US firms steadily acquiring majority stake in Indian JVs
New Delhi, October 26 (Nitya Chakaborty-Hindustan Times)
THE MARKET value of the total United States investment in India at present is estimated at US $10 billion and American companies plan to invest another $4.6 billion during 1999-2003, says a survey of the US administration.
The interesting finding of this survey is that American companies have been steadily acquiring majority holdings in their companies including joint ventures and this trend has accentuated in recent months. The past year witnessed especially the trend towards majority shareholdings for foreign investors, a trend that began in 1991 with the Indian government's decision to raise the limit on foreign equity in joint ventures from 40% to 51%
According to the survey, 61% of the responding firms reported a majority US shareholding as against 58% in the previous survey while only 17% held minority stakes. 11% of the firms held exactly 50% of shares while the remaining 11% did not report their ownership structure.
The survey observes that majority ownership among US companies will continue to increase owing to relaxation in the Vajpayee government's foreign investment policy. An analysis of sectoral distribution of US investment reveals that manufacturing with a 55.3% share leads followed by energy with 29.2%, telecom- 4.6%, banking 4.2% and software 3.4%. The total employment of Indians by these US firms is put at around 100,000.
What is revealing is that Maharashtra, Delhi, Haryana and Tamil Nadu together account for 87.5% of total book value of US investments reported with Maharashtra having the lion's share of 40.5%. The three states rated the best for doing business are Maharashtra, Karnataka and Gujarat.
The geographic distribution of investment in India indicates a heavy concentration of US companies around the major metropolitan areas of Bombay, Delhi and Bangalore. While other states including Tamil Nadu, Haryana and Gujarat are also attracting investments, major portions of north, central and east India continue to have little or no US investments.
The survey expects major new investments to occur in all regions over the next five years with the possible exception of small and geographically isolated states on India's northern and northeastern periphery. The US survey observes that given the increasing decentralization of decision making and intense competition among the states, the growth of FDI in future will be most rapid in states that combine effective promotional efforts with above average physical and social infrastructure and sound pro-business policies.
The survey projects that Maharashtra will continue to dominate US investments in India over the next five years ? 56.5% of the total American investments proposed ? followed by Karnataka with 17.4%, Delhi - 12.9% and Haryana - 9.3%.
According to the survey,unstable policies and a reputation for lawlessness and corruption have hurt the prospects for foreign investment in Uttar Pradesh, . Only $13 million of prospective U.S. investment was reported from UP.
|
