Overseas direct investment
Also called: ODI, Outward FDI · Topic: Balance of Payments and Exchange Rates · NCERT: Beyond NCERT
Meaning
Overseas direct investment (ODI), or outward FDI, is investment by Indian residents and companies in foreign entities. It includes setting up subsidiaries or buying firms abroad. ODI is governed by the FEMA Overseas Investment Rules 2022. In the BoP it is a capital outflow, recorded as a debit, because foreign exchange leaves India to buy a foreign asset.
Example
Tata Steel's purchase of Corus (2007) and Tata Motors' purchase of Jaguar Land Rover (2008) are well-known Indian ODI deals. Recently, gross FDI inflows into India have stayed high, but net FDI has shrunk sharply. One reason is that Indian firms are investing more abroad.
Don't confuse with
- Inward FDI: this is foreigners investing in Indian enterprises, which is a capital inflow. ODI goes the other way.
- Round-tripping: this means sending Indian money abroad and bringing it back disguised as foreign investment. Genuine ODI stays invested abroad.
Related concepts
- Capital account
- BPM6
- Capital flows
- Foreign Direct Investment
- Foreign portfolio investment
- Greenfield and brownfield investment
- Automatic route and government route
- Round-tripping
- External commercial borrowings
- Non-resident deposits