India’s open for business push has local quirks
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Shritama Bose
MUMBAI, Sept 20(Reuters Breakingviews) -Prime Minister Narendra Modi has spent much of the past decade lowering barriers to foreign investment in India. Yet a growing list of firms including BlackRock BLK.N, BMW BMWG.DE and Shein are expanding in the country in partnership with local tycoons. It tightens the grip powerful families have on the world’s fifth-largest economy, and sets them up as future global rivals to those knocking on their door.
On paper, the once-markedly socialist country is open for business. Its craving for capital is strong. Overseas companies in most sectors are free to enter the market on their own, unlike in China, where large swathes of the economy were kept off limits and where some sectors, like autos, were opened up on the condition that foreign companies found local partners.
The problem is, India’s federal political system and sheer cultural and geographical diversity means it remains a tricky place for international companies. Powerful families offer a shortcut to establishing a nationwide footprint, avoiding cut-throat domestic competition, or achieving both of those things.
BlackRock’s decision to re-enter India exemplifies the dilemma. The company run by Larry Fink, which manages over $10 trillion, is in the process of teaming up with Mukesh Ambani’s Jio Financial Services JIOF.NS in asset and wealth management. The U.S. company exited an Indian joint venture with DSP in 2018 because it didn’t have a path to control.
Fink is unlikely to have a path to control with Jio but the rapid financialisation of savings in recent years means the market is too attractive for BlackRock to ignore. Partnering with a tycoon is less risky for the U.S. company than trying to beat India’s richest man who wants to push into financial services and is known for obliterating competition.
The desire of foreign companies to defend their market position in India partly explains their rush to subscribe to fundraisings by Reliance’s RS.N business units in 2020. These include Facebook-owner Meta Platforms' META.O $5.7 billion purchase of a 10% stake in Reliance’s digital and telecoms business. India remains open for U.S. Big Tech but Indian companies are also flexing their muscles more in digital businesses from telecoms to e-commerce as more Indians get smartphones.
Elsewhere, New Delhi is encouraging partnerships through subsidies in its flagship production-linked incentive scheme to spur manufacturing. This allows the government to dictate which foreign companies team up with which Indian families to be the next leaders in future industries.
Taiwan’s Hon Hai Precision Industry 2317.TW, more widely known as Foxconn, pulled out of a joint venture last year to make chips with Anil Agarwal’s Vedanta VDAN.NS after widespread concerns about the Indian company’s debt and its ability to fund investments. Meanwhile, global companies like French oil giant TotalEnergies TTEF.PA are burnishing their green credentials by partnering with Indian tycoon Gautam Adani, who has big ambitions in renewable energy. Smoother access to subsidies is one reason companies including Japan’s Fujifilm 4901.T are scouting for local partners before they start production in India.
It’s significant that many of the new partnerships are in the realm of technology. Adani’s group will work with Israel’s Tower Semiconductor TSEM.TA to build a chip fabrication plant; German carmaker BMW and Tata Technologies TATE.NS plan to leverage Indian talent in IT to develop intellectual property that will drive cars of the future.
While India’s approach to inward investment differs from China’s in many ways, the country desires the same thing as its neighbour wanted from foreign multinationals: know-how.
The government yearns for the South Asian nation to become a manufacturing powerhouse. India’s leading business families also want to dominate in their home market and to break out as leaders on the global stage. After picking up a stake in UK telecom operator BT BT.L last month, Bharti Enterprises Chair Sunil Bharti Mittal told journalists India's government is continuously encouraging a handful of companies which have gone global to accelerate the process.
That sets up the potential for at least some of the new Indian alliances to sour, just as several Chinese joint ventures did. True, some foreign companies that ventured into the People’s Republic simply failed to keep up with fast-changing local consumer preferences. Others, though, said they were pressured into handing over technology to their private or state-backed joint venture partners, to local officials or to Chinese regulators as a condition for doing in business in the world’s second-largest economy.
That complaint took centre stage in a trade war launched in 2018 by then U.S. President Donald Trump. When Stellantis STLAM.MI ended its joint venture with Guangzhou Automobile Group 601238.SS in 2022, the European carmaker’s CEO Carlos Tavares blamed rising “political influence” in doing business with partners in China.
It is therefore perhaps unsurprising that Chinese companies have the least freedom to operate on their own in India. The government turned up the heat on companies from the People’s Republic after a deadly skirmish between the two countries’ militaries along the Himalayan border in 2020. This tension has resulted in some particularly eye-catching joint ventures struck by Chinese companies that want to continue to expand in the fast-growing Indian market.
Four years after New Delhi banned Shein’s app, the fast-fashion company which was founded in China is back in partnership with Ambani’s $240 billion Reliance Industries. Together they plan to digitise the supply chains of the conglomerate’s retailer, manufacture goods and export them to the world. Similarly, less than two years since India launched an investigation into a local unit of Chinese automotive giant SAIC Motor 600104.SS, the company finalised a joint venture in March to sell its MG-branded cars in partnership with Sajjan Jindal’s JSW Group.
New arrivals at least have some examples of successful foreign joint ventures in India to aspire to. Take $46 billion Maruti Suzuki MRTI.NS, purveyor of 40% of the country’s cars. This partnership with Japan’s Suzuki Motor 7269.T has delivered yearly returns to shareholders over the past decade, including dividends, which exceed those of the benchmark Nifty 50 Index. Meanwhile, Adani Wilmar ADAW.NS, the Adani group’s partnership with Singapore’s Wilmar WLIL.SI, established a quarter of a century ago, is behind India’s largest selling edible oil brand.
Outside of joint ventures, some foreign companies have had more luck than others on their own in India. South Korea’s Samsung 005930.KS has had remarkable success selling smartphones and held a leading position in the consumer electronics market for a long time, but British telecom operator Vodafone VOD.L struggled with a price war and merged with India’s Idea Cellular in 2018. Whether or not India is open for business, foreign business alliances are accumulating even more power in the hands of the country’s leading tycoons.
Follow @ShritamaBose on X
Graphic 1: Foreign direct investment into India is slowing https://reut.rs/4e6ihW9
Graphic 2: Tycoons lead a third of India's benchmark index https://reut.rs/3B6k1Am
Graphic 3: Suzuki's Indian joint venture is a standout success https://reut.rs/4d7FIwZ
Editing by Una Galani and Ujjaini Dutta
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آخر الأخبار
إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.
