Indian companies are setting out more investment plans abroad than ever before, pursuing international growth in a hedge against weakening domestic consumer demand and pressure to establish a physical presence in major export markets.

India has become an increasingly larger source of global greenfield FDI since 2022, reaching a quarterly record of 195 overseas projects announced between July and September 2024, according to the latest data from fDi Markets. 

India was the fifth largest source of greenfield FDI projects in the third quarter of the year, just ahead of China, but still behind advanced economies like the US, UK, Germany and Switzerland. This is a significant jump upwards from India’s position as the 11th largest source of greenfield FDI projects between 2015 and 2019.

While Indian companies rank lower in terms of their greenfield FDI capital expenditure than other source countries, official statistics from India’s Department of Economic Affairs show that total overseas direct investment reached $33.45bn in the 2023 financial year, up from $17.53bn a year earlier. The increasing confidence of India Inc on the global stage is also reflected by the country’s growing cohort of overseas investors. 

In the first 10 months of 2024, some 419 Indian companies announced at least one greenfield FDI project abroad, putting it on track to surpass a record 439 companies in the whole of 2023, fDi Markets shows. This is a significant increase on the 351 Indian companies investing abroad in 2022 and a pre-pandemic average of 209 companies between 2010 and 2019. 

Naresh Chandra, Delhi-based senior partner at Fox&Angel, a global expansion consultancy, says that many Indian companies are investing abroad to increase revenues, diversify and launch new products. “The Indian market may not be enough [for companies] because it is a developing market,” he adds. 

India’s quarterly GDP growth slowed to 5.4% in the third quarter of 2024, down from 8.1% a year earlier, as concerns mount about weaker consumer spending and corporate profits in the world’s most populous country.

Indian conglomerates like Tata and Mahindra, as well as tech giants like Infosys, Wipro and Zoho, have for years been establishing physical presence in international markets. But Indian overseas investors are now found across more sectors, including wealth management firms like Neo Group, real estate consultancy Geetanjali Homestate and 4baseCare, a biotechnology start-up.

“The investment profile has diversified significantly beyond IT services, with India emerging as a high-volume, low-capex FDI source market,” observes Kavan Bhandary, director of Nueconomy, an advisory firm. Three quarters of Indian outbound FDI projects since 2022 have been in business services, sales, marketing and support operations, which tend to be less capital-intensive than projects to build infrastructure, factories or logistics hubs.

Indian state-owned companies, known locally as Maharatnas and Navratnas, have also become more active internationally, including fossil fuel producer ONGC, which set out plans in 2023 to invest $2bn in the Arabian Sea.

While the Asia-Pacific region led by Singapore was traditionally the first choice for Indian firms overseas expansion, this has shifted towards other regions like the Middle East, Europe and North America. The largest destination for Indian FDI projects so far in 2024 was the UAE, followed by the US, UK, Canada, Saudi Arabia and Singapore. 

A large Indian diaspora has long helped support trade and investment between them and their home country. But as overseas countries have become more protectionist and imposed more strict immigration policies, including in the US, Canada and Europe, Indian companies have taken a different approach.

“Internet-first consumer goods and software product companies are increasingly adopting direct market entry over traditional distributor models,” says Mr Bhandary, adding that venture capital firms invested in Indian companies have financed and encouraged more aggressive international expansion. 

As the Indian government falls short of its target of $100bn of annual inbound FDI and aims to encourage more domestic investment, India Inc is increasingly looking further afield for its next growth opportunity.

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