Partners in Progress: Indian Companies’ Investment Journey in Developing Countries

By Jaya Prakash Pradhan December 5, 2008 620

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Type	Journal article
Title	“Rise of Indian Outward FDI: What Implications Does It Hold for Host Developing Countries?”
Author	Jaya Prakash Pradhan
Published	2008 · Revista Economía: Teoría y Práctica, No. 29, pp. 9–49 · Universidad Autónoma Metropolitana–Iztapalapa
Coverage	Developing-region-bound Indian FDI · 1960s–2008
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This is a plain-language summary of “Rise of Indian Outward FDI: What Implications Does It Hold for Host Developing Countries?” (Pradhan, Revista Economía: Teoría y Práctica, 2008).

In short:

Indian firms have invested some $10.9 billion across 92 developing countries — and the developing world was their first destination, long before they reached advanced economies.
Engagement evolved over three eras: cautious joint ventures (1960s–80s), a reform-era widening (1990s), and large-scale, strategic investment (2000s).
Geographically it concentrates in Asia (45.6%) and Africa (30.8%), with the rest in transition economies and Latin America.

A different kind of expansion

Most attention to Indian multinationals focuses on their move into rich economies — the Tata–Corus deals and the like. This study tells the other, earlier half of the story: Indian firms investing in fellow developing countries. In fact, the developing world was where Indian outward investment began in the 1960s and where it kept returning. By the time of this study, Indian companies had put some $10.9 billion into 92 developing countries — a substantial example of “South-South” cooperation, where one developing economy invests in another’s growth.

Three eras of South-South investment

The character of that investment shifted markedly over four decades.

In the early decades (1960s–80s), a handful of pioneers tested nearby markets — the Birla Group set up Ethiopia’s first Indian textile factory; the Shriram Group took sewing machines into Sri Lanka. Tellingly, essentially 100% of these investments were joint ventures with local partners: Indian firms entered cautiously, sharing risk and ownership. The 1990s brought reform-era confidence — more firms went abroad, manufacturing expertise spread to fellow developing nations, and the model began shifting from partnerships toward independent operations. By the 2000s, Indian firms had become strategic, large-scale investors: ONGC pursuing oil from Sudan to Russia, IT companies building tech hubs in Southeast Asia, and pharmaceutical firms making affordable medicines available across developing markets.

The regional footprint

Where does this investment go? The study maps a clear geographic concentration.

Asia dominates at about 45.6%, anchored by Singapore (a Southeast Asian gateway), the UAE (a Middle East hub), and Indonesia. Africa follows at 30.8%, with Mauritius serving as a financial bridge, Sudan as energy cooperation, and Kenya as an East African anchor. Transition economies (Russia, Kazakhstan — largely resource partnerships) take about 12.8%, and Latin America (Brazil, Mexico) about 10.8%. The pattern reflects a mix of cultural and regional familiarity, resource-seeking, and market-development motives.

Why South-South investment is distinctive

The paper’s argument is that Indian firms bring something particular to other developing countries. Because they have solved problems in a comparable environment, they tend to transfer appropriate technology — software solutions, affordable pharmaceutical innovations, and methods suited to local conditions and budgets rather than imported wholesale from rich-country contexts. Sharing a broadly similar development experience, they can navigate the challenges of developing markets as partners rather than distant investors. The associated development benefits the study highlights include job creation, technology transfer, local capacity-building, infrastructure development, and improved market access for host economies.

What it means

The larger point is a hopeful one about development cooperation: investment between developing countries can be a genuine engine of shared growth, not merely a commercial sideline. For investing firms, the lessons are to start with regional partnerships, lean on cultural similarities, and build lasting relationships; for host governments, to welcome development-friendly investment, encourage knowledge transfer, and create supportive frameworks. As Indian firms deepen their presence across the developing world, the study frames them as writing a new chapter in South-South cooperation — one where developing nations help build each other’s prosperity.

Read the academic abstract

This study analyses the overall and regional trends in Indian direct investment flows into the developing region since the 1960s, and explores the various development impacts they have on host developing countries. The evidence indicates that the developing region was the initial destination for Indian outward-investing firms and continued to receive their attention over time. Developing-region-bound Indian FDI — led by a small group of firms in a few selected countries during 1960–80 — is now giving way to a more extensive pattern involving a large quantum of outward investment, with many Indian firms investing across different sub-regional developing groups and for a variety of firm-specific motivations.

Cite this article

Pradhan, J. P. (2008). Rise of Indian outward FDI: What implications does it hold for host developing countries? Revista Economía: Teoría y Práctica, 29, 9–49. https://doi.org/10.24275/ETYPUAM/NE/292008/Pradhan

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