have been rising, their invocation has been negligible during 2009 – 10 and 2010 – 11. it has been observed that the number of outward fdi proposals under the automatic route during 2000s has also been on the rise ( table 2 ) indicating the growing appetite of the indian corporates to establish their foot prints abroad and the liberal regulatory regime. athukorala, prema - chandra ( 2009 ), “ outward foreign direct investment from india ”, asian development review, vol. 26, no. 2. bis central bankers ’ speeches position of india in the global context outward fdi from india has mainly been by way of equities and loans ( table 1 ). according to unctad ’ s world investment report 2011, based on the magnitude of fdi outflows, india was placed 21st in the world. in terms of value of net purchases 4 ( i. e., cross border acquisition deals ) by indian companies in 2010, india was placed fifth in the world after the us, canada, japan and china. investment trends of indian transnational companies importantly, scale of overseas investment by domestic companies has also expanded as india was placed second in 2010 only after china in terms of average size of net purchase deals ( us $ 190 million in india as compared to us $ 197 million in china ). similarly, india also figures among the top five emerging and developing economies whose state owned enterprises are increasingly becoming transnational corporations. it is not surprising as in recent years, india ’ s public sector units ( psus ), viz. ntpc, gail, ongc and nalco have undertaken significant overseas green - field investments. sectoral investment trends sectoral pattern of outward fdi during 2006 – 07 to 2010 – 11 shows that it has been mainly invested in services and manufacturing sector. in 2010 – 11, within manufacturing, major sub - sectors which attracted outward fdi from india included agriculture machineries and equipments, basic organic chemicals, drugs, medicines & allied products, refined petroleum products, indigenous sugar, etc. similarly, within services sector, a majority of outward fdi had gone into business services, data processing, financial services, architectural and engineering, engine architectural and other technical consultancy activities ( table 3 ). net cross - border m & a purchases by a home economy imply purchases of companies abroad by home - based tncs netted by sales of foreign affiliates of home - based tncs. bis central bankers ’ speeches since late 1990s, indian outward fdi

/ jvs or spvs are being used to fund acquisitions through leverage buyout route which reduces the risk on the domestic balance sheet. a substantial portion of investment has taken place through the spvs set up for the purpose abroad. the funding is often arranged through overseas banks backed either by shares or assets of the target company and / or guarantees by the indian parent. so far companies have largely used a mix of their retained earnings ( internal source ) and borrowings ( external source ) to finance their overseas acquisition. this is in quite contrast to what is generally seen in the context of many other countries ’ cross - border m & as where share swapping is a popular option of financing. share swaps have not yet emerged as a favored payment option in india except in a few large transactions in the software industry 7. during the post - reform period, indian capital market has been significantly liberalised. as a result, the market capitalisation of stocks of indian companies has also substantially improved over the years. this, in turn, seems to have facilitated greater access to overseas capital markets for financing their overseas investments. further, sustained growth in corporate earnings has improved the profitability and strengthened the balance sheets of indian companies which also helped them to undertake cross - border acquisitions through internal resources. e. measures taken by the reserve bank of india the liberalisation of the overseas investment policy since the year 2003 has been substantial, given the improvement in macro fundamentals, and bias towards calibrated relaxation of the policy towards capital account rules. commensurate with the build - up of the foreign exchange reserves of the country, there has been a larger opening up of the overseas direct investment avenues resulting in the enhancement in the quantum of overseas direct investment to 400 per cent of the net worth as mentioned earlier. similarly, the aggregate ceiling for overseas investment by mutual funds, registered with sebi, was enhanced from us $ 4 billion to us $ 5 billion in september 2007. this was further raised to us $ 7 billion in april 2008. apart from raising the financial limits, the reserve bank has also overseas investments by indian companies – evolution of policy and trends : keynote address by ms shyamala gopinath, deputy governor of the reserve bank of india, at the international conference on indian cross - border presence / acquisitions, mumbai, 19 january 2007. bis central bankers ’ speeches automated the entire process of allocation of unique identification number ( uin ). the automation through a web based application has enabled efficient processing which has