RBI for closer monitoring of outward FDI flows

“On the flip side at times the underlying motive could be to create opacity through a labyrinth of structures for reasons unjustified on business grounds or from the point of view of home country’s interest. Hence,there is a need to have a greater clarity in our approach in this regard,” RBI Deputy Governor HR Khan said.

Net outward FDI flows recorded a sharp uptrend at $ 74.3 billion from 2005-06 to 2009-10 compared to $8.2 billion from 2000-01 to 2004-05. It needs to be ensured that overseas investment by Indian companies do not crowd out domestic investments,the RBI said. “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,” Khan said at the BCCI meeting.