INWARD & OUTWARD FDI TRENDS 2023

September 14, 2023

A Recent Census by the Reserve Bank of India shows that Total Outward Direct Investment by Indian Firms rose by 46% in FY2023.
This census relied on foreign liabilities and assets (FLA) data, which encompassed cross-border assets and liabilities of various entities such as companies, limited liability partnerships, alternative investment funds, and partnership firms engaged in inward and outward direct investment (DI).
Outward direct investment (ODI) – It is a business strategy in which a domestic firm expands its operations to a foreign country.
It distinguishes from the Foreign Portfolio Investment.
Singapore was the largest beneficiary of outward direct investment (ODI) by Indian firms.
Also, 3 countries Bermuda, Jersey and Cyprus which are known for their tax benefits are in the top 10 countries that received Indian ODI.

Foreign portfolio investment (FPI) – It consists of securities and other financial assets held by investors in another country.

It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market.

Inward FDI Trends – US was the largest source of inward foreign direct investment (FDI) followed by Mauritius, the UK and Singapore which collectively accounted for 60% of the inward FDI in the country.
Sector wise – The manufacturing sector continued to attract the largest share of FDI equity, both at market value as well as at face value.
Services – Among services, information & communication and financial & insurance activities were the major FDI recipient sectors.
Market Value – In terms of market value, ODI growth outpaced the growth in FDI and, as a result, the ratio of inward to outward direct investment stood at 5 times in 2023 as compared with 6.1 times in 2022.

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