In 2023, the global economy displayed surprising resilience amid significant monetary tightening, pervasive policy uncertainties, geopolitical conflicts, and climate change. Despite these shocks, large developed economies showcased robustness, supported by strong labor markets and declining inflation, leading to lower interest rates in the US and Europe, hinting at lower cost of operation for businesses. This provided investors with a favorable opportunity to expand in economies that are exhibiting positive prospects.
The outlook for emerging industries in 2024 is promising, with sectors such as battery energy storage, green hydrogen, biotechnology, AVGC (animation, visual effects, gaming, comics), and semiconductor manufacturing poised for investment-led growth.
In this current global landscape, India’s outbound foreign direct investments (OFDI) maintain a strategic focus. According to data from the Reserve Bank of India (RBI), India consistently directed its investments towards traditional destinations, with the USA, Singapore, the UK, Netherlands, and the UAE leading the OFDI chart. Notably, Canada has emerged as a significant addition to the top 10 list, indicating India’s exploration of growth opportunities in the North Americas. The manufacturing sector remains a primary recipient of Indian equity-based investments.
The World Investment Conference 2023 held in New Delhi underscored India’s pivotal role in addressing global FDI imbalances, with emphasis on investment-friendly policymaking and fostering inclusive growth. Aligning with the conference theme, “Investing for a Better World,” investors were urged to prioritize sectors such as renewable energy, semiconductors and clean hydrogen, demonstrating a commitment to sustainable and impactful global collaborations.
It is in this context we can note that Indian companies venturing abroad are shifting their priorities from mere expansion to building resilient supply chains to mitigate risks. They are looking at geographies such as Canada and Latin America abundant in natural resources such as oil and gas, critical minerals, and biofuels – for expansion in both fossil-fuel and renewable energy projects. Besides, Indian corporations are also seeking opportunities to globalize their technology, with a strong focus on manufacturing technology.
In Q4 2023, there was a cumulative ~USD 100 Mn investment made by Indian companies in Latin America across energy, technology, agribusiness and automobile sectors.
In response to significant political shifts and high debt levels in 2023, countries in Latin America implemented robust macroeconomic frameworks – positioning themselves as attractive destinations for foreign investment. For instance, Brazil is a magnet for investors, especially in international renewable energy projects with ~USD 115 billion investment in the 2015-2022 period. FDI boom is also evident in countries like Chile and Colombia experiencing the high inflows.
Given the outlook for the year, leaders in the global economic development space on various forums issued a compelling call to investors to take center stage in reshaping the global economy. They highlighted the imperative to capitalize on emerging opportunities arising from the energy transition, agrifood and health sector transformations, and evolving solutions for sustainable development. The call to action resonates with India’s commitment to seize opportunities abroad to position itself as a global player.