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India seeks investment from Indians abroad

Published by The Straits Times, Singapore on 2004-04-29

NEW DELHI--Baljeet and Inderjeet Singh are brothers who inherited an electronics shop in the upmarket Defence Colony. Their father set it up more than 40 years ago, back when the neighborhood was still considered a suburb of this capital city. The urban sprawl since then, of course, has been relentless, and now Defence Colony is a virtual city in itself, with a warren of bungalows, apartment complexes, parks and a busy shopping area. Business is flourishing for the Singh brothers.

'So many of our customers don't even live around here,' Baljeet Singh said yesterday, as he deftly wrapped a mobile phone for one buyer while fetching CDs for another. 'They come from overseas--Indians who live abroad. They shop with us because the prices here are better than anything they can get outside the country."

"They" are also known as NRIs, or non-resident Indians. According to a study released by Citigroup some days ago, there are some 15 million of them around the world, the third biggest expatriate community globally after the Chinese and Irish. Another study by ABN AMBRO, the Dutch financial giant, says that Indian expatriates generate more than US$100 billion in income each year; they remit around US$30 billion every year to their native country.

But the figures that are likely to most intrigue small businessmen like the Singh brothers, as well as the Indian government which is stepping up its call for foreign direct investment (FDI), are the ones that Citigroup has just released. There are 150,000 Indian millionaires outside India, Citigroup says. And they have a total of US$360 billion in surplus funds available for investment.

These are impressive figures, but does the Indian economy stand to benefit from the success of its emigrants? Will the Indian equity market and sectors such as engineering, technology and manufacturing get more investment from NRIs? (India's total FDI is around US$3 billion annually, a fraction of which is from NRIs.) Beyond getting more foreign shoppers of Indian origin, how will small-business owners such as Defence Colony's Singh brothers profit from the prosperity of overseas Indians? Who's guiding these affluent Indians about specific investment possibilities in the land of their origin?

A number of international financial institutions are taking steps to help NRIs channel their funds into emerging markets such as India, which has been growing at a respectable 6.1 percent annually for the last decade. For example, ABN AMBRO in Singapore has started "single-window" wealth management services in March for Indians with assets of at least US$100,000 available for investment. Reuters recently quoted a prominent Singapore restaurateur, Mr Surya Jhunjhunwala--whose assets reportedly are in excess of US$100 million--that he viewed India as a "prime country we are looking at investing in." Mr Jhunjhunwala and his younger brother have built a restaurant and real-estate business that includes Singapore, Australia and Hong Kong.

Institutions such as Coutts, a leading international merchant bank, are betting that there are others like Mr Jhunjhunwala who will look favorably at India. Coutts in Singapore, in fact, has hired 14 private bankers specifically to concentrate on generating business from NRIs. Citigroup's private banking division--which aims at NRIs with a net worth of at least US$10 million--says it will increase its staff for overseas Indians by 30 percent this year.

Mr Kuldip Sahdev, India's former ambassador to Japan and other countries, told The Straits Times that, in his view, a sophisticated campaign to tap into NRI funds could be very successful. In the seven countries of the Gulf, for instance, there are some 4.5 people of Indian origin; they send $4 billion in remittances to their relatives in India each year. But their investment potential has yet to be fully explored.

Part of the problem appears to be that Indian officials are perceived to be lethargic in cultivating NRIs, often leaving the task to the private sector. The report card on many Indian diplomatic missions overseas is less than encouraging when it comes to aggressively going after potential NRI funds. Only a few Indian states, such as Andhra Pradesh and Maharashtra, have mounted promising campaigns to woo investors of Indian origin. Andhra Pradesh's emissaries, for example, regularly attend meetings of the prestigious World Economic Forum in Davos, Switzerland and elsewhere, and target not only non-Indians but also NRIs through innovative PowerPoint and multi-media presentations.

Indian officials in New Delhi such as Mr Arun Jaitley--the minister for law and company affairs--say that want FDI to triple to at least US$10 billion annually. This week, they received some gratifying news: Emerging Portfolio Fund Research (EPFR), a widely respected organization that tracks investment flows and trends, said that foreign funds are increasing their investment in India and some other emerging markets in Asia.

India has received US$1.12 billion since the beginning off this year, accounting for 28 percent of the US$3.97 billion flowing into Asia. This represents a record for India, EPFR said, because India has traditionally lagged behind Korea, Singapore and Thailand. "India equity funds were an important driver of inflows," the organization said.

Ambassador Sahdev's message to NRIs: India, anyone?

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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