A stark retreat in India’s outward foreign direct investment (OFDI) has been observed in the fiscal year ending March 2024, with a plummet of 39 percent to $28.64 billion. This significant downturn reflects the widespread uncertain global economic conditions that have impacted international investment opportunities. The previous fiscal year’s OFDI had reached a robust figure of $46.96 billion, based on data from the Reserve Bank of India (RBI), illustrating a notable decline in financial commitment by Indian enterprises abroad.
This financial downturn encompasses both the automatic and approval routes of India’s overseas direct investment. A detailed look into the equity contributions for the FY2024 reveals a fall to $9.62 billion, a stark contrast to the $19.13 billion recorded in FY2023. Equity investments constituted approximately 34 percent of the total OFDI, marking a significant reduction in the stake Indian companies are willing to place in foreign ventures.
The RBI data further unraveled that in FY2024, loan commitments dipped to $5.24 billion from $7.73 billion in the preceding fiscal year. Chief Economist at Bank of Baroda, Madan Sabnavis, attributed this cautious approach to the availability of suitable opportunities for Indian businesses, which have been scant due to the tumultuous state of global economics. He pointed out that external investments by Indian companies were curtailed as the global economy’s unpredictabilities left few viable investment options.
In line with the overall downward trend, guarantees extended overseas by Indian companies also took a dive, arriving at approximately $14 billion, down from $20.09 billion in the previous year. Nevertheless, March of FY2024 saw a slight surge in OFDI, topping at $3.92 billion for the month, with equity commitments peaking at $2.03 billion—the highest throughout the year, as per the provisional data from the RBI. Loan commitments in the same month totalled $1.05 billion, with guarantees amounting to $839.17 million.
Such a pronounced decrease in India’s outward FDI activities can be attributed to a cautious stance adopted by Indian corporations in response to the overarching global economic volatility. Experts in the domain highlighted that the preceding year has not seen substantial overseas acquisitions by Indian firms—a testament to the existing reservations about engaging with unstable or unpredictable foreign markets.
Amid these figures, various sectors of India’s international business engagements have felt the impact of this investment aversion. While certain core industries have maintained stable investment patterns, the high-growth potential sectors witnessed a substantial reduction in Indian financial commitment, underscoring a careful and selective strategy in international dealings. Market analysts suggest that such cautiousness was inevitable, given the blend of political unrest, fluctuating economic policies, and unforeseen trade disputes that influenced global market dynamics over the year.
The decline in India’s outward FDI has also been mirrored by similar trends observed in other emerging economies, which have all been working to navigate through the economic turbulences caused by a myriad of factors ranging from geopolitical tensions to health crises impacting global trade and commerce.
Looking forward, while the short-term prospects for a rebound in India’s OFDI appear muted, long-term strategies focusing on leveraging partnerships in stable economies and strategic sectors could see a revival of Indian investments overseas. Analysts advocate for a nuanced understanding of global market trends, increased collaboration amongst Indian businesses, and sustained government support to create conducive conditions for an upward trajectory in India’s outward FDI in the forthcoming fiscal periods.
In conclusion, the financial year 2024 for India stands marked by a reticent and strategic approach to outward FDI amidst challenging and uncertain global economic landscapes. The year’s reduction in investment activity indicates an era of introspection for the Indian international investment community, as it recalibrates its approach to overseas financial investments.
