Google investing $10 billion in India actual mean of announcement

By Rajat Maske

I hope you’ve read the previous blog in which we discussed the blind spots surrounding the announcement of $10 billion. Google investment in India. This blog is a continuation of the same. If you haven’t read that one, please do so. Because with that reference, this blog will make a little more sense than otherwise. You’ll also be prepared for the tone of it and also know what to expect from it.

If you haven’t noticed yet, this is going to be a very different kind of blog. So let’s jump right into it

What does the announcement about Google investing $10 billion in India actually mean?

In order to understand the announcement better, we will have to learn a few new things and unlearn the old ones. There’s a mountain of misinformation surrounding people’s understandings regarding how businesses and countries work. For a basic understanding, you shall exchange the roles in order to get rid of the persepectives or beliefs associated with them as entities. Now imagine India as a business too, run by the Govt as a CEO, there are some functions for which India needs outsourcing. Our outsourcing tools are simple. So the foreign investments are our outsourcing partners.

There are mainly two types of foreign investments possible in our country.

1) FDI

And

2) FPI

FDI stands for Foreign Direct Investments which is investment into the risk associated factors such as new office, new branch, expansion, distribution centers, buildings and machinery that deteriorate in value over time along with everything else that is financial or non-financial byproduct.

However, FPI stands for Foreign Portfolio Investments which is strictly related to bonds and shares, such investment into the shares or securities up-to 10% of the total paid up capital of a company makes it a risk free investment. 10% is the limitation put for securing and defending a company’s core management.

In a way, according to SEBI, investments above 10% will allow the foreign investors to exert some type of force or influence on the decision making body of the company. That maybe manipulative in nature and may harm not only the market but also the country.

Hence, limiting it to 10% will allow the company to raise capital and maintain authority at the same time protecting Indian businessmen and investors as their first priority; the way it should be. In this way, the business entity can survive in global market with appropriate legal enforcements in place to protect its national interests. Now, do you remember 3 months ago, Facebook invested in $5.7 Billions in Jio platforms? Guess what is the percentage of that investment with respect to company’s paid-up capital? 9.9%. Coincidence? No. It was FPI.

This is how you secure your funds by not investing in machinery and building. Here, the risk is still borne by Indian businesses and its Indian investors however, the profits will be shared by Indian + Foreign investors according to their investment. No matter the proportion of profit, what requires a country to grow is his capacity to constantly and consistently progress, create wealth, value, and upliftment of its citizens. However with foreign investments in the risk free form and on top of those tax benefits, India is not only losing money but also winning risks. Which is odd to say but definitely not odd to write so I’m going to write it anyway. Below is the detailed report on FDI in India, compare this to the FPI to get the bigger picture.

Other recent investments in India –

• Qualcomm wants to invest 97 million U.S. dollars in Reliance to acquire a 0.15 percent equity stake.
• Intel wants to invest 253.5 million U.S. dollars in Reliance to acquire a 0.39 percent stake.
• Apple is stepping up its iPhone manufacturing in India and promised to invest $1 billion through its supplier Foxconn.
• India has received a foreign direct investment of over USD 20 billion in the last few months during the coronavirus pandemic.

All of these were FPI investments. But we must share some spotlight on Jio, it is on fire!

So the question arises, is everybody like that? Does everyone only care about his/her business and profit? Well, that’s how the world works but still there are exceptions proving it to us that it is still possible to earn humongous profits and give back to the society by investing right. Take following two examples –

In January, Amazon promised to invest $1 billion in digitising small and medium Indian businesses among other plans while creating 1 million jobs by 2025.

But doesn’t that sting a little? Foreign investments taking benefits of our businesses and our hard work without bearing any risks associated with businesses’ failure? Emotionally it does sting a bit, but logically speaking, it shouldn’t. I’ll tell you why. Because even though the foreign investment in the form of FPI may seem very selfish in nature, they are practical. Everybody wants to be rich with minimum to no risk, and we as Indians accept the FPI because we are unable to generate the same on our own. Companies that require funds do not get sufficient investments through Indian investors; hence FPIs are important as well.

