Manufacturing's share in outward FDI slips

The manufacturing sector accounts for the bulk of overseas investment (FDI) by Indian companies. Its share in total outward FDI has, however, declined significantly over the past one year. It fell from 50% in FY09 to 43% in FY10, according to a latest study by the Reserve Bank of India.

The second-largest sector for outward FDI is ‘financial, insurance, real estate and business services’ followed by ‘wholesale and retail trade and restaurants and hotels’.

Their respective shares have picked up in the latest year. India’s outward FDI is largely financed in the form of equity, loan and guarantee. These include sources, such as drawal of foreign exchange in India, capitalisation of exports, funds raised through external commercial borrowings, foreign currency convertible bonds and ADRs/GDRs, and also through leveraged buyouts by way of setting up of special purpose vehicles (SPVs), according to the central bank.