Foreign firms bullish on services sector

Written by Saikat Neogi | Updated: Jul 19 2013, 09:55am hrs
Services sector is outpacing manufacturing when it comes to entering into a technical collaboration with foreign firms. A RBI survey on 835 Indian companies shows the share of services companies forging foreign collaborations increased to 25.6% during 2007-10 from just 7.5% during 1994-2001 while the share of manufacturing fell to 68.8% from 74.6% during the same period. The value of production of services companies with foreign ties increased from 1.2% in 2007-08 to 18.78% in 2009-10, mainly because of growth in computer and related services, while it dropped to 81.15% in from 98.69% for manufacturers.

The profitability of companies having foreign collaboration, measured in terms of the ratio of gross profit to capital employed, slipped to 11.3% in eighth round (2007-10) from 13.2% in the previous round (1994-2001). However, the number of employees in these companies went up from 62,166 in 2007-08 to 71,268 in 2009-10. Indian companies sourced technology mostly from the US, Germany, the UK and Japan.

Most foreign collaborations entered into by Indian companies are for technology transfer followed by trademark or brand name. Royalty and lump-sum technical fees account for about 45% of the payment for the foreign collaboration.