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India, the hottest investment destination

By rediff Business Desk in Mumbai
December 27, 2005 08:17 IST
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If it's investment, it's India.

From software giant Microsoft to telecom biggies Nokia and Samsung to auto majors Honda and Toyota, global players now eye India as the most attractive destination for investment.

December 2005 alone saw a number of global business leaders in India lauding India's great economic prowess and making huge investment promises.

Microsoft chairman Bill Gates, during his visit to India, announced that the company would invest $1.7 billion in India over the next four years to expand its operations.

"India has a fantastic pool of software professionals. The world needs to benefit from this. I never thought with so little product companies software services sector will grow so strong as it has grown here," Gates gushed.

Toyota Chairman Okuda Hiroshi praised the quality of products made in India, which he said was better than even Japanese companies.

While billions of dollars have been committed to boost business in India, it needs to be seen how much of this actually turns into reality.

Here's a checklist of the big investment promises, with IT companies topping the charts.


Microsoft Corporation plans to invest $1.7 billion in India over the next four years to expand its operations. The amount will be deployed across select focus areas in line with Microsoft's strategic vision for India.

The funds would also be spent in making India a major hub of Microsoft's research, product and application development, services and technical support for both global and domestic companies. The software giant will hire more than 3,000 employees over a period of three to four years in India.


The world's largest manufacturer of computer chips, Intel Corporation said the company would invest more than $1 billion in the next five years to expand its operations in India and in local technology companies.

Chipmaker Intel has formed a $250-million Intel India Technology Fund that would be used for venture capital investment in technology start-ups in India.

"The pace of technology innovation is accelerating. The investment demonstrates the company's long-term commitments and builds on the foundation we created during the last ten years," said Intel chairman Craig Barrett during his visit to India.

The funds will be used to invest in companies that can benefit from the rapid growth in the domestic IT market segment in India, and provide local businesses with capital to help nurture important technologies and products developed for local use.

AMD & SemIndia

SemIndia, a consortium of overseas Indians, plans to invest $3 billion in an advanced semiconductor manufacturing facility in the country with technology from America's Advanced Micro Devices Inc.

The project -- a public-private partnership - is expected to take off next year and will lead to a world-class industry in India to meet domestic and global demands of semiconductor chips for cell phones, PCs, set-top boxes among others.

AMD will transfer high-end microprocessor and logic manufacturing technology to SemIndia, and may pick up a stake in the proposed plant, Hector Ruiz, chief executive officer of AMD Inc, said during his visit to India.

SemIndia sees Indian demand for semiconductor chips at $30 billion each year by 2015.


Networking major Cisco's CEO John Chambers announced a $1.1 billion investment package for India. Of this, $800 million would be invested in Bangalore over the next two years. The company would pump in $750 million in its new R&D campus in Bangalore. The company plans to triple its existing head count from the current 1,400 by 2008.

Chambers said that the company is also considering India as a manufacturing base.

Automobile sector

The automobile sector is also slated to witness a lot of action with foreign car makers driving to India. According to Commerce Minister Kamal Nath, India is an attractive destination for global auto giants like BMW, General Motors, Ford and Hyundai who were setting base in India, despite the absence of specific trade agreements.

The government is also likely to grant special economic zone status and take a re-look at the tax structure for setting up testing centres and manufacturing plants in a bid to make India the automotive hub of the world.

Here's what the auto biggies have lined up.


German automobile major BMW signed a memorandum of understanding with the Tamil Nadu government to establish its car assembly plant at an investment of $38 million in five years. The German group has selected a site in Mahindra World City in Maraimalainagar, near Chennai, to set up its assembly plant.

BMW has selected Chennai as the "best location" for establishing its car assembly plant with an investment of about Rs 180 crore (Rs 1.8 billion) in five years, a statement said.

BMW senior vice president Klaus Berning told the Tamil Nadu Chief Minister J Jayalalithaa that the company had decided to establish its car assembly unit in Chennai due to the 'favourable investment climate' in the state.


Global auto giant Toyota is planning to set up a gearbox manufacturing plant in India to serve the Asian market. Toyota is planning to invest around Rs 387 crore (Rs 3.87 billion) in collaboration with its mini-vehicle making arm Daihatsu.

