreign investments. And although Canadian investments into India have almost doubled between 2010 and 2014, India is only the 33rd country to which Canadian investments are directed, receiving a mere 0.1% of all Canadian outwards FDI stocks.

Needless to say, there is room for improvement in the economic exchanges between those two very large and complementary countries.

* * * * *

This post was coauthored by David Tournier and Simon Pillarella.

DT profile

David is an executive and lawyer focusing on corporate law, governance, project finance and cross-border transactions. He is currently Executive Vice-President of IFFCO Canada, a joint venture incorporated by shareholders from India, Dubai and Canada to design, finance and build a large industrial project in the Province of Quebec. You can follow him on LinkedIn and on Twitter.


Simon has an extensive international experience in global businesses and organizations as well as non-profit organizations and the public service sector.  He has worked and lived on 3 continents before settling back in Canada.  Over the past years, he has worked closely with Indian investors looking for growth opportunities in North America while he was in charge of foreign investment promotion at Investissement Quebec. His biggest achievement has been to convince the world largest agricultural cooperative, the Indian Farmers Fertilizer Cooperative (IFFCO), to invest in the biggest industrial project of the past 10 years in the Province of Quebec.  He became a founding member of the management team for the launch of IFFCO Canada, building a valuable experience working with Indian executives and shareholders. You can follow him on LinkedIn.

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