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INDIA CREATES JOBS IN USA
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It has been popularized by the US that Indian companies are snatching away jobs from their citizens, though the reality remains totally different and undisclosed. But now a recent study has spilled the beans, as it has found that Indian companies have actually created job opportunities in the US and invested USD 26 billion in the country. The new study has challenged the popular notion of Indian companies taking away US jobs and has helped bring out the truth
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A study jointly conducted by the Federation of Indian Chambers of Commerce and Industry
(FICCI) with the India-US World Affairs Institute and the Robert H School of Business, and the University of Maryland, revealed the undisclosed truth that Indian companies have helped generate thousands of jobs in the US. The 70-page report of the study revealed that Indian companies have actually created more than 55,576 jobs in the US and have invested over $26 billion in five years from 2004-2009.Contrary to US President Obama’s rhetoric that jobs are moving from “Buffalo to
Bangalore”, the study demonstrates that Indian companies have been investing steadily in the US for decades, and with the rise of India Inc, the magnitude and impact of such investments has increased significantly.
Using the Tata Group as a case study, the report shows how Indian firms are contributing to the US economic growth through investment and job creation in America. Tatas alone have created 15,000 new employment opportunities in the US.
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How America Benefits
The continued globalization of the American economy has evoked widely disparate viewpoints within the United States – from a threat to the American way of life to globalization as a panacea for anything and everything. Clearly, neither view presents an accurate account of reality. This study investigates one specific aspect of globalization of the American economy, namely, the United States-India business relationship. It provides, for the first time, a comprehensive analysis of America’s economic engagement with India for the period 2004 to 2009. The analysis covers India’s foreign direct investments into the US and US exports to India, as well as an assessment of their impacts on the American economy. Also included in the study are the economic impacts Indian Americans are having in the US. It presents a case for even stronger business ties between the United States and India. Such a relationship will benefit the US (and India) especially with regard to jobs, the number 1 policy issue in Washington and the number 1 livelihood issue on Main Street America today. The study is based on a variety of published information, information from world-class sources such as the Financial Times, Thompson SDC Database, the U.S. Department of Commerce, and Reserve Bank of India, among others.
ACCELERATED INVESTMENTS OVERSEAS
Indian companies have been investing abroad for decades, though the pace of foreign investments has accelerated significantly since 1991, and especially in the 2000s. This development is a result of several factors, including Indian companies’ ability to arbitrage their cost advantages, access to a large talent pool, success at home – in a huge domestic market with cut-throat competition, reasonably well-developed institutions (compared to many other emerging markets), business acumen arising from an entrepreneurial tradition, business sophistication, financial market sophistication, production efficiency, a long exposure to Western and Japanese multinationals and their management practices, and Government of India’s progressive relaxation of foreign investment rules. While in the 1960s/1970s/1980s, Indian multinationals were investing in other developing countries, the trend in the last decade has been to go “up market” and they now also invest in highly developed economies like the United States. This portends a reversal of roles whereby developing countries like India are now making investments in developed countries, not just the other way around.
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“The study shows how major multinationals from India are now making significant acquisitions and greenfield investments, and creating jobs in the US. Some of the Indian companies to which work was being outsourced in the earlier times are now in-sourcing such jobs within the US itself, using American workers to perform value-added work,” said FICCI Secretary General Amit Mitra in his foreword. According to the study titled “How America benefits from economic engagement with India”, during 2004-2009, 90 Indian companies made 127 greenfield investments worth $5.5 billion, and created 16,576 jobs in the US. The top three destination states for greenfield investments were Minnesota, Virginia, and Texas. On an average, Indian companies invested $916 million per year or $43.3 million per greenfield project and despite the onset of worldwide recession in 2007, the value of greenfield investments continued to rise through 2008, the study said. Apart from direct investments, the study disclosed that 239 Indian companies made 372 acquisitions in the US during the period 2004-2009. It also revealed that Indian companies spent about $21 billion through 267 acquisitions in the US. More than 80 percent of the M&A investments were in five sectors including manufacturing, IT, biotechnology, chemicals and pharmaceuticals, automotive and telecom. Data show that manufacturing attracted the most investments by Indian companies.
Job creation in case of 85 M&As (of the 372 acquisitions) was estimated at over 40,000 jobs in the United States. The actual number of workers employed by the Indian companies, therefore, will be much larger, the study said.
Immigrant Entrepreneurs, Professionals and Students from India
The 2.57 million Indian Americans in the US contribute to the US economy and society in numerous ways. It’s hard to measure their economic impact with any precision. Here are some pointers in that direction.
• A 2007 joint Duke University-UC Berkeley study found that Indian immigrant entrepreneurs had founded more engineering and technology companies during 1995-2005 than immigrants from Britain, China, Japan, and Taiwan combined.
• A 2007 study by the National Venture Capital Association (NVCA) found that India was the most common place of birth for foreign-born founders of venture capital-backed public companies, followed by Britain, China, Iran, and France.
• The list of major companies whose founders or co-founders are of Indian heritage include Akamai (1,750 employees), Bose Corporation (8,000 employees), iGate (6,910 employees), Kanbay International (6,900 employees), Sun Microsystems (29,000 employees), and Syntel (13,600 employees). Dozens of such companies in the US have created tens of thousands of jobs.
• There are currently almost 10,000 Indian American owners of hotels/motels in the US, who together own over 21,000 hotels with 1.8 million guest rooms and property valued at $129 billion. They employ 578,600 workers.
• There are about 50,000 physicians (and 15,000 medical students) of Indian heritage in the US, serving in cities, rural, and peripheral areas throughout the country. They continue to make major contributions to their communities, to healthcare, and to the medical profession in the US.
• Education is one of America’s finest exports. The foreign students who come for higher studies to the US not only bring talent, but also contribute to the US economy via tuition and living and other expenses. The expenses incurred by foreign students in the United States are treated as “deemed exports,” with implications for thousands of jobs linked to such exports.
India has had the largest number of foreign students in the US among all countries of origin for eight years in a row. In 2008, there were 94,563 students from India whose net contribution to the US economy was $2.39 billion. All in all, the study shows how America benefits from economic engagement with India and with people of Indian origin. It has highlighted only the financial and employment benefits of such engagement to the US, which of course are the biggest issues facing the US today. However, the non-financial benefits of engaging with India are equally significant – cultural, social, regional security, and political advantages to name just a few.
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November 2011
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