India's GDP recently crossed the trillion-dollar mark for the first time and with this India has joined the elite club of 12 countries with a trillion dollar economy. Countries that have breached trillion-dollar GDP level in the past are he US, Japan, Germany, China, UK, France, Italy, Spain, Canada, Brazil and Russia
According to the data released for the year 2006-2007, India's GDP grew at an impressive 9.2 per cent. The share of different sectors of the economy in India's GDP is as follows: Agriculture - 18.5 per cent, Industry - 26.4 per cent, and Services - 55.1 per cent. The fact that the service sector now accounts for more than half the GDP is a milestone in India's economic history and takes it closer to the fundamentals of a developed economy. At the time of independence agriculture occupied the major share of GDP while the contribution of services was relatively very less.The government has set a target of an average annual GDP growth of 9 per cent for the Eleventh Five Year Plan. The target looks achievable as all the macroeconomic fundamentals are strong and the impressive growth rate of Indian GDP looks all set to continue.
Welcome to India
India is the second most populous country and the largest democracy in the world. The far reaching and sweeping economic reform undertaken since 1991 have unleashed the enormous growth potential of the economy. There has been a rapid, yet calibrated, move towards deregulation and liberalisation, which has resulted in India becoming a favourite destination for foreign investment. The mood is upbeat and the signals strong. Undoubtely. India has emerged as one of the most vibrant and dynamic of the developing economics.
What India Offers
One of the largest economies of the world, fourth largest economy in terms of purchasing power parity.
Large and rapidly growing consumer market-up to 300 million people constitute the market for branded consumer products.
Easy access to markets of the other nations belonging to the South Asian Association for Regional Cooperation (Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka).
Large and diversified infrastructure spread across the country.
Promising future in the Information technology industry.
Large manufacturing capability, spanning almost all areas of manufacturing activities.
Well-developed research and development (R&D) infrastructure and technical and marketing services.
Well established knowledge industry.
Abundance of natural resources (has a rich mineral base), and agricultural self-sufficiency.
Developed banking system-commercial banking network of over 63,000 branches supported by a number of National and State level financial institutions.
Vibrant capital market consisting of 22 stock exchanges with over 9,000 listed companies.
Skilled manpower and professional management including engineers, managerial personnel, accountants, and lawyers, available at competitive costs.
Conducive foreign investment environment that provides freedom of entry, investment, location, choice of technology, import and export.
The policy environment provides clear guidelines for entry, freedom of location, choice of technology, production, repatriation of capital, dividends, etc., which is specifically aimed of enhancing the flow of FDI.
Well-balanced package of fiscal incentives.
Stable democratic environment fostered by over 53 years of Independence.
Established, Independent judiciary.
English the preferred business language.
Business opportunities
The reform process has deregulated the economy and stimulated domestic and foreign investments, taking India firmly into the forefront of investment destinations. The Government, keen to promote investment in the country has radically simplified and rationalised polices, procedures and regulatory aspects, Foreign investment is welcome in almost all sectors, except those of strategic concern ( for instance, defence and atomic energy).
A series of incentives has been announced to promote investments. These include import of capital goods at concessional customs duty (subject to fulfillment of certain export obligations), liberalisation of external commercial borrowing norms, tax holiday, and concessional tax treatment for certain sector. In addition, several State Government offer incentives, such as subsidy on fixed capital, loans at concessional rates of interest, and attractive power rates, While several incentives are project specific, a number of firms have been successful in negotiating favourable investment terms with the State Government concerned.
Since the initiation of the economic liberalisation process in 1991, sectors such as automobiles, chemicals, food processing, oil & natural gas, petrochemicals, power, services, and telecommunications have attracted considerable investments. Today, in the changes investment climate, India offers exciting business opportunities in virtually every sector of the economy.
Energy
Power
Investment Policy
The 1991 Power Policy seeks to attract significant private sector investment in the Indian power sector. The key initiatives include:
Private sector permitted to set up cool, gas or liquid based thermal project, hydel projects and wind or solar projects of any size.
Foreign equity participation brought under automatic approval of generation, transmission and distribution of power generated in hydro-electric, oil based and coal/lignite based power projects.
Role of the Central Government curtailed and the State Governments and State Electricity Boards (SEBs) empowered to negotiate directly with developers, facilitating speedy clearances for the investor.
Ancillary sector such as cool significantly deregulated.
100% foreign equity permitted.
Opportunities
Demand is expected to grow to 570 billion Kwh by 2001-02 and to 782 billion Kwh by 2006-07. Over the 10 year period from 1997-2007, a total capacity addition of 98,000 MW is envisaged, entailing an investment of Rs. 5,750 billion in power generation, transmission and distribution.