The aim is to develop a compact car for the Indian market. Besides, Toyota, Honda Motorcycle, Suzuki Motor (Maruti Suzuki) and Kansai Paints are firming up plans to pump in foreign direct investment (FDI) of at least $1.5 billion in the next three years.


Beleaguered carmaker Fiat will be sourcing components worth $10 million from India in 2006, which is expected to increase further in the coming years, and make significant investments for reviving the company. The components are being sourced for the company's 'Palio' model in South Africa.

The company has said it will resume production of cars like 'Palio', 'Petra' and the 'Adventure' at Kurla in Mumbai from January 2006. "Fiat has plans to introduce new models in India, as the company works on a revivalĀ  trategy in the market," Fiat India managing director De Filippis Giovanni said.

Fiat India is getting ready to start production from its Kurla facility in Mumbai and may launch the Grande Punto soon in the country. The Grande Punto, which was successfully launched recently in Europe, is a premium B-segment category car.

Telecom sector

There's more cheer in the telecom sector as well. While LG Electronics announces an investment of Rs 900 cr (Rs 9 billion) at Ranjangaon, Samsung has planned to set up a mobile manufacturing base in India. There's demand a-plenty: the government has forecast that India will have 250 million phone lines, both fixed and mobile, by the end of 2007. Since the majority of these would be mobile connections, the Indian telecom base is seen hitting the 200-million mark by 2007 from the present 70 million.


Finnish mobile handset giant Nokia plans to set up a manufacturing plant in Chennai with an investment of up to $150 million to meet the booming demand for its handsets in India. Production is likely to begin in the first half of 2006.

The Chennai unit will be Nokia's tenth mobile device production facility globally and will roll out India-specific entry level and mid and upper end GSM and CDMA handsets. India has skilled labour, friendly business environment and overall cost efficiency, Nokia officials said.

Nokia is the leader in India's $2.5 billion handset market, believed to have about 45 per cent market share.

LG Electronics

LG Electronics India plans to invest Rs 900 crore (Rs 9 billion) in the next five years in the production of optical storage devices, GSM-based phone handsets, and air conditioners. Of the total amount earmarked, Rs 200 crore (Rs 2 billion) will be ploughed into the segments in the next calendar year itself.

LG is the first in India to produce DVD writers. It plans to produce 33 million units of DVD writers by 2008. Most of the production will happen at the company's facility at Ranjangaon in Pune. GSM handset product line would be expanded to and capacity increased to 18 to 20 million by 2010.

LGEIL plans to increase the number of GSM models from the existing 12 to 23 by next year and a target of 1.5 million GSM handsets have been set which would comprise 10 per cent of the market share. The company's goal is to produce 20 million handsets by 2010 at the Pune unit and has already started producing the same from March this year with a capacity of 40,000 to 50,000 per month.


Samsung Electronics has plans to invest $15 million to set up a mobile handset plant in India as it looks to corner a bigger share of the world's fastest-growing mobile market. The capacity of the handset manufacturing unit, to be built in Manesar in Haryana, will be 1 million units a year, rising to 20 million by 2010, said H C Ryu, director, telecom, Samsung India.

The plant, Samsung's fourth overseas handset-making facility, will produce handsets in the mid- to high-end price range and is due to open by the end of the first quarter of 2006, he said.

Samsung, the world's No. 3 mobile phone maker, will begin making GSM handsets and add phones for the rival CDMA technology later, he said.

Samsung will also look at exporting to the Middle East and southwest Asia after stabilising production for India.


Motorola is setting up its applied research lab in India, with plans to invest $17 million a year in its Indian R&D activity over the next few years. Motorola believes India is the ideal region for applied research and software development, she said, adding that the country would be a focus for soft manufacturing for now, although the company was looking at investment options for handset manufacturing.

Motorola's investments in the past couple of years in India have amounted to $85 million in technology and R&D, taking its total investment to $150 million. The company is also setting up a campus in Hyderabad this year.

Investment is pouring in into other industry sectors too as the Indian economy fundamentals remain robust and perfect for global investors to make the most of this great Indian opportunity. And this is just the tip of the iceberg so to speak.

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