Why in the news?

• According to the census by RBI, Mauritius was the largest source of foreign investment in India, followed by the US and the UK.

More on news

• Singapore and Japan were the next two sources of foreign direct investment (FDI), said the Census on Foreign Liabilities and Assets of Indian Direct Investment Companies 2016-17.
• Of the 18,667 companies that participated in the census, 17,020 had FDI/overseas direct investment in their balance sheets in March 2017
• As per the census, 96per cent of the responding companies were unlisted in March 2017 and most of them had received only inward FDI; unlisted companies had higher share of FDI equity capital vis-à-vis listed companies.
• And over 80 per cent of the 15,169 companies that reported inward FDI were subsidiaries of foreign companies (single foreign investor holding over 50 per cent of the total equity).
• Mauritius was the largest source of FDI in India (21.8 per cent share at market value) followed by the USA, the UK, Singapore and Japan whereas Singapore (19.7 per cent) was the major ODI destination, followed by the Netherlands, Mauritius, and the USA
• The ratio of market values of inward to outward direct investment, increased to 4.3 in March 2017 from 3.6 a year ago; equity participation accounted for 94 per cent and 79 per cent shares in inward and outward FDI
• The manufacturing sector accounted for nearly half of the total FDI at market prices; information and communication services and financial and insurance activities were the other major sectors that attracted FDI.

Inward and outward FDI

• Foreign direct investment (FDI) is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy.
• Direct investment provides capital funding in exchange for an equity interest without the purchase of regular shares of a company's stock.
• An Inward investment involves an external or foreign entity either investing in or purchasing the goods of a local economy. A common type of inward investment is a foreign direct investment (FDI).
• This occurs when one company purchases another business or establishes new operations for an existing business in a country different than the investing company's origin.
• An Outward direct investment (ODI) is a business strategy in which a domestic firm expands its operations to a foreign country. his can take the form of a green field investment, a merger/acquisition or expansion of an existing foreign facility.
• Employing outward direct investment is a natural progression for firms if their domestic markets become saturated and better business opportunities are available abroad

Source

Indian Express, Investopedia.