The specific project opportunities expected in the near future include:
Liquid Fuel Based Projects using low sulphur heavy stock (LSHS), furnace oil (FO), heavy petroleum stock (HPS), Naphtha, Vacuum Residue, Condensate and Orimulsion are permitted by the Government. Import of liquified natural gas (LNG) is also being considered for setting up large capacity combined cycle power plants, Transmission projects for power transfer are available for competitive bidding by the Central Transmission Utility (Power Grid) and State Transmission Utilities (SEBs)/Grid Corporations). The transmission system project are being identified for competitive bidding by the Central and State Transmission Utilities.
Attractive investment opportunities are likely to develop in distribution of power as several State governments have agreed to allow the gradual entry of the private sector in distribution.
Non-Conventional Energy Sources
Investment Policy
Foreign Investors can enter into a joint venture with an Indian partner for financial and/or technical collaboration and also for setting up of renewable energy based power generation projects. The liberalised foreign investment approval regime is aimed at facilitating foreign investment and transfer of technology through joint ventures.
100% foreign investment as equity is permissible.
Government of India encouraging foreign investors to set up renewable energy based pwer generation project on Build-Own-Operate basis.
Opportunities
In India, investment opportunities are available for the following types of investors and users:-
Investment by foreign investors in renewable energy:
Wind, Solar Photo-voltaic, Solar Thermal, Small Hydro, Biomass, Co-generation, Geothermal, Tidal and Urban & Industrial Wastes based power projects.
Investment by foreign investors for manufacturing of renewable energy systems and devices based on:
Wide, Solar Photo-voltaic, Solar Thermal, Small Hydro, Biomass, Co-generation, Geothermal, Tidal and Urban & Industrial Wastes for their utilisation in India and also for exports to developing and Third World countries.
OIL & NATURAL GAS
Investment Policy
The Government has announced significant new policy initiatives to attract foreign investment:
In exploration and production, oil and gas fields are open to the private sector as well as for foreign participation under production sharing contracts. Foreign investment it to be permitted up to;
100% in small-sized oil fields
60% for unincorpoorated joint ventures and 51% for incorporated joint ventures
100% for exploration and production of blocks identified under the new Exploration Licensing Policy
In the case of private Indian companies, FDI in refining is permitted up to 49%. The level of FDI in the oil refining sector under automatic approval has been raised from 49% to 100% EOU refineries, 100% FDI is permitted.
For gas fields developed in the private sector, promoters are free to market the gas at market related prices.
For the petroleum products and pipeline sector, FDI is permitted up to 51%
FDI is permitted up to 74% in infrastructure related to marketing and marketing of petroleum products.
100% wholly owned subsidiary (WOS) is permitted for purpose of market study and formulatopn.
100% wholly owned subsidiary is permitted for investment /financing.
For actual trading and marketing, minimum 26% Indian equity is required over 5 years.
Opportunities
Total sedimentary basins, including deep waters; 3.14 million sq . kms (41% of this still unexplored)
Large demand for natural gas:
Year
Demand (MMSCMD)
1999
110
2002
151
2007
231
2012
313
2025
391
MMSCMD : Million Standard cubic Metres Per Day
The present domestic gas supply is only 65 MMSCMD. The increasing demand-supply gap is expected to be met by imports.
Development of infrastructure
1998-99
2024-25
Product Pipeline Capcaity (MMTpa)
Port Capacity (MMT)
22.85
111.00
166
361
Coal
Investment Policy
Private Indian companies setting up or operating power projects as well as cool or lignite mines for captive consumption are allowed FDI up to 100%.
100% FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
FDI upto 74% is allowed for exploration or mining of coal or lignite for captive consumption. In all the above cases, FDI is allowed up to 50% under the Automatic Route subject to the condition that such investment shall not exceed 49% of the equity of a PSU.
Communication & Information Technology
TELECOMMUNICATION
Investment Policy
In Basic, cellular Mobile, Paging and Value Added Service, and Global mobile personnel communications by satellite, FDI is limited to 49% subject to grant of licence from the Department of Telecommunications and adherence by the companies (who are investing and the companies in which investment is being made) to the licence condition for foreign equity cap and lock-in-period for transfer and addition of equity and other licence provisions.
FDI upto 100% is allowed for the following activities in the telecom sector.
ISPs not providing gateways (both for satellite and submarine cables):
Infrastructure Providers providing dark fibre (IP category);
Electronic Mail; and
Voice Mail
Upto 100% FDI in telecom manufacturing activities on automatic approval basis.
Opportunities
There exists an enormous demand-supply gap for basic services, with the average waiting period for telephone connections exceeding one year.
