In a joint study by the University of Maryland, India-US World Affairs Institute and the Federation of Indian Chambers of Commerce and Industry, India had increased outward FDI projects in the US. Over the last five year period, Indian FDI projects in the US created about 60,000 jobs with investments worth $26.6 billion in total.
The outward FDI projects included 372 acquisitions pegged at about $21 billion by 239 Indian companies and 127 greenfiled investments pegged at $5.5 billion. The five year study period covered 2004 to 2009 and was titled, “How America Benefits from Economic Engagement with India.” The Greenfield investments created 16,576 jobs in the US and were mainly carried out in states such as Minnesota, Virginia and Texas whereas the states with the highest job creation rates were Ohio, Texas and California, revealed the study. The huge percentage of the Indian outward FDI into the US went into the mining, manufacturing and other industries, with software and IT services getting a small percentage, 15%, of the total Indian investments.
Nevertheless, the Greenfield investments mostly went into metals, software and IT services, leisure and entertainment, industrial machinery, equipment and tools and financial services, representing nearly 80% of the total greenfield investments into the US. On the other hand, 75% of the total deal value went into five states that attracted the most Indian FDI investments through mergers and acquisition by Indian firms.
They included Georgia, New Jersey, Michigan, California and Texas whereas the top five sectors of the American economy that got the most M&A investments by Indian firms were biotech, chemicals and pharmaceuticals, automotive and telecom, manufacturing, IT & ITES that accounted for a sum of 83% of the overall deal value. However, a majority of India Inc.’s Investments in the US were in manufacturing and other industrial sectors, as opposed to services for which India has repute.
In 2008, the value of India acquisitions in the US declined, worsening in 2009 as a consequence of the global financial meltdown but even so, Indian greenfield investments in the US went up through 2008, achieving their highest level that year, but declined slightly in 2009, even though the decline was not as steep as for acquisitions. The study accounted for this trend by observing that greenfiled investments are long term while acquisitions are often opportunistic and accomplished relatively faster. The study comes after US president, Barrack Obama, announced an end to tax incentives for companies that shift jobs overseas through outsourcing, but rather give incentives to those creating jobs in the US.