In spite of a run of bad news, the US Assistant Secretary of State for South and Central Asia, Robert Blake, believes India is on its way to becoming the world’s largest economy by 2050. He recently observed at the Centre for Strategic and International Studies: “India is a rising giant whose influence is felt not only in the Indian Ocean, but in the Americas, in Africa, the Middle East, and in Central Asia… Its rise, fuelled by a dynamic, young, optimistic and educated population, will be one of the great stories of our time.”
A survey published by Ernst & Young at the beginning of June showed that despite regulatory obstacles, India remains one of the most favoured destinations for FDI thanks to its comparatively high economic growth. “India is undergoing a transition in terms of investor perception of its market potential, which is bolstered by economic growth projected to surpass eight percent annually,” it said.
Due to its acknowledged success as a centre for business outsourcing, India will rank fifth among the most attractive business locations for European companies within the next three years, the Ernst & Young survey showed. “Foreign investors are not deterred by current regulatory issues to invest in India, and its perceived specialisation as a low cost business process outsourcing hub continues to appeal to investors across the globe,” the report said. The survey, to which around 800 executives from top level international companies contributed, also stated that Mumbai and New Delhi are among the cities most likely to create the next Microsoft or Google.
Contrary to the support issued by Blake and the survey, data published at the end of May showed India’s economy grew at its weakest pace in five quarters, as it slowed to 7.8 percent in the three months to the end of March. Analysts have attributed the slowdown intense inflation, a gradual increase in borrowing costs and lacklustre investment sentiment.
And yet, the government saw it coming. The country’s economy grew last year by a comfortable 8.5 percent, just 0.1 percent central bankers’ predictions. Representing a steady climb of a half percentage point from the year previous. Fuelled by export demands across technology and material markets, the country is enjoying the rush for commodities to support the ever-growing call for specialists identified by the Ernst & Young report.
India has always been marred by reports of corruption at government levels – a contamination that the state has been striving to cleanse. Now, with traditionally Western automotive and telecommunication groups moving into the country, it seems Blake might be on to something in the long-term at least. Here, we profile some of the regions appealing most to investors.
Known as the financial and commercial capital of India, Mumbai is the home to numerous key financial institutions, including the National Stock Exchange, the Reserve Bank of India, the Bombay Stock Exchange and the India Government Mint. Although Mumbai’s affluence originally began thanks to its textile mills and seaport, it has developed into a hub for IT, engineering, diamond polishing and healthcare industries, among others. As an increasing number of companies employ more skilled labour, more and more industries have emerged as significant economic contributors in and around the city. Among the most prevalent are the Bollywood film industry, clothing, pharmaceuticals, utensils and food industries.
Thanks to the success of some of these industries, some of the nations’ highest earning companies are headquartered in Mumbai. One of the biggest players, with revenues of $62.5bn at the last count, is the Tata Group. The company which acquired Jaguar Land Rover three years ago for $2.3bn from Detroit carmaker Ford, sold more than 28,000 units last year. This year, Jaguar Land Rover set up its first assembly plant in India to assemble the Freelander 2 Sport model, which will use parts from Tata’s Land Rover facilities in the UK.
Mumbai-based Reliance Industries announced it is to acquire Bharti Enterprises’ majority stake in Bharti AXA Life Insurance, the latter’s general and life insurance ventures with Europe’s biggest insurer. Reliance Industries will hold 57 percent in the companies, while its associate Reliance Industrial Infrastructure will hold 17 percent. AXA will retain its 26 percent interest in the companies, the maximum stake allowed to a foreign company in an Indian insurance joint venture. Reliance’s billionaire owner Mukesh Ambani is hoping to expand in the financial services arena as demand increases, and is aiming to diversify the business as earnings grow from its core oil and gas business. Commentators anticipate Ambani is keen to keep any extra funds generated from the recent deal in his birth city.
The capital serves as the heart of India’s government, and is located within the wider city of Delhi. The city’s service sector is constantly expanding as an increasing number of multinational companies open businesses. In addition to banking, media and tourism, IT and telecoms have flourished as key industries within the capital. Major IT companies have emerged over the last few years, taking advantage of the skilled labour, and bolstering the city’s reputation as a hub for cutting-edge technology.
New Delhi-based IT product design and manufacturing company MSI India serves as the benchmark for the industry, with global customers recognising its award-winning production of notebooks, motherboards, networking and server products. The company recently announced its intentions to launch its own range of portable tablet computers in the domestic market soon. It also announced it is to spend around $1m on marketing and advertising this year, with aims to double head count and expecting revenues of around $60m for this financial year. That’s a $15m increase on last year.
Another New Delhi-founded e-commerce company, BenefitsPLUS Media, continues its acquisition spree as it aims to gain a market share of between 10 and 15 percent of the domestic market. In June, the company came closer to its target when it announced that parent company DigiVive Services had acquired one of India’s leading group buying websites, Koovs.com for $2m.
