India’s US investment had boosted jobs

Other reasons that have contributed to loss of appetite for investing in US include declining profitability of the acquired firms on account of the recessionary trend and reduced consumer spending. Further,liquidity crunch and impending maturity of foreign currency convertible bonds (FCCBs) issued during boom time is expected to weaken the cash flow for financing such investments by Indian companies in the US. Over 2007-08 and 2008-09,there has been a 48 per cent decline in the volume of Indian outbound investments in the US,according to the study.

Indian entrepreneurs have acquired several companies in the United States that filed for bankruptcy and have also set up their own manufacturing facility. Nearly 30 per cent of jobs created by US affiliates of foreign companies are in the manufacturing sector and forms about 12 per cent of the sector’s jobs,says the report. In fact,multi-national companies investing in the US contribute to 19 per cent of the country’s exports. “Foreign companies also generate revenue for the government,” it states further.

In 2007-08 and 2008-09 Indian companies made 143 acquisitions across various sectors in the US. The prominent ones were in areas of information technology,manufacturing and pharmaceuticals. In 2008-09,Indian companies were involved in 49 US bound transactions,according to the study. Of these,deal values for about 24 disclosed cases stood at $960 million with the deal size ranging from $0.7 million to $172 million.

Despite pointing out the tepid interest in the short term,the report says that in the long term Indian companies may rejuvenate their interest in the US market. In 2007,total foreign direct investment stood $276,835 million in the US with India’s share being a fraction of this. However,India’s need to tap the knowledge base and R&D potential of the US will increase investments,says the report.