India suffering investment flight

In an interview to The Indian Express Editor-in-Chief Shekhar Gupta for NDTV’s Walk the Talk programme in December last year,Parekh had said that an environment of negativity gripping the country had taken the wind out of the sails of India’s ambitious growth story and that the big boys of industry were taking their investments abroad. The UPA government needed to work as a team and get back on track,he had urged.

Analysts agree with that sentiment. India Inc may be finding it difficult to set up units in India because of the multiplicity of approvals,delay in the whole process,the Centre-state equation,land and environment matters and a host of other problems,they say.

“The cause of concern that the recent numbers generate is not trivial as rising domestic competition amid bottlenecks in the form of lack of policy,especially land acquisition,the series of corruption scandals,unrelenting inflation and rising domestic interest rates are propelling not only the domestic companies to invest abroad but also deterring foreign companies from investing in India,” says Dr Arun Singh,Senior Economist,Dun & Bradstreet.

Given the sharp rise in the quantum of FDI by India Inc abroad,many top groups also earn more than half their revenues from foreign markets. For instance,the Tata Group earned more than a third of its $70-billion revenue in 2009-10 from its overseas operations.

It was 61 per cent the year before that. After the acquisition of Novelis,Hindalco of Aditya Birla group earns 70 per cent of its revenue overseas. Bharti is getting there. After taking over the African operations of Zain Telecom,Bharti Airtel gets 26 per cent of its revenue from abroad.

The who’s who of Indian business groups is leading the overseas investment spree. Four top business groups of Mukesh Ambani,Bharti Airtel of the Mittals,Anil Ambani’s Reliance Communication and the Tatas have invested close to $22 billion (Rs 99,000 crore) abroad in the last two years,as per figures compiled by the RBI. These are actual investments,and not just proposals,which means money has gone out of the country.

The biggest overseas investor is Sunil Mittal’s Bharti Airtel which invested $10.92 billion through the Netherlands and Singapore for its telecom acquisitions.

Reliance Gas of Mukesh Ambani invested close to $5.77 billion in three gas assets abroad — mainly in the US.

The entire amount was routed through Mauritius,say figures revealed by the RBI. Reliance Infocomm and Rel Communication of Anil Ambani invested $2.83 billion in two ventures in June 2010 and February 2010. The Tatas — mainly Tata Motors in TML Holdings in Singapore — invested $3.44 billion in the past two years. The most recent mega investment of $1.83 billion was done by Gammon India in Campo Puma Orient in Panama in May 2011.

No doubt,securing market penetration and access to technologies,aided by the progressive liberalisation of the Indian overseas investment policies,has been the primary driver of Indian incorporation going for overseas investment over the years.

The five-year period during the UPA-I government had witnessed several global takeovers by Indian companies,especially the Tatas acquiring the Corus and Jaguar Land Rover and Aditya Birla buying Novelis.