India’s Outward FDI: 56% Routed via Low-Tax Jurisdictions
Why in the news
The Hindu’s analysis of RBI data found most Indian investment abroad in 2024-25 passed through low-tax destinations, raising questions on taxation and regulatory arbitrage.
Key facts
| Destination | Share |
|---|---|
| Singapore | 22.6% |
| Mauritius | 10.9% |
| UAE | 9.1% |
Other low-tax hubs: the Netherlands, UK and Switzerland.
About OFDI
Outward FDI is investment by Indian companies or residents abroad, unlike inward FDI.
- Greenfield: a new unit or plant abroad.
- M&A: buying or merging with a foreign firm.
- Joint ventures: sharing capital, technology and management with foreign partners.
- Portfolio OFDI: foreign financial assets, more tightly regulated.
Objectives
- Market access, resource access, diversification and strategic advantage such as global brands.
Regulation
- RBI and the Commerce Ministry, under FEMA, 1999.
- Automatic route: no prior approval within limits; government route: approval for sensitive sectors or larger amounts.
Exam angle
- Largest destination in 2024-25: Singapore.
- Greenfield means new unit; M&A means existing firm.