Page 239 - DMGT401Business Environment

Business Environment

Notes

Task List a few MNCs that have found their ground in India via merger and
acquisition of Indian companies. Also list some Indian companies that
have acquired foreign companies.

Case Study FDI in India: A New Dawn

n the recent few years, the outlook of India as an investment destination has been
growing. This is indicated by surveys of different consultancy groups on the outlook
Iof different countries as a host to FDI, which are consistently upgrading the rank of
India.

In JBIC surveys India has moved up with its rank increasing from 7th in 1996 to 5th in 2001.
India is ahead of countries like Vietnam, Taiwan, South Korea, Malaysia and Singapore as
promising destinations for FDI over the medium term but lagging behind countries such
as China, US, Thailand, and Indonesia. In terms of Kearney’s FDI confidence index, India
is moving in the narrow range of 5th -7th position between 1998 and 20031 (1 Business
Line (18.9.2003) ‘India moves up in Kearney’s FDI Confidence Index’)
Kearny has also ranked India as the top destination for business processing. India is also
the R&D base for over 100 of the Fortune 500 companies, with GE’s largest R&D Centre
outside the US. India is also a preferred business process outsourcing destination. 250 of
the Fortune 500 companies are clients of Indian companies High quality standards in the
field of IT with over 2/3rd of the world’s SEI CMM Level-5 companies being Indian.
FDI approved in 2003 is US$ 3.1 billion as against US$ 4.43 billion in 2002. FDI inflows
approved in the period April 1991-April 2003 stood at US$ 78 billion, of which US$ 35.5
billion has been realized. USA accounted for $ 16 billion (24.9%). The other major investor
countries are Mauritius, UK, Japan, South Korea, Germany, Netherlands, Australia, France,
Malaysia, Singapore and Italy in that order. Even Chinese firms have started investing in
India. For example, ZTE of China is investing $ 50 million in the telecom sector. Haier is
investing 200 million dollars to manufacture refrigerators and set up a Rand D facility.
Sector-wise break-up of FDI is as follows: fuels -26.7%, telecom-19.6%, electrical
equipments-9.9%, transportation-7.5%, services-6.5% and metallurgical industry-5.3%
MNCs, which have invested in India include GE, DuPont, Eli Lily, Monsanto, Caterpillar,
GM, Hewlett Packard, Motorola, Bell Labs, Daimler Chrysler, Intel, Texas Instruments,
Cummins, Microsoft, IBM, Toyota, Mitsubishi, Samsung, LG, Novartis, Bayer, Nestle,
Coca Cola and McDonalds.
Cumulative FII (Foreign Institutional Investors ) investment since the equity market was
opened in the early 1990s is $ 25 billion. US$ 6.5 billion of the FII funds in 2003 went into
equities FIIs have 50 percent stake in one third of the 30 companies which make up the
BSE-30 Index and hold about 10 percent of the stakes in public sector undertakings.
FDI also contributes to exports. As in 2001 Faber Heatcraft Industries Ltd had decided to
increase the production capacity of its manufacturing facility in Pune by 4-5 times at a cost
Contd...

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