In a move that emphasizes the strategic importance of India these days, {dirlink 2|19} (Nasdaq: CSCO) is investing more than $1 billion in its operations there over the next three years. (See Cisco Invests $1B in India .)

The figure represents the vendor's largest investment outside the U.S. and displays its faith in what's become a rapidly expanding market since deregulation just over three years ago. Cisco's business in India has grown by more than 50 percent in the past two years and the company expects an annual growth rate "in excess of 30 percent" for the next two, notes spokesman Terry Alberstein.

On a visit to India, CEO John Chambers announced that aside from $750 million for research and development, the vendor will provide $150 million from Cisco Systems Capital to offer leasing arrangements for customers and partners, as well as $100 million for investment in Indian startups.

The company has allocated an additional $100 million for customer support operations and pledged to explore setting up a manufacturing facility. That should endear it to the Indian government following its recent moves to encourage local production and after-sales support, although Cisco already contracts out manufacturing to local suppliers. (See India Blocks Foreign Telecom Gear.)

On top of that, the company will invest another $10 million in joint initiatives with the government -- donating networking equipment facilities for pilot e-government services in rural areas and helping telecom operator Bharat Sanchar Nigam Ltd. (BSNL), in which the government holds a stake, set up an IP NGN lab. (See Cisco Links With BSNL .)

Alberstein, director of corporate affairs for Asia/Pacific, says that although the Indian market is highly price competitive, the conditions are "very favorable for Cisco," particularly as demand is largely IP-oriented. "We're very bullish and positive about the long-term prospects."

— Nicole Willing, Reporter, Light Reading