From Local to Global: The Evolution of Indian Companies’ International Investments

By Jaya Prakash Pradhan December 5, 2017 1.6K

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Type	Journal article (review)
Title	“Indian Outward FDI: A Review of Recent Developments”
Author	Jaya Prakash Pradhan
Published	2017 · Transnational Corporations, 24(2), pp. 43–70 · United Nations (UNCTAD)
Coverage	Trends in Indian outward FDI since the 1990s
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This is a plain-language summary of “Indian Outward FDI: A Review of Recent Developments” (Pradhan, Transnational Corporations, 2017).

In short:

Indian outward investment has shifted from manufacturing to services, and from developing toward developed markets — Europe’s share of India’s developed-region investment rose from 52% to 76%.
The cast has widened: young firms (11–20 years old) now make up about a third of foreign investments, and SMEs are starting to invest — though large business groups still account for 68%.
Firms increasingly want full ownership of their foreign operations and are moving up the value chain.

A changing landscape

By the mid-2010s, Indian outward FDI had been growing fast for two decades — and this review takes stock of how it had changed, not just how much. The picture it draws is of an investment landscape transforming on several fronts at once: which sectors lead, where the money goes, which firms participate, and how they structure their deals.

The headline shifts are four. Sector: manufacturing led Indian OFDI through the 1990s and 2000s, but services have taken over — IT first, then telecom, construction, and finance. Destination: where Indian firms once favoured fellow developing countries, they now invest heavily in developed markets, with Europe’s share of developed-region investment climbing from 52% to 76%. Firm age: going global is no longer the preserve of decades-old companies — firms aged 11–20 now account for roughly a third of foreign investments, and many tech firms are “born global.” Ownership: firms increasingly take full ownership of foreign operations, reflecting greater confidence and a wish to protect intellectual property.

Who’s driving it

The other big change is in who invests. The field has broadened well beyond the handful of conglomerates that once defined Indian OFDI.

Large business groups — Tata, Reliance, and their peers — still dominate, accounting for 68% of foreign investment and using their scale to make the biggest overseas acquisitions. Alongside them, state-owned enterprises invest mainly to secure energy and resources abroad. But the newer story is the entry of young, “born-global” firms that internationalise early, and of small and medium enterprises — individually modest, collectively growing, and often targeting niche or specialised technologies. The result is a more crowded and varied field than a decade earlier.

Why it matters

Taken together, the trends say that India’s outward investment has matured into something broad-based and capability-driven. For firms, the practical lessons are to consider going global earlier in the company’s life, to look beyond the familiar developing-country markets, and to keep building technological and R&D strength. For policymakers, they argue for enabling firms’ international ambitions, helping smaller firms clear the barriers to investing abroad, and nurturing the knowledge-intensive sectors where the new advantages lie.

Read the academic abstract

This paper reviews recent developments in Indian outward foreign direct investment (OFDI), which has been expanding rapidly against the backdrop of liberalisation and openness policies instituted since the 1990s. The Indian OFDI landscape is changing — with the participation of growing numbers of firms from a wide range of industries, the proactive role of state-owned enterprises in seeking overseas energy resources, and an increasingly geographically spread distribution of investments across developed and developing regions. Indian firms are turning into global players with a global market focus, undertaking overseas investment for international production, the acquisition of foreign-created assets, and foreign R&D activities.

Cite this article

Pradhan, J. P. (2017). Indian outward FDI: A review of recent developments. Transnational Corporations, 24(2), 43–70. https://doi.org/10.18356/32864c71-en

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