Sector
Current Size
Projections
Basic Service
19 million lines
Additional 64 million lines required over the next 9 years to meet the demand for basic services; 20.4 million lines expected to be provided by the private sector
Cellular Services
0.9 million subscribers
Cellular subscribers expected to cross 1.6 million by March, 2000
Radio Paging
0.8 million subscribers
1.5 million subscribers expected by the end of financial year 2000
Very Small Apertue Terminal (VSAT)
6,000
VSAT demand estimated at 11,000 shared hubs and dedicated hub terminals by 2000
Internet
150,000
2 million Internet subscribers expected by the year 2000
Internet Services
There in no restriction on the number of Internet Service Providers (ISPs). No licence fee is payable up to October 31, 2003; thereafter a taken licence fee of Rs. 1 per annum is payable, ISP are free to fix their own tariff; ISPs have been permitted to establish their own international gateways for carrying internet traffic. They can obtain transmission link on lease from DTS, licensed basic service providers, railways, SEBs, Power Grid Corporation or any other operator specially authorised to lease such lines, ISPs can also establish their own transmission link within their service area if such links are not available from any of the authorised agencies.
Basic Telephone Services
Basic service providers are permitted to establish last mile linkages and carry their own long distance traffic within their service area. They are to be permitted direct interconnectivity and sharing of infrastructure with other basic service providers or any other type of service providers in their area of operation.
Cellular Mobile Services
Cellular service providers are permitted to carry their own long distance traffic within their service area. They are to be permitted direct interconnectivity and sharing of infrastructure with other cellular service providers or any other type of service providers in their area in their area of operation.
National Long Distance Services
As per the National Telecom policy `99, National Long Distance Services (NLD) beyond the service area shall be opened for competition. With a view to providing choice to consumers and promoting competition, all access provides would be mandatorily required to provide interconnection to all NLD providers.
Global Mobile Personal Communication By Satellite (GMPCS)
There is no restriction on the number of GMPCS licences and licences are issued on first-come-first-served basis. Gateways for GMPCS are to be located in India and operation and maintenance of the same are to be with an organisation designated by the Government. A two-tier licence fee is payable- a fixed component plus a variable component as percentage of revenues.
Other Value Added Services
As the telecommunications and Information Technology(IT) infrastructure in the country is expanding, there is a surge in demand for a range of value added services. The scheme for value added services has been considerably liberalised. These services include radio paging, public mobile radio trunking, and domestic data using VASTs, Evolving of new services- Tele-education, Tele-medicine, Tele-banking, Call Centre-is catching up with the Indian Industry and has recently witnessed significant investments from domestic and foreign investors.
INFORMATION TECHNOLOGY
Investment Policy
Automatic approval for foreign equity in software and almost all areas of electronics.
Automatic approval accorded for foreign technology agreements in all areas of electronics except aero-space and defence, subject to specified conditions.
100% foreign investment permitted in units set up exclusively for exports. Such units can be set up under any one of the following schemes; EHTPs, STPs, Free Trade Zones/EPZs, and 100% EOUs.
Opportunities
According to a recent World Bank study, India is the preferred location for software vendors for its quality and cost. India has strong Unix base which provides opportunity for the development of products for internet based applications. Further, India has global connectivity with international dialing facility from over 13220 locations, Leased/switched high-speed data links from major centres through STPs and VSNL for point-to-point communication are also available. Internet connectivity is provided through several networks. Abundant investment opportunities exist in the following thrust areas in India:
Communication Infrasture Optic Fibre CableGatewaysSatellite based Communication WirelessSoftware DevelopmentIT-enables ServicesIT Education (100,000 post graduate professionals in IT required annually by 2004)IT-enabled educationData Centres & Server Farms
E-commerce
Investment Policy
Upto 100% FDI is permitted for e-commerce, subject to the condition that the companies concerned would divest 26% of their equity in favour of the Indian public in five years, if the companies are listed in other parts of the world.
Opportunity
According to a study by ICRA Ltd., the volume of e-business in India is likely to increase from the level of Rs. 4.7 billion in 1999-00 to a level above Rs. 250 billion in the next three to four years, The figure makes a clear case for large scale investments in the Indian e-commerce sector.
Knowledge Based Industries
Pharmaceuticals
Investment Policy
Automatic approval for up to 74% foreign equity in the case of bulk drugs, their intermediates and formulations (except those produced by the use of recombinant DNA technology).
Opportunities
India pharmaceutical industry has shown tremendous progress in terms of infrastructure development, technology base and range of production, India derives its technological strengths in pharmaceuticals on the following bases:
Self reliance displayed by the production of 70% of bulk drugs and almost the entire requirement of formulations within the country.
Low cost of production
Low R&D Costs.
