actual acquisition value. many acquisitions are taking place through an overseas spv set up to raise finances from international market and such transactions are not captured in the overseas investment statistics. evolution of overseas investment policy it would be interesting to trace the evolution of public policy in respect of liberalizing outward investments, within the broader ambit of capital account management. indian overseas investment policies has been progressively liberalized and simplified to meet the changing needs of a growing economy. the policy, which was evolved as one of the strategies for export promotion and for strengthening economic linkages with other countries, has expanded significantly in scope and size, especially after the introduction of fema in june 2000. the evolution has taken place in a sustained manner and could be classified into two distinct phases : the pre 2003 phase and the post 2003 phase. the first phase was export oriented and with restrictions of cash flows from the country reflecting the need to manage capital outflows to conserve foreign exchange resources. an important development during this phase was the transfer of work relating to overseas investment from ministry of commerce to rbi in 1995 to provide a single window. the pre 2003 policy regime • in december 1969, the govt. of india for the first time issued formal guidelines for overseas direct investment. indian parties were permitted minority participation in turnkey projects involving no cash remittances. • in april 1978, an inter - ministerial committee in the ministry of commerce was set up to clear proposals for overseas investments. there was a requirement for repatriation of dividend of 50 % of the declared profits. • in 1992 an automatic route for overseas investments was introduced, and cash remittances were allowed for the first time. the total value was restricted to $ 2 million with a cash component not exceeding $ 0. 5 million in a block of 3 years. • in 1995 the work relating to overseas investment was transferred from ministry of commerce to rbi in 1995 to provide a single window, while laying down a policy framework. in terms of the policy, a fast track route was introduced where limits were raised from $ 2 million to $ 4 million and linked to average export earnings of the preceding three years. cash remittance continued to be restricted to $ 0. 5 million. beyond usd 4 million, approvals are considered under normal route at the special committee level. investment proposals in excess of us $ 15. 00 million were considered by mof with the recommendations of the special committee and generally approved if the required resources were raised through the gdr route. •

cent of the net worth, whichever is higher. for recurring expenses, remittance upto 10 per cent of the average annual sales / income or turnover during last two financial years is allowed. within these limits, ads can allow remittance by a company even to acquire immovable property outside india for its business and for residential purpose of its staff. • partnership firms registered under the indian partnership act, 1932 and having a good track record are permitted to make direct investments outside india in any bonafide activity 200 per cent of their net worth under the automatic route. i must mention that that the liberalization in the policy on overseas investments has been very much informed by the detailed framework set out by the government in 1995 when the work was transferred to reserve bank of india. for the first time the framework articulated a cohesive policy in regard to overseas investment policy, flexible enough to respond to likely future trends. to quote from the guidelines, they reflected the'need for transparency, recognition of global developments, capturing of indian realities and learning of lessons from the past '. the basic objectives of the policy, as laid out in the notification, were as follows : • recognising the link between trade and investment flows, to provide a framework for indian industry and business to access global networks. • to ensure that such flows, though determined by commercial interests, are consistent with the macroeconomic and balance of payment compulsions of the country, particularly in terms of the magnitude of the capital flows ; and • to give liberal access to indian business for technology - sourcing or resource - seeking or market - seeking as strategic responses to the emerging global opportunities for trade in goods or services. • to give a signal that there is a qualitative change in the approach of the government, from one of regulator or controller to one of facilitator. • to encourage the indian industry to adopt a spirit of self - regulation and collective effort for improving the image of indian industry abroad. experience and trends the overseas acquisitions, which started of on a small scale, have reached to globally visible levels with big ticket acquisitions being announced by large corporates regularly. a report of the boston consulting group ( bcg ) on the emerging multinationals in the world puts 21 indian companies among the top 100 such multinationals. only china with 44 companies is ahead of india. tata group, bharat forge, infosys, wipro, ongc, ranbaxy and such indian companies are venturing overseas and expanding