First From Japan, Then From Taiwan & Now From Russia – With Love Into India


Three weeks ago we reported that Japan’s Softbank had announced its plans to make a $20 billion investment in India to produce 20GW of Solar Power. Softbank Chairman, Masayoshi Son, extremely well regarded globally as a smart investor, said that day:

  • India’s economy is on the cusp of the “hockey stick” curve before takeoff, and has the potential to overtake the United States within 25 years … it will be India and China fighting for the number one and two positions this century after overtaking the United States. … I would like to participate in this exciting moment, as we participated in China’s hockey stick moment … That’s why I am not just saying these beautiful words, but I am saying it with the money. I am really interested in participating in India’s hockey stick moment …”

Taiwan’s Foxconn is a joint venture partner with Softbank in this mammoth solar venture. The scale of this venture and the reputation of these two partners led the Wall Street Journal and the Financial Times to write about it in profuse terms.

This week Foxconn announced their own plan for a massive investment in India. Their announcement said:

  • “This includes plans to establish 10 to 12 manufacturing facilities in the country by 2020, which would generate around 1m job opportunities.”

According to the Financial Times,

  • “Foxconn’s move is also likely to make India its largest production base after China, where it operates more than a dozen large facilities, employing the vast majority of its more than 1m global workforce.”

To explain why this is a big deal for India, the FT article quoted  Arun Maira, the former chairman of Boston Consulting Group, the professional services firm, in India:

  • “This affirms what people have been saying, namely that manufacturing companies that are big in China are seeking other places to produce, and in particular India,… So this is a very significant move for Foxconn, but also for India itself, because Foxconn is an exemplar of the type of large-scale manufacturing facilities, which are well entrenched into global supply chains, that India needs to attract.”

Now Enters Russia

Well, Russia hasn’t entered quite yet, but is looking seriously at entering both the Solar Power market and the Submarine repair outsourcing market.

According to Live Mint,  

  • “Russia’s OAO Rosneft, the world’s largest publicly traded oil company, is exploring a huge investment in solar energy in India, in a move that is as much a sign of the company’s interest in the Indian market as it is the potential of solar energy in the country. “Representatives from Rosneft have met the Indian government officials. They want to set up a capacity ranging between 10,000MW (megawatts) to 20,000MW,” said a government official who spoke on condition of anonymity. At an investment of around Rs.6 crore per MW, a 10,000MW capacity will entail an investment of around Rs.60,000 crore.””

Besides solar power, Rosneft is also in talks to buy 49% of Essar Oil from India’s Essar Group. 

Rosneft eyes Indian solar power market

(Photo Bloomberg via LiveMint)

India is well known as the center of outsourcing in technology and business process operations. Under PM Modi, India is trying to built a manufacturing outsourcing business as well. This week brought such a deal in the works not just in basic manufacturing outsourcing but in military outsourcing. According to the Economic Times,

  • Russia says that it wants to make India a global hub for the upgrade, maintenance and repair of conventional submarines and its leading shipyard is in final talks to select an Indian joint venture partner for a mega project to set up facilities here
  • “With contracts worth several thousand crores in the offing for the upgrade of Russian origin diesel electric submarines — several from the Indian Navy itself — the joint venture has the potential of making the selected Indian shipyard a serious player in the international market
  • “Officials from the state-run Zvyozdochka shipyard told ET that a memorandum of understanding could be signed within a month as it is in final talks with an Indian partner for the project. Russian engineers have already visited the Indian yard and advised it on changes to be made as well as investments needed to execute the project”
  • “We are in the process of negotiating with an Indian shipyard and if these negotiations are successful, it could become our partner for future tasks of modernising Kilo class submarines. Not just for India but for third nations as well,” Evgeny V Shustikov, Deputy Director General of Zvyozdochka told ET”

Russian engineers have already visited the Indian yard and advised it on changes to be made as well as investments needed to execute the project.

(photo – courtesy ET)

A number of countries operate Russian Kilo-class submarines including Vietnam, Iran, Nigeria. As Andrey Baranov, deputy CEO Rubin design bureau that has designed the Kilo class, told ET:

  • India could become a second center in the world for Kilo class upgrade. For certain nations it is easier to send the submarine for repair to India than to any other place. It is also a good chance for India to master the repair and upgrade of this class of vessel,” 

This could be a secular movement for both Russian & European military manufacturers. These countries have technology, expertise but cannot match the US in terms of scale or in terms of availability of skilled labor. India can become a value-added partner to both Europe and Russia in their efforts to sell advanced weapons to the Middle East & Asia with repair, maintenance and upgrade centers in India.  

The next higher step is manufacture of advanced weaponry in India. Sweden has expressed serious interest  in manufacturing its Grippen fighter in India with full transfer of technology. The US is in talks to manufacture howitzers in India for use by the Indian Army.

All this is in less than one year after PM Modi announced his Make in India initiative! And this is all in addition to being the best secular income growth and consumer spending story in the world. No wonder, Jeffrey Gundlach, a renowned money manager, said on Wednesday, July 15 on CNBC:

  • we are long the Indian stock market; have been for quite awhile; gonna be long it for years; … I think its a market that is probably a good one for the next generation & so we are going to stay long for a long time



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