Outward FDI - A New Dimension

Abstract

Foreign Direct Investments (FDI), as generally understood, is related to capital flows, from developed countries to the developing countries. When the flow is from developing countries to advanced economies, the phenomenon is called outward FDI or Reverse FDI. This paper identifies an additional capital flow that flows from developing countries in the form of Intellectual Capital, which also ensures returns to the developing nation. This paper attempts to present a different angle to what should Foreign Direct Investment also include, especially from the developing countries to rest of the world. This phenomenon is also known as Outward FDI or Reverse FDI. The specific reference in this paper is with respect to India. The investment pattern from India, follows the same pattern as the contribution done inside the country, by different sectors of the economy to the Gross Domestic Product. The main recipient of Indian FDI has been developed countries like the United States of America, Canada, Australia and also developing countries like Taiwan, Thailand and Philippines in both manufacturing and IT areas. India is very well known for its intellectual capital and its systematic attempts to improve the same is an acknowledged fact. This paper advocates that this form of capital, which is the accumulation of culture and the literacy, should be taken into account while accounting for outward FDI from India. The Indian outward FDI has a long history starting from the early 19th century though the measurable phenomenon, has happened and been commented upon, from the 1960's onwards. As we go ahead in the new millennium, it is felt that this form of outward FDI will only rejuvenate India and make economic development, a progressive and tangible reality. The method of approach is essentially descriptive and the interpretation is based on qualitative analysis.