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India & Its Magnetic Charm For Foreign Investments

As Facebook, Google, Apple and several other companies line up to invest money in India and its companies, let us take a closer look at why this is happening now!

On Monday, Sundar Pichai, CEO of Google and Alphabet Inc announced a $10 billion (₹75,000 crore) Google for India Digitization Fund. The amount will be invested in India over the next 5 to 7 years. The investment will take place via a combination of equity investments, partnerships, and operations, infrastructure and ecosystem investments.

He added that the investments will focus on four areas important to India’s digitization:

  • First, enabling affordable access and information for every Indian in their own language, whether it’s Hindi, Tamil, Punjabi or any other
  • Second, building new products and services that are deeply relevant to India’s unique needs
  • Third, empowering businesses as they continue or embark on their digital transformation
  • Fourth, leveraging technology and AI for social good, in areas like health, education, and agriculture

While we were wondering how and where this money is going to be spent, Reliance’s AGM today gave us all the answers.

At the 43rd Annual General Meeting of RIL shareholders, Mukesh Ambani said that Google will be investing ₹33,737 crore or $4.5 billion in Jio Platforms for a 7.73% stake in the company. Sundar Pichai said that this is Google’s first investment from the Google For India Digitization Fund.

Google said that it will develop an entry-level affordable smartphone jointly with Jio Platforms with optimisations to the Android operating system and the Play Store.

Google said, as quoted in the blog, ” We want to work with Jio and other leaders in the local ecosystem to ensure that smartphones — together with the apps and services in the Play Store — are within reach for many more Indians across the country. And we believe the pace of Indian innovation means that the experiences we create for India can ultimately be expanded to the rest of the world”.

This announcement by Google came nearly a week after a Bloomberg report said that Apple asked its supplier Foxconn to invest up to $1 billion to expand a factory in Southern India.

Also, Facebook, which is a rival to Google, has also bought a stake in Jio Platforms. Besides Facebook, if you look at the other firms that bought a stake in Jio Platforms, you can find a pattern here. Investors of Jio Platforms such as Vista Equity Partners, KKR, Silver Lake, TPG Capital, L Catterton are American private equity companies while Public Investment Fund is a sovereign wealth fund of Saudi Arabia and Mubadala, ADIA are UAE’s sovereign wealth funds and Qualcomm Ventures, which is again an American firm.

These investments show how foreign companies trust India and Indian companies to grow exponentially in the future.

Growth: Global rating agency Standard & Poor’s (S&P) said that it is expecting India to recover strongly from the slowdown this year. It has forecasted an 8.5% GDP growth in the next fiscal. Fitch Ratings, also, anticipates the country to grow at 9.5% next year while the International Monetary Fund projects a growth of 7.4% next year.

Reducing Dependency On China: The spread of the coronavirus, China’s trade war along with other issues with the U.S, its border tensions with India and also, China’s “not so transparent” policies have made other countries question their dependence on China. Also, Chinese companies have invested funds throughout the world but for other countries’ companies to enter China’s market still continues to be a dream.

A Plethora Of Opportunities: India has 1.3 billion consumers and this is a major reason why most of the companies want to establish their footprint here. According to Cole Market Research, the IT and BPO services market in India is expected to grow by $83.6 billion during 2020–2024.

Looks like India is going to give a tight competition to the rest of the world with its open foreign direct investment policy and a diverse growing market.

Head to moneyguru’s Insight section to stay updated on all major financial news updates of the day!

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