India appears open to new US ventures
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It seems sheer chance to Alan Lukas that he is now working to establish a joint venture in India - a venture he thinks can provide considerable growth for his small business in Saco, Maine.Skip to next paragraph
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Opportunity knocked recently in the shape of an Indian engineer living in Chicago. The engineer had noticed an advertisement for a utility meter made by Intelligent Controls Inc., where Mr. Lukas is president. The engineer believed the meter could solve a problem he knew of at Calcutta Electric, a utility in India. Had it not been for this connection, Lukas says, ''we would not have thought of India.''
Not thinking of India - that's one reason more American businesses have not invested in this South Asian democracy, says S. P. Bagla, minister of economics at the Indian Embassy in Washington. ''India is far too distant for (Americans). It's not on their horizon,'' Mr. Bagla explained in an interview here.
But recently, India has zoomed much closer than the horizon. ''The assassination (of former Prime Minister Indira Gandhi) has brought India into consciousness,'' said the slight man, who spoke before a sizable group of high-tech business professionals gathered here last week to learn about joint ventures in India.
India's need for Western technology has not changed with the death of its leader. It is still searching to lease, buy, or do joint ventures in essential technology that will help build its electronics, communications, power, machine tools, oil and natural gas, chemical, and fertilizer industries. But some of the people at this conference wondered if the business climate there would change. ''There's no question. As a businessman, you think about riots ...,'' Mr. Lukas said.
It now looks as if Rajiv Gandhi, Indira Gandhi's son, is likely to win the December elections and hold his position as the new prime minister. Mr. Gandhi is generally considered more pro-business than his mother, who in the last few years increased incentives for foreign investors and opened up large-scale projects, such as the development of telecommunications, to the private sector.
Gandhi has reportedly transferred the Company Affairs Department, a bureaucratic maze that administers antimonopoly laws, from the Ministry of Law to the Ministry of Industries, where business gets a better hearing.
A US State Department official, although acknowledging Mr. Gandhi's pro-business attitude, says there are still two big issues to be considered: Gandhi's specific economic plans, which are unclear at this point, and whether stability can be brought about so that he has time to work on other priorities.
During the 1970s, the door to foreign investment was essentially shut. Indians were undertaking a massive effort to modernize themselves, by themselves. ''They came out with the realization that they couldn't do that and still compete on world markets,'' says Shiva Singh, manager of project development at India International Inc., a business consulting firm in Washington, D.C.
India then began to look beyond its borders for technology to build up the country's infrastructure, including transportation and power systems. In January , a new five-year plan swings into action, concentrating on telecommunications.
The Indian government has been big on incentives in the last few years. It has two free-trade zones now and four more coming; with these, foreign businesses can take a five-year tax holiday and can import duty-free. While the traditional allowance for equity control in a venture there has been 40 percent for foreigners, that can now go much higher, even to 100 percent ownership, if the venture involves essential technology or is completely export oriented.
''India is still not the ideal country in terms of investment, but if you consider the options, I think India ranks No. 1,'' says Mr. Singh. Labor is roughly 75 percent cheaper in India than in Hong Kong, Singapore, Taiwan, and South Korea. It also has the third-largest scientifically and technically trained work force in the world, he says. ''That, coupled with the labor cost advantage, puts you in a very strong position.''
While the US ranks second behind Britain in the number of collaborations with India, Singh says the Japanese are coming up fast. Toyota, Nissan, and Suzuki already have the auto market tied up, he says. He warns that doors open up only to a few foreign companies in each sector, because India still wants to do as much on its own as it can. Those that make it, though, end up with captive markets.
Coming into the picture is also the consumer market. About 50 million Indians , twice the size of Canada, can afford the Western life style, says S. V. S. Sharma, director of the India Investment Center, the Indian government's office in New York responsible for channeling foreign investment to India. Officials emphasize, however, that they are not interested in foreigners peddling lipsticks. They want ''useful'' products, like television sets.
The number of American collaborations with India has increased since 1980, but Indian Ambassador K. S. Bajpai says India still suffers from an ''image'' problem. He says India's recent successes - self-sufficiency in agriculture, an excellent debt payment record, and shift from overdependence on oil imports - are not generally recognized. India's history proves, he says, that its legal structure can ensure stability in the long run, though he doesn't deny the reality of major challenges: population fragments pushing for their own identity and a power struggle between state and federal governments.