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Spain´s Inbound FDI to India Country rank jumps from Number 22 to 13.
Traditionally Spain has looked to Latin America and North Africa for foreign direct investment opportunities. An emergent Asia as a market, not only for manufacturing or outsourcing, but for trade has finally seemed catch the eye of Spanish companies.
And, while China remains the largest trading partner for Spain in Asia, one of the most promising in the emerging market for bilateral investments, is India. Spain has jumped from 22nd to 13th most invested in terms of Inbound Foreign Direct Investment into India. But, what has led to this rise?
For the last couple of years, India saw a roller coaster of investments and growth. Although the investments in India faltered in 2011, along with the decline in domestic growth, a strong hit to banks and corporations, India took on a number of steps. Among them were opening the doors to mergers and acquisitions.
The recent changes in Tax Withholding Laws, going from 20% to 5%, are predicted to increase investments, resulting in about $6-8 billion cash flow investments next year.
Just one more step in opening the markets and attracting investors on the way to become number one. On today, India is second in development and rapid-growth only to China, but is already predicted to surpass the economic giant b y 2050.
Demographic driven growth makes India the 10th largest economy in the world by GDP, 3rd largest by PPP. On average the country’s economic growth turns out at around 7% per year since 1997.
In recent years it faced a slower growth rate due to declines in investments and problems with the government. A growth rate of 5% is the lowest it has been in the past decade, but it is predicted to pick up once again to 6.4% by 2014.
FDI in India increased from $232.7 billion in 2011, to $256.6 billion in 2012. So, what do all these numbers actually mean? It means, that India is growing, exponentially so, allowing for investment in many of it’s industries that would result in large returns.
Already, many early investments in this market are paying off three-fold, as businesses in India are gaining both status and stability.
One of the countries that are taking advantage of this opportunity is Spain. Although it is not the biggest investor, Spain’s FDI has grown in the past year, showing strong growing bond between these two markets. So far, total Spanish investment in India is around 762.22 million USD. Spain has been not only looking at India for investments, but also exporting their offices and production there.
Investments alone grew nearly 60% from 2011 to 2012, and are continuing to grow.
The joint ventures and collaborations between Spain and India in various fields ranging from electronics, to pharmaceuticals, to infrastructure, total up to around $762.22 million USD worth of investments. Nearly 70 Spanish companies have established offices in India.
They are investing in food-processing, steel, and are even establishing massive operations such as the wind-turbines and developing highways.
Long range projects such as these help to establish not only trust, but also good-will that hold a promise long-term collaboration between the corporations and countries.
Trade is also increasing in-between these two countries. Not only is there a full Commercial Office in New Delhi, and another in Mumbai, many of the companies both in Spain and in India are establishing closer relations.
One of the signs of a blossoming relationship is the quantity, and size of the investment. The heavier the investment, the longer and closer it promises to be. Gamesa, the biggest Spanish company in the Wind Energy sector, for example, has already set up 17 wind turbines in the Tamil Nadu state.
This is a considering investment for the beginning of a relation. Acciona, another Spanish company in the Green sector, has already set up two wind farms in Karnataka, and is planning on further expanding its presence.
Such large investments show the country, that the investments that are put in are not just a one time-test-the-ground venture, but rather, a considerable gesture toward establishing a stronghold relation, especially in such a fast growing field such as Green and Renewable Energy.
With the increased mergers-and-acquisitions, many of the companies are heavily investing in their productions in Spain. ROCA, a sanitary ware company bought 50% of Parryware, at a total cost of €50 million, making it the largest company for sanitary fittings in the world. M/s Duro Felguera won the contract for building equipment for the new port of Gangavaram in Andhra Pradesh, at a cost of around $100 million. And although the project was completed in July of 2009, it is looking for more opportunities for collaboration. But the investments are coming from the service industry as well. BBVA, one of the Spanish banking majors, entered into a joint venture with the Bank of Baroda, granting it access to the credit-card business in India. Banco Santander, another banking giant in Spain, is also looking to extend it’s presence to India.
Some of the companies are purchasing products and establishing liaison offices, going a slightly different route. Indian imports to Spain have increased by an average of 4.5%. Spanish exports to India, although overall decreased since last year, increased significantly in several sectors such as agriculture, drinks, and raw materials.
There has also been an increased interest in tourism and consulate relations; the Ministry has already made decision to open a tourist office in India this year. As part of the “Plan for Asia and Pacific for the year 2008-2012” the Spanish government has pledged to reinforce relations in commercial, tourism, and investment, as well as implementing a plan to develop the Indian market, primarily science and technology.
But what does that mean for the future? While there is lot to catch up between Spain and India in bilateral investment and trade this year has been off to a promising start. It appears that it will continue to flourish as India delivers on its demographic dividend to the world and Spain.
Director Europe India Chamber of Commerce,
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