Investment outflows from India improve after declining in FY12 and FY13

After a slowdown in India's direct investments overseas over the past two fiscals, recovery seems to be on the cards, with the total deal value touching $29.3 billion so far during the current year, according to a report.

"The period between FY07 and FY11 has been buoyant at times for outward FDI investments, but there has been a slowdown since then. Investments declined in FY12 and FY13, but there has been a recovery in FY14 so far," Care Ratings said in a report.

The report said total FDI investments by domestic companies between April-January of FY14 stood at $29.34 billion.

The falling trend in outward FDI took hold from FY11 when it stood at $19.25 billion, it was $11.18 billion in FY12, was at $7.13 billion in FY13. According to the rating agency, following the moderate FDI investment between FY03 and FY04, investments started picking up thanks to the relaxations in overseas investment policy in 2004.

Outward investments by domestic companies have improved appreciably since FY07 peaking in FY09 with investment of $19.45 billion abroad, it said. FDI comprises three categories-equity, loans and guarantee issued. The investments are mostly by way of guarantees issued followed by equity, and lastly in the form of loans.

Meanwhile, FDI in drugs and pharmaceuticals stood at Rs589 million in the April-December period of 2012-13, latest data from Department of Industrial Policy and Promotion showed.

Faced with the rush of multinationals for acquisition of Indian pharma firms, the commerce and industry ministry had proposed tightening of norms for foreign investors in the existing firms, but the proposal was rejected by the union cabinet.

The norms had been proposed by the department to arrest the spurt in pharma MNCs acquiring domestic firms that made ''rare and critical'' medicines.

According estimates, over 96 per cent of the total FDI in the sector between April 2012 and April 2013 had come into brownfield or existing pharma.

The government had cleared a Rs5,168 crore proposal of US-based pharma firm Mylan Inc for acquiring Indian generic drugs company Agila Specialties.

Though India allows 100 per cent FDI in pharma sector through automatic approval route in the new projects, foreign investment in the existing companies are allowed only through the FIPB (Foreign Investment Promotion Board) approval.

Other sectors which reported high FDI flow during the 9-month period of the current fiscal include services ($1.59 billion), automobile ($871 million), construction ($914 million) and chemicals ($490 million).