At a time of adverse tariff headwinds and geopolitical uncertainties, there is no doubt that India Inc must seize opportunities to increase its global footprint. To be sure, leading conglomerates like the Tatas, Aditya Birla Group, Mahindra & Mahindra, Bharti Airtel, among several others, already have a presence in several countries. The government’s push to create many more multinational corporations (MNCs) is definitely to be welcomed. Top officials have indicated to FE that this idea is being shared with India Inc. Industry is being encouraged to look beyond participating in global tenders and setting up camp offices to execute these orders. The emphasis is more on setting up permanent establishments in countries where they see opportunities that can be seized with agility. The government’s advice to India Inc is to hedge risks, tap global talent, and integrate into global value chains. The ministry of External Affairs has created three permanent desks in its embassies in all major countries to help firms set up permanent establishments.
Strategic rationale for outbound investment
The government’s push to India Inc to look outwards comes when outbound investments have risen 79% on-year to $25.8 billion in FY25 and 164% to $5.4 billion in April-May this fiscal, according to the Department of Economic Affairs. While an uptrend is underway—with 419 firms announcing green-field projects abroad in 2024—the ruling regime thinks this is the best time to impart further momentum to this process. The government is not worried that this outbound drive is at the expense of investing domestically to bolster the India growth story. The thinking is that when companies invest overseas, they keep a buffer, as a result of which their domestic investments are bound to remain stagnant. The rationale behind the creation of more Indian MNCs is not only that they would see returns in terms of dividends and royalties coming in by the 2030s but also create more opportunities for two-way trade flows.
Strategic rationale for outbound investment
The government must therefore urge India Inc to leverage opportunities in all countries with whom we are inking trade deals, including regions where there is a declining foreign direct investment (FDI) footprint. Outbound FDI from April 2023 to May 2025 has largely gone to the city-state of Singapore and Mauritius which together account for one-thirds of such investments. More welcome is that 14% of outbound FDI went to the US. Another 9% and 6% of FDI headed to the UAE and the UK with whom India has already signed deals. It would be tempting to infer that India Inc’s investments in Singapore are a base to foray into the Association of Southeast Asian Nations (ASEAN). But that does not seem to be case as the bulk of FDI into India from ASEAN is also from the city-state.
The two-way flows of investments between India and Singapore have led researchers to investigate whether there is round-tripping. India Inc has not followed the footsteps of the Aditya Birla Group that made pioneering forays into Thailand and other economies of ASEAN in the late 1960s and 1970s. The Tata Group has exited from its manufacturing presence in the region. At a time India is reviewing its free trade agreement with ASEAN to make it work better, India Inc must be encouraged to set up permanent establishments in these economies to seize emerging opportunities to integrate with global value chains.