In recent years, Indian companies and individuals have shown a growing appetite for global exposure through Overseas Direct Investment (ODI). While earlier investments were largely aimed at resource-rich nations such as Australia, UAE, and Sudan, recent trends indicate a strategic shift towards countries offering tax benefits, regulatory ease, and strong financial markets. These include Singapore, Mauritius, British Virgin Islands, and the Netherlands.
According to recent data, Singapore was the leading investment destination with Indian ODI worth ₹46,915 crore (approx. US$5.5 billion), followed by the United States (₹13,658 crore or US$1.5 billion) and the United Arab Emirates (₹21,325 crore or US$2.5 billion). This surge in global investment is largely driven by Mergers and Acquisitions (M&A), enabling Indian companies to gain direct access to new technologies, expanded markets, and a broader global customer base.
What is Overseas Direct Investment (ODI)?
Overseas Direct Investment (ODI) refers to investments made by Indian residents in foreign business entities through:
- Acquisition of unlisted equity capital in a foreign entity.
- Subscription to the Memorandum of Association of a foreign entity.
- Holding 10% or more of the paid-up equity capital in a listed foreign entity or acquiring control in a listed entity even with less than 10% equity.
Who Can Invest Abroad?
The following are eligible to make ODI:
- Indian companies incorporated under the Companies Act.
- Statutory bodies formed under an Act of Parliament.
- Partnership firms registered under the Indian Partnership Act, 1932.
- Limited Liability Partnerships (LLPs).
- Registered Trusts and Societies (under RBI-specified conditions).
- Resident Individuals under the Liberalised Remittance Scheme (LRS).
How Much Investment is Allowed?
For Indian Entities:
- Companies can make ODI up to 400% of their net worth (as per their latest audited balance sheet).
- Investments may be in the form of equity, debt, or non-fund based commitments like guarantees, pledges, or charges.
For Resident Individuals:
- ODI can be made under the Liberalised Remittance Scheme (LRS).
- The annual limit is USD 250,000 per individual, including minors.
Permissible Investments for Individuals under LRS:
- Overseas Direct Investments
- Acquisition of immovable property abroad.
- Overseas education, medical treatment, emigration.
- Maintenance of relatives, business, or personal trips.
- Donations and gifting abroad.
This has made it increasingly convenient for Indian investors to access global opportunities and invest in international stocks from India or diversify their portfolios through foreign mutual funds.
Restrictions and Prohibited Sectors
Despite the increased liberalization, there are sectors where ODI is restricted or prohibited:
- Real Estate Activity (buying/selling land or trading in transferable development rights is prohibited; however, construction and infrastructure development are allowed).
- Gambling and betting activities.
- Financial products linked to INR (without prior approval).
- Investments in Pakistan or restricted jurisdictions are allowed only through the RBI approval route.
- Structures with more than two layers of subsidiaries are not allowed if the foreign entity is directly or indirectly investing back in India.
As globalization becomes the norm, both Indian corporates and individuals are actively participating in cross boarder transactions. The flow of capital across borders is reshaping the Indian financial ecosystem. ODI by Indian residents serves as a powerful tool to expand global footprints, tap into emerging markets, and create long-term value.
