INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

INDIA PREFERS TO GO DUTCH

 THE NETHERLANDS has emerged the largest recipient of overseas Indian investment, surpassing traditional favourites — the US and Russia. In the first nine months of FY06, of the total $1.6-billion overseas investment approvals, around $244 million has been earmarked for the Netherlands, with the US closely following with $225 million.

There has been a dramatic improvement in the Netherland's attractiveness as an investment destination for India Inc. Overseas investments from India, measured in terms of approvals, to the Netherlands between April 2005 and January 2006 was higher than the cumulative FDI from India to that country between April 1996 and March 2005.

A growing number of manufacturing and software companies from India is looking to establish greater presence in the European market. Indian investments to the European Common Market have been the highest among other regions, with manufacturing and non-financial services constituting the bulk of FDI approvals. “Increasing, investments into the Netherlands is largely because of the fact that the country is very investment friendly and it offers the best place for Indian companies to establish their presence in Europe. The wide usage of English as a medium of communication gives it an added advantage,” says Rajiv Kumar, chief executive of ICRIER.

 In addition, some Indian companies have also set up their holding companies in the Netherlands to route their investment to Europe and the US. With India Inc increasing its presence in these regions, more investments are now being routed through these holding companies.

Indian companies are not the only ones attracted to the Dutch market this year. According to the Netherlands Foreign Investment agency (NFIA), 2005 witnessed the highest number of new investment projects by foreign companies into that country, with a major chunk from Asia.

While this has been the largest amount of FDI received by the Netherlands from India in any given year, on a cumulative basis, Russia and the US continue to occupy the top spots. The Netherlands remains the tenth largest recipient of Indian overseas investments, if cumulative investment approvals since 1996 are taken into account. Within the other top 10 recipient countries, Vietnam and Oman have been replaced by Sudan and Singapore in the past seven years, as the favoured destination for Indian investments. While investments in Sudan were mostly for oil exploration, Singapore has attracted mostly IT and tech investments from India. According to the RBI annual report, more than 1,400 Indian companies are operating in Singapore, of which, around 450 are technology enterprises.

On the whole, there has been a 70% increase in actual FDI outflow from India in April 2005-January 2006 over the corresponding period last year. The share of manufacturing is above 50% and the share of non financial services is 30%.