In a bid to further expand different industries in New Delhi, a governmental team will shortly review four sick public sector companies to fast track their disinvestment process, according to an official within the Ministry of Heavy Industries and Public Enterprises, . The companies, which are just four of 27 sick under the administrative control of the ministry, have been listed as Richardson & Cruddas, Hindustan Cable, Hindustan Machine Tools and Tungabhadra Steel. The team will consider a range of options, one senior official said. “In some cases it can be an outright sale, while the option of revival through a joint venture will also be explored.”
The government originally considered disinvestments only through public offers. The ministry has been postponing the sale of shares in some profitable companies because of stock market unpredictability but aims to raise around INR 400bn ($8.87bn) through divestment in public-sector companies to improve the fiscal deficit.
Bangalore is another city which has developed into a centre for heavy industries, Indian telephone industries, BPO and IT. The city’s IT industry is divided into three main groups: the International Tech Park, the Software Technology Parks of India, and Electronics City.
Bangalore has rightfully earned its nickname as the Silicon Valley of India, which first emerged after the establishment of the country’s biggest electronic industrial park, Electronics City. The park currently houses several global companies including Siemens Information Systems, 3M India, HP, General Electric, Bharat Heavy Electricals, CGI and Yokogawa. Infosys technologies and Wipro, the country’s second and third largest IT services companies respectively, are also based at there.
Great news for Bangalore came in mid-June, when Infosys Technologies clinched an INR 1bn ($22.2m) deal with India Post as the countrywide organisation embarks on a huge modernisation programme. Infosys beat its largest domestic rival, Tata Consultancy Services, to clinch the contract, with the widest postal network in the world. The company operates approximately 155,670 post offices, of which nearly 90 percent are located in rural areas. According to company, only 12,604 of its post offices have so far been computerised.
Although IT is a key facet in Bangalore, a recent survey published by Monster Employment Index showed a slow demand in the IT and ITES area has lowered in recent months, as different industries grow more attracted to the city. Aircraft manufacturer Airbus SAS, which has an engineering centre in Bangalore, announced in mid-June that it had signed a strategic agreement with CADES Digitech and QuEST Global. The two Bangalore-based companies, which are already suppliers to Airbus SAS, are to establish centres which will solely focus on the design of aircraft components while providing engineering services. Each company will concentrate on a different aspect of the initiative, with QuEST focusing on wing and pylon engineering, while CADES will deliver aircraft main body fuselages across various aircraft programmes. According to an Airbus statement, each company will have offices in Europe and dedicated centres in India. The new agreement with the two companies will attempt to consolidate engineering services already acquired from a variety of different suppliers, and will “focus on the development with the two tier-one suppliers.”
SunTechnics Energy Systems, one of Bangalore’s largest companies dedicated to solar energy, said in June that it would change its focus, name, and branding. It will now take on its parent company name Conergy to become Conergy Energy Systems, and shall focus mainly on solar photovoltaic projects.
Conergy’s clients in India outside of Bangalore include key telecom, oil, and gas companies, as well as government agencies, state and national government units, and manufacturing sector customers.
Home to India’s largest bourse, the Calcutta Stock Exchange, Kolkata is the key business, commercial and financial centre of East India and the north-eastern states of the country.
Much like the other key Indian business cities, IT has become a chief pull for investment in Kolkata. In addition, Kolkata has always been an important centre for banking and finance, for which it is respected on the global stage. At the minute, a variety of large international banks like Bank of America, Standard Chartered Bank and HSBC Bank boast offices and branches in Kolkata. This is in addition to the country’s three large nationalised banks, Allahabad Bank, UCO Bank and United Bank of India, who have their headquarters in Kolkata.
State-owned Allahabad Bank, which is planning to open more overseas branches in Singapore, Hong Kong and Schenzen in China, announced that it is aiming to achieve business growth of 24 percent during the financial year 2011-12. The bank’s shareholders additionally approved a dividend of INR 6 per equity share of face value INR 10 for fiscal year 2010-11. At the bank’s annual meeting its managing director JP Dua said: “Targeting a 24 percent growth for this fiscal year will take the business level to INR 2.8trn [$62bn].”
In and around the city sit several industrial units managed and operated by various large domestic companies. Some notable organisations headquartered in Kolkata include ITC, Birla, Haldia Petrochemicals, Exide Industries, Britannia Industries, Bata India, CESC, RPG Group, Texmaco, Bengal Ambuja, Philips India, Coal India and Damodar Valley.
Silk Air, a regional wing of Singapore Airlines, commenced lower budget flights to Kolkata’s Netaji Subhash Chandra Bose Airport from the beginning of July, a move that has brought a great deal of attention from those considering investing in the city. The thrice-weekly service between Singapore adds to the flights already operated by its parent company, and will cost 15-20 percent less. The additional traffic in and out of the city provides a platform for more skilled workers bringing more money to the city.