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Business

India’s Outward Foreign Direct Investment Sharply Declines to $2.25 Billion in December: RBI Data

OFDI is a business strategy in which a domestic firm expands its operations to a foreign country. According to 'Business Standard', they were also down from $4 billion in November 2023.

New Delhi: India’s outward foreign direct investment (OFDI) commitments saw a sharp decline from over $4.12 billion in December 2022 to $2.25 billion in December 2023, Business Standard reported, citing Reserve Bank of India (RBI) data.

Sequentially, they were also down from $4 billion in November 2023, per RBI data.

OFDI is a business strategy in which a domestic firm expands its operations to a foreign country. It involves acquiring assets in another country, often through the establishment of foreign subsidiaries, branches, or ownership stakes in foreign enterprises.

It comprises three components: equity, loans, and guarantees. The equity commitments declined to $646.7 million in December 2023 from $1.38 billion in December 2022. It was also significantly lower than the $1.09 billion recorded in November 2023, the newspaper reported.

Debt commitments decreased to $625.91 million in December 2023, down from $1.15 billion a year ago. However, it was higher than $190.05 million in November 2023. Guarantees for overseas units declined to $978.19 million in December 2023 from $1.58 billion in December 2022. They were down substantially compared to $2.72 billion in November, the business daily reported, citing RBI data.

In October, OFDI fell by 12.14% sequentially to $1.88 billion, compared to over $2.14 billion in September. According to RBI data, this was also a decrease from the over $2.66 billion recorded in October 2022, Business Standard reported in November.

The newspaper attributed the decline to a slowdown in economic and business activities, especially in developed markets, that has impacted direct investment flows, both inbound and outbound.

The majority of investments in OFDI take the form of subsidiaries or stakes in foreign companies. Bankers attribute the decline in opportunities to a slowdown in developed markets.