Indian Investments Abroad: Creating Significant Impact Overseas

Indian companies have always taken advantage of opportunities in other countries and in the last four years, they have invested as much as $36 billion overseas, as per the latest World Investment Report of UNCTAD released on 6 June 2018. India’s total cumulative stock of overseas foreign direct investment (OFDI) amounted to $155 billion in 2017. Working with local communities, Indian companies support jobs and societies wherever they operate, bringing benefits to local economies.

The Confederation of Indian Industry (CII) regularly tracks Indian companies investing in key overseas markets to provide insights into their impact on local economies. This article discusses patterns of Indian investments in five major countries, namely, the United States, United Kingdom, South Africa, Germany and China.

United States

There is a large presence of Indian companies in the United States which have a significant impact on the US economy. The fifth edition of the “Indian Roots, American Soil” survey report highlights the reach and spread of Indian companies across all US states.

A total of 100 companies were surveyed and the aggregate tangible investment by these companies was in excess of $18 billion. The companies are concentrated in the five states of New Jersey, Texas, California, New York and Pennsylvania.

The Information Technology (IT) and ITES sector accounts for 28% of the total, followed by life sciences, pharmaceuticals and healthcare at 25% and manufacturing at 14%. Indian companies have a diversified presence in the US, with companies also dominant in other sectors such as energy, food and agriculture, automotive, financial services, among others.

The companies together employ more than 113, 423 people and the quantum impact of direct jobs created is very significant, considering the multiplier effect of direct jobs in a range of other sectors and through related ancillary services. The top five states benefitting from employment by Indian companies are New Jersey, Texas, California, New York and Georgia.

57% of the companies polled reported conducting Research and Development (R & D) across the US and the total R & D and innovation expenditure was reported at more than $588 million.

Indian companies are also actively contributing to local economies in the US in terms of their Corporate Social Responsibility (CSR) activities. More than 65% of the Indian companies engaged in CSR activities, spending over $147 million

The US is one of the top five destinations for Indian investments. Indian investments to US can be expected to grow in an upward trajectory, given that 85% of the respondents in the survey said they would expand investments over the next five years.

United Kingdom

India and UK share a long standing economic relationship. India currently invests more in the UK than in the rest of the European Union combined.

The fifth edition of the Grant Thornton ‘India meets Britain Tracker’ 2018 in collaboration with CII identified approximately 800 Indian companies operating in the UK. The combined revenues generated by the companies stood at £46.4 billion with £2.25 billion worth of operating profits. Together the companies employed 104,932 people.

This year, 87 Indian companies met the criteria for fastest growing Indian companies in the UK as compared to 55 in 2017. Of these, 47 companies are SMEs with a turnover between £5 million to £25 million, 34 are mid-sized corporates with a turnover between £25 million to £250 million and 6 are large corporates with a turnover of over £250 million.

The dominant sectors for Indian companies were Technology, Media and Telecoms with 23%, followed by pharmaceuticals and chemicals, and engineering and manufacturing. Other sectors of interest for Indian companies were business services, media, energy, automotive, financial services, hospitality and tourism.

The average growth rate among the Tracker companies was significantly higher this year at 192% compared to 31% in 2016, with the jump in growth driven by three major companies, for whom the average turnover grew by more than 500%.

The performance of Indian companies in the UK following the decision of Brexit remains robust.

South Africa

India has a rapidly expanding relationship with South Africa and the South African market provides ample opportunities for Indian businesses to flourish as brought out in the report “Indian industry’s inclusive footprint in South Africa” by CII and PWC..

In 2017, CII (SA) in collaboration with the Consul General of India in Johannesburg carried out a survey of 140 Indian companies in South Africa to measure the footprint of Indian industry in South Africa.

The survey revealed that a total of Rand 33 billion had been invested by 45% of the surveyed companies. These companies employed 11,000 people, 70% of whom were South African nationals.

Indian industry in South Africa is present in diverse sectors such as pharmaceuticals, automotive, financial services, information technology, mining and green economy. Apart from generating substantial employment, these companies go beyond profitmaking and provide solutions to the economy, for e.g., providing drugs at affordable costs, offering comprehensive mobility solutions to the South African automobile market, and providing financial services and housing project finance.

Indian companies are also contributing to the South African economy in terms of offering sustainable solutions and creating a greener and healthier economy. They are actively involved in community activities such as skilling the workforce, CSR investments in important fields such as education, and women empowerment, among many others. With Indian companies already having a significant and positive impact across the country, South Africa will remain an attractive destination for them.

Germany

India and Germany are natural partners in terms of trade and investments, backed by robust growth and stable economic developments in both markets. India has a significant investment engagement in Germany, with around 17% of India’s total OFDI projects in Europe flowing to Germany between 2010 and Q1 of 2016.

CII in collaboration with Ernst and Young brought out the study titled “Indian Investments in Germany: Prospects for Shared Prosperity” in 2017, providing a comprehensive overview of Indo-German business relations and India’s economic presence in the key sectors.

Germany is the second most attractive investment destination for India in Europe after the UK, with around 140 major investment projects initiated since 2010. The projects in Germany generated around 1,330 jobs during the reviewed period of time.

Software and machinery equipment were the leading sectors, accounting for 37% of the total, followed by business services accounting for about 11%. Other sectors where Indian projects were operational include automotive assembly, plastic & rubber, pharmaceuticals, among others.

Given the high-quality business environment and stable market conditions, Indian investors would increasingly look at Germany as a top investment destination in years to come.

China

The operations of Indian companies have expanded in China over time. CII brought out the survey report “Growing Footprints of Indian Companies in China”, in partnership with Evalueserve, that highlights the operations and investments of 54 Indian companies in China.

The survey revealed that Shanghai is the most popular investment destination with almost 76% of the companies investing here. Indian origin companies are present across multiple industries in China, with the majority in manufacturing, accounting for 37% of the total. Other major sectors where Indian companies are concentrated are healthcare, financial services, IT & BPO, telecommunications, logistics and business consulting.

Employment has significantly expanded since the companies started operations in China, with more than 56% of Indian companies employing more than 50 people as of 2017. Three companies reported employing more than 1,000 workers.

Indian companies have also generated significant revenues and expect revenues to go up further in 2018 compared to 2017. 12 out of 30 companies, that considered their business to be profitable, reported revenues exceeding RMB 100 million.

Indian companies also expect their business to grow further in 2018 with 17% of companies planning to expand their investments by 10% more than the previous year.

The outlook for Indian investments in China appears positive in coming years, with 82% of the respondents expecting their business to grow in 2018.

Indian investments abroad are rapidly expanding and generating significant benefits for the host countries, beyond the profit sharing motive. CII tracks the growing footprint of Indian companies overseas regularly and provides insights for future growth areas. These will encourage potential investors to further enhance their economic activities.

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