Even though both domestic capital formation and overseas FDI investments have increased concomitantly in recent years, potential implications of rising trend in outward FDI for domestic investment, growth and employment need to be examined against the benefits that domestic companies derive elsewhere in terms of expanded market base, backward and forward vertical integration and cheap skilled labour.
In a globalised business environment, establishing an overseas presence becomes inevitable on account of a country’s policy on outsourcing, emphasis on on-shore presence, protectionism, etc. Hence, the Indian companies have to balance the need for domestic business expansion with the compulsions of overseas investments.