Holcim Group, located in Switzerland, is the latest multinational corporation (MNC) to abandon India owing to macroeconomic and regulatory issues in order to focus on its core activities. Holcim said it sold its India operations, Ambuja Cements and ACC, for $10.50 billion in order to focus on green revenues and decrease exposure to the carbon-intensive cement business. In addition, the company has sold cement holdings in Russia, Brazil, Sri Lanka, Malaysia, and Northern Ireland.
Companies that have left India in the past include Cairn Energy, Hutchison Telecommunications International, Docomo, Lafarge, Carrefour, Daiichi Sankyo, and Henkel, while international banks such as Citi, Royal Bank of Scotland, and Barclays are focused only on wholesale banking. Commerce and Industry Minister Piyush Goyal briefed the Lok Sabha in December 2021 that between 2014 and November 2021, 2,783 foreign corporations and their subsidiaries ceased operations in India.
‘Many of these withdrawals are influenced by global macroeconomic forces. Regulatory problems that formerly hampered some ventures are no longer an issue. Regulators have welcomed them, supported them, and departed when they pleased. Many of these withdrawals are sector-specific and have been affected by the previous two years of epidemic-related slowdown,’ said Manoj Kumar, founder and managing partner of Delhi-based legal firm Hammurabi and Solomon.
Several corporations, including Gruppo SES and Dragados of Spain and Leighten Construction of Australia, have evaluated investment opportunities but have not moved further in the previous decade. Apart from selling products, companies such as GE and Bombardier have also invested in various European nations, but not in India. According to Manish Agarwal, former PwC Infrastructure head and co-founder of AskHow India.org (an organisation that simplifies complicated public policy discussions for the general public), while FDI is still coming to India, strategic investors have stayed away.
‘India must establish sufficient project preparation deadlines for public-private partnerships, offer balanced risk-sharing norms, and contracts must be effectively enforced,’ Agarwal added. Five car MNCs – Ford India, Harley Davidson, UM & Lohia, Man Trucks, and General Motors – left India in the last five years, resulting in a loss of Rs 2,485 crore in dealer investments and over 64,000 job losses.
‘At first, several automakers established operations in India, believing the nation would serve as a dump for items that did not sell in worldwide markets. At the time, Indian enterprises were unable to compete with the quality of these MNCs’ products. While the majority of these international businesses did not consider Indian circumstances or clients, domestic enterprises gradually began to produce quality goods,’ stated Vinkesh Gulati, head of the Federation of Automobile Dealers Associations of India (FADA).
‘There were no regulatory or political issues that would have jeopardized their success. The move has harmed both dealers and consumers because there are no services for the items they sold in the nation, and it has also resulted in massive employment losses,’ he noted. Domestic markets are maturing, and government efforts such as ‘Make in India’ and ‘AatmaNirbharBharat Abhiyan’ are gaining traction, making India a more difficult market for MNCs.
The withdrawals also came at a time when the Centre and several state governments were laying out red carpets, including tax breaks, for MNCs eager to relocate their headquarters from pandemic-ravaged China. According to a Parliamentary Standing Committee study released in February 2021, India is behind countries such as Vietnam, Taiwan, and Thailand as favored destinations for enterprises relocating out of China.