Microsoft Corp. said it plans to invest $1.7 billion and hire 3,000 additional people in India over the next four years, making it the latest in a line of foreign companies to pledge more than a billion dollars each to tap growth and talent in the subcontinent.
Microsoft Chairman Bill Gates said yesterday his company was boosting its presence in India because it expects the country to become an increasingly important area of demand for its software, as well as a source for the brilliant but inexpensive-to-hire engineers Microsoft needs to build its empire.
"We are keen to increase the growth of Microsoft activities in India," Gates told a news conference in New Delhi. "Microsoft has been in India 15 years now, and our commitment continues to grow."
Microsoft's announcement came on the same day the company lost an antitrust case in South Korea and was ordered to separate its instant-messaging service from its Windows software and allow rival products on its system. South Korean antitrust regulators fined the company $31.9 million for what they said was abuse of its software-market dominance. Microsoft, based in Redmond, Wash., said it will fight the decision in court.
Microsoft is not alone in its rapid expansion plans in India. This week, Intel Corp., the world's largest chipmaker, announced plans to invest more than $1 billion in India over the next five years. Meanwhile, in October, Internet-equipment maker Cisco Systems Inc. unveiled plans to invest $1.1 billion in India. Late last month, SemIndia Inc., a consortium of Indians living outside the country, said it plans to invest $3 billion to use Advanced Micro Devices Inc. technology to produce microprocessor chips in India.
Analysts and politicians are hoping these announcements could mark the beginning of a wave of foreign direct investment in India. Despite an economic expansion of close to 7 percent for the past two fiscal years and projected expansion of more than 7 percent this fiscal year, ending March 31, India has been attracting less than one-tenth the amount of foreign direct investment heading to China. In 2004, for example, China attracted more than $60 billion in foreign direct investment, compared with $3.2 billion for India.
The high-tech sector is ripe for investment, analysts said, as an increasing number of big international names are outsourcing software programming, accounting and telemarketing to India. The country also is becoming an increasingly important source of demand, as the country's affluent middle class is buying cell phones, computers and cars at an unprecedented rate.
Research company Gartner Inc. said this week it expects annual technology spending by companies in India to more than double to $43 billion in the next four years. India's average annual growth in technology spending will be 20.8 percent over the next four years, said Dion Wiggins, a vice president and research director at Gartner, in a report. That is well above the 4.5 percent growth expected worldwide.
"This trend is being driven faster and further in Asia-Pacific," he said. "We expect to see increasingly innovative design and business models emerge in Asia."
Santanu Choudhury of Dow Jones Newswires contributed to this report.