US President Barack Obama’s visit to India later this week is seen as a shot in the arm for the many American companies operating here. Over the past month, an inter-ministerial committee set up in December last year to fast-track investment proposals from the US has met twice.
The idea is to facilitate clearing of bureaucratic hurdles for several ongoing projects involving US companies, besides starting some fresh ones. On the list are the projects of 40-odd American companies, such as Morgan Stanley, Ford Motors, GE, Hughes Communications, International Paper, Hines, eBay, Amazon and Cisco.
The inter-ministerial committee, headed by department of industrial policy & promotion (DIPP) secretary Amitabh Kant, has representatives from a dozen ministries and departments as members.
While following up with ministries and departments to expedite decisions on stuck projects at the Centre and in states, copies of correspondence were marked to individual companies whose cases were taken up. The India head of a US company, reacting to the correspondence his company received from DIPP, said: “This has come as a pleasant surprise. I have not seen anything like this before.”
Acknowledges Diane Farrell, acting president, US-India Business Council (USIBC), an association representing 300-odd US and Indian companies: “The approach is diametrically different from what we saw a year back.”
Ajay Singha, executive director, American Chamber of Commerce in India, agrees with the approach. “Resolving bottlenecks will help existing companies to carry out their business more effectively,” he said. Also, speeding existing projects gives a strong signal to potential investors of India as an investment destination, adds Farrell.
“We see the setting up of an inter-ministerial committee as an important step. Mechanisms have been put in place which are effective and beginning to yield results,” says Banmali Agrawala, president and chief executive officer (CEO), GE South Asia. Among ministries, he says, there is willingness to cooperate and work toward resolving bottlenecks to create an enabling environment. During the Vibrant Gujarat summit earlier this month, USIBC members pegged potential investment to India by US companies over the next two to three years at $ 41 billion. As of November 2014, foreign direct investment inflows from US companies to India was $ 13.2 bn, said a senior DIPP official. Both the governments have said they plan to step up Indo-US trade and business from the current level of around $ 100 bn to $ 500 bn by 2020.
“There is a genuine desire by both governments to take business to the next level. That is what makes companies excited,” says Siraj Chaudhry, chairman, Cargill India. Ajay Kela, president and CEO, Wadhwani Foundation, who has had stints in several multinational companies, both there and here, adds the hunger to do business with India is a lot more than in the past 10 or 20 years.
Several US multinational companies have over the past three-four months announced big investments. Many have reiterated plans to step up investment in the country. In November last year, Cisco, the information technology (IT) and networking major, announced $ 1.7 bn of investment into the India operations over the next year. This included a plan for a $ 40-million innovation fund and stepped up investment in research and development. Cisco says it wishes to bid for the government contracts in setting up the Smart Cities and other Digital India projects.
Soft drinks and beverages major Coca-Cola India has reiterated plans to invest $ 5 bn in this country by 2020. The Atlanta-headquartered company and its bottlers have invested $ 2.2 bn over two decades. “All we seek from the government is a level playing field and an enabling environment,” said a spokesperson. In 2013, another soft drink major, PepsiCo, had announced plans to invest $ 5.55 bn in India by 2020.
Food-cum-commodity trading major Cargill India is investing Rs 1,000 core over the next 12 months. Continuing its blend of organic and inorganic growth, Cargill recently set up a back-end delivery centre in Bangalore to service its global need for IT and human resource services. “We want to see a friendlier operating environment in the country,” says Chaudhry.
Most US companies in the manufacturing space are looking to tailor their India plans to the government’s ‘Make in India’ initiative. “We see a bright future in manufacturing for local needs, be it for health care, renewable energy or the oil and gas sectors,” says GE South Asia’s Agrawala. GE India has 10 manufacturing facilities in the country. It recently unveiled a $ 200-mn multi-modal facility at Chakan, near Pune. Agrawala considers modernisation of the freight rail system another big opportunity for GE in India.
For Boeing India, the transport and defence major, civil aviation had been the cornerstone of its business. It now plans to focus energy and resources to create a system for aerospace manufacturing, says Pratyush Kumar, president, Boeing India. “One of our key strategies is to bring the best of India to Boeing, by tapping into the country’s incredible capability in engineering, technology and emerging capabilities in the manufacturing sector,” he says. It plans to hasten a partnership strategy with Indian companies for this. “We might also look at equity partnership, though that has not been the preferred mode till now,” adds Kumar.
Most US companies say even as they look for more predictability, transparency and consistency in policies in India, the challenge would be to engage with local and state governments. “There is a need to create a support-system for US SMEs (small and medium enterprises) to facilitate their entry into India,” says USIBC’s Farrell.
One lesson US companies operating out of India have learnt over the years is that this is a long-haul market, a marathon, not a sprint. “You’ve got to have patience, perseverance and endurance to win in India,” says Boeing’s Kumar.
According to Cargill’s Chaudhry, one needs to learn to deal with the fragmented nature of the market, and with value-conscious consumers. Also, being active in seeking ways to solve local problems. “It is important to be a part of the solution, even if we are not the cause of that problem,” says a spokesperson from Coca-Cola India.