When was the last time Google invested in India? –

Google partnered with Tata to launch Internet Saathi, a programme to help bridge the gender divide and deliver technology to Indian villages. According to the programme’s website, the effort has helped around 28 million women across nearly 3,00,000 villages that got connected to the internet by this investment in 2015

Why would Google invest in India?

Following at the basic reasons many of you already know –
1) India is a huge market. It is new and ripe for growth and expansion.
2) Digitization is the mission supported by the government; hence it will be easier to expand in India,
3) India is trying to push out China from Indian businesses. Hence taking help from China’s biggest business rivals is the only logical choice India is left with.

Knowing that Google has also decided to invest $4 Billion in Jio, it is considered another FPI investment. India is still expecting great FDIs in the small companies, which will help a developing economy ours.

Where will the Google investments go?

The Google investment announcement by Mr. Pichai suggested major plans ahead concerning cloud technology. India is still technologically developing and growing; hence, the next 5 years are expected to be booming for cloud based technology. Therefore, industry experts such as Mr. Suman Layak (Senior Editor, Economic Times) note that India’s next move will be in Cloud technology, as attested and asserted by Mr. Karan Bajwa, head of Google Cloud India. However, the details are not out and expected to be visible in a 7 years long period. So we will leave you at that.

Perception of the news on on global level.

–

According to CGNT China,

• The move has been seen in connection with the ban of 59 Chinese apps imposed by the Indian Information Technology Ministry.
• A trade move against Chinese interests in retaliation to border tensions.
• Even considering New Delhi’s pride spirit, which imposes the country to not appear driven by foreign actors in any moves, it could easily become an important dowel in the context of the U.S.
  – China rivalry which should not be underestimated for the pressure that could eventually exercise on the Asian counterpart.
• And it could indeed be interpreted as a move with a political meaning, which sees Washington leveraging New Delhi tensions’ with Beijing to expand the presence of U.S. companies in such an important market, and consequently the American influence.
• Silicon Valley’s top venture capitalist, entrepreneur and philanthropist M. R. Rangaswami recently said in an interview with Prittle Prattle News, “Coronavirus is sweeping the world, especially the US and India. In spite of that, the amount of investment going into India is mind-boggling.” And, “India’s golden moment is coming soon.”

Why is this important for you to know?

As a citizen of the country, you and I need to know where our government is falling short. Where the companies are fooling us? Where the media is lying and why? Who is benefited by such foreign investments? What s the politics behind it all? Where does the money go? Is it justifiable to give tax benefits to these foreign companies? Why doesn’t the mainstream media teach you all these complexities in simplest ways possible? What should be your next step? Which things you should lookout for? And which companies should you invest in or work for? All these are the questions for us to answer in the upcoming blogs and/or more importantly, in life.

Will this turn out to be a good decision? And for who?

Now will this turn out to be a good decision or not. And for who? We are the working class, we fund the country. The elite is still the ruling class and the third group counts on us for not only progress but also survival. The foreign investments like these constitute for a number of new employment opportunities. However the creamy layer that is the ruling class of politicians and wealthy people directly associated with such businesses will get a smidgen after the actual investors or owner’s of the specific company. It will take us at least a few years to contemplate after completion of the project that is scheduled for 7 long years in order to make up our mind about how good or bad it is. But if you ask me, we’ll find a way to incorporate every big and small change in the economy step by step with our strong foundations. However, there are some serious changes required at the legal sphere to keep companies in check.

My final thoughts –

Mr. Pichai; the Indian-American CEO wrote in his blog that this mission was “deeply personal”. As an Indian student studying international business I say, “Mr. Pichai, that depth is too shallow.” Anyone with common sense will tell you what’s wrong with it, Mr. Pichai. Indian businesses are struggling to survive in these disturbed market conditions. Small businesses are literally on life support right now many have been obliterated too. Thousands of medium sized businesses are going to shut down within weeks and hundreds of them already have! Millions of lives are at stake and none of it is your mistake but knowing where you are investing and why, is making me lose my mind and heart. I used to idolize you. If your “deeply personal mission” was all about earning profits, I can not imagine what you’d accomplish if you were a little selfish.