The Reserve Bank of India (RBI) has now started publishing data on India’s outbound foreign direct investment (FDI). The data published on financial commitments made by Indian companies to their foreign subsidiaries over the last four years reveal two interesting trends.
The first relates to the strong growth in debt-based financial commitments. Indian companies have been advancing more loans to their foreign subsidiaries over the last four years. Suprisingly, this lending increased after February 2010, even as the cost of funds in India were headed north.
The second trend relates to the 350% plus year-on-year spike in guarantee based commitments made by Indian companies in the last fiscal year (2010-11). Consistent with the Pareto principle, this spike was attributable to a handful of large international projects (mainly in the telecom sector, but also in oil and gas, manufacturing and other capital intensive sectors).