Policy paralysis, bureaucratic delays, a shambolic national infrastructure and a fraught political environment are propelling India Inc’s cash-rich emerging multinational enterprises on a search for big-ticket investments overseas.

With the Congress-led ruling United Progressive Alliance (UPA) buffeted by corruption scandals, policy U-turns and the inability to get on with the basic task of governance, the pace has picked up, with disenchanted Indian companies going abroad for investment in countries as far flung as Argentina, Africa and Abu Dhabi.

Reserve Bank of India data show that Indian companies carried out more than 400 overseas investment transactions that resulted in outward foreign direct investment of US$3.46 billion during September 2011 alone. Outward investment by India companies or entities was at US$19 billion for the first six months of the fiscal year 2011-12.

It is a depressingly familiar phenomenon, stretching back to the days when the country was ruled by the import-substitution philosophy, according to Prema-chandra Athukorala, writing in a 2009 research paper for the Asian Development Bank:

“There is evidence that the constraining effects of government policy on business operations played a pivotal role in the emergence of Indian MNEs,” Athukorala writes. “During this period, many big industrial houses in India felt constrained not by the lack of profitable market opportunities at home, but by government legislation that created market imperfections and distortions affecting their ability to expand, diversify, and export.”

According to the India Brand Equity Foundation, a trust established by the Ministry of Commerce and the Confederation of Indian Industry, Indian companies are on a continuing search for new investment destinations.

“Despite India's vast opportunities across under-penetrated sectors, companies are venturing abroad for inorganic growth," HDFC Securities analyst Anupam Gupta wrote in a 2011 report. “While this is also partly driven by rising global aspirations for Indian companies, another reason for this is a tough competitive field, made no easier by the unpredictable regulatory environment."

However, an official with the consultancy Bain & Co points out that “these outreach initiatives by Indian companies shouldn’t be misread as the `dynamism’ of a rising power. “It is fuelled largely by frustrations back home while doing business.”

World Bank’s `Doing Business’ 2012 data ranks India at a lowly 132 in the overall "Ease of Doing Business" of 183 economies surveyed. Is it any surprise then that it took seven months to get the $7.2 billion RIL-BP deal cleared and more than a year to approve the Vedanta-Cairn $6 billion transaction? asks the Bain official. Even Posco's US$12 billion proposed investment, the largest FDI proposal in India, says the expert, is stuck in a quagmire awaiting land clearances.

What is driving Indian companies to foreign shores are the perpetually high bank interest rates, inflation and ferocious competition in Asia's third-largest economy. Small wonder that two of the country’s largest conglomerates -- Reliance Industries and the Tatas – earn more than half their revenue abroad.

Mumbai stocks are among the world's worst performers this year, with the Sensex down more than 9 percent. This week, the country’s leading business chambers, the Confederation of Indian Industry, sounded the alarm over the slowdown and emphasized that the government and the RBI need to do something quick to revive the economy.

“A significant pull-down in investments is apparent and this can take the overall economy down further since there are very few developments in the country which can be termed as confidence boosters,” said CII director general Chandrajit Banerjee.

The Federation of Indian Chambers of Commerce & Industry estimates that GDP growth in the current fiscal year will now be in the range of 7- 7.1 per cent with significant downside risks as against 7.6 forecast earlier by the RBI.

Due to near double-digit inflation, the cost of raw materials has ratcheted up, resulting in slowing factory output. India Inc has also blamed the tight monetary policy, which has increased the cost of borrowing, for hindering fresh investment and crimping industrial growth.

The RBI has hiked interest rates 13 times since March, 2010, to seek to tame demand and curb inflation. Despite that, headline inflation has remained above the 9 percent mark since December 2010. The decline in the mining sector is worrisome too and could trigger higher input costs for many companies, economists say.

HDFC chairman Deepak Parekh recently told an Indian daily that many top industrial houses have admitted that it's “much easier” to invest abroad. Their aim or strategy, said Parekh, is to now have 50 percent of their turnover from abroad. “Take the top five to seven group—the Tatas, Birlas, Ambanis, Ruias,” Parekh said. “Some have already achieved their target. These are industrialists who have established their reputation, capacity and stature in India."

A new report by the Macquarie Group identifies 80 key pieces of legislation languishing in Parliament. In recent weeks, prominent business leaders, including Ratan Tata, have warned that the lack of reforms is causing Indian companies to concentrate their investments abroad “as government chokes the economy.”

Tata has also argued that the government has to “remove barriers and constraints that are making it difficult for the country’s economy to flourish”.

India Inc is also demanding a more transparent and coherent tax regime that can whittle down red tape and facilitate investment in the country. Unfortunately, at the moment at least, there is little to suggest that the Indian government is pushing through any of the reforms urgently needed to uplift the economy and prevent billions from leaving the country’s shores.

A list of the emerging multinationals that have recently invested overseas includes these:

• Fortis Healthcare (India) is to acquire Singapore-based Fortis Healthcare International for US$665 million. The purchase, subject to regulatory approval, is expected to close by mid-December.

• The Hyderabad-based GVK Power has invested US$1.41 billion in its Singapore-based joint venture with GVK Coal Developers (Singapore) which is involved in transport, storage and communication services. GVK has also signed a memorandum of understanding to invest US$3-5 billion to build airports on the Indonesian islands of Bali and Java.

• ETHL Communications Holdings has committed US$776.88 million in its Mauritius-based wholly owned subsidiary ETHL Communications Mauritius, which is engaged in financial, insurance, real estate and business services.

• Tata Steel has invested US$173.55 million in its Singapore-based subsidiary, Tata Steel Asia Holdings Pte, which is also engaged in financial, insurance, real estate and business services.

• RHC Holding investments invested US$113.62 million to its Mauritius-based wholly owned subsidiary.

• Jindal Saw invested US$ 78.64 million in its Cyprus-based manufacturing unit, Ralael Holdings Ltd. Jindal has also committed an investment of US$48.31 million in its UAE-based unit Jindal Saw Holdings FZE.

• In October this year, two companies from the US$83 billion salt-to-steel conglomerate Tata Group as well as Larsen &Toubro and the Aditya Birla group clinched agreements with Kizad, an Abu Dhabi government-owned industrial zone to set up projects worth billions there. Kizad is setting up one of biggest industrial zones in the UAE and has signed 40 deals worth US$10 billion. Almost half of it is said to be from Indian investors.

• Australia has emerged as a favored destination with Lanco Infratech acquiring Griffin Coal for A$730 million. The Adani Group snapped up Australia’s Abbot Port for A$1.8 billion while GVK acquired Hancock Coal and Infra of Australia forA$1.21 billion.

• In far-flung Africa, Essar Steel has acquired Zimbabwe Iron and Steel Company (ZISCO) with a commitment to invest US$750 million. Religare Capital Markets acquires majority stake in South African broking firm Noah Financial Innovation. Godrej Consumer Products acquired 51 percent of a leading pan-African hair care company, Darling Group Holdings, for over Rs5 billion. Tata Chemicals acquired the US-based potash miner EPM Mining Ventures for an undisclosed sum.

• Indian home and personal care goods makers Godrej Consumer Products , Dabur India Ltd and Marico are also searching for properties in Africa amidst fierce competition back home

(Neeta Lal is a New Delhi-based senior journalist; neetalal@hotmail.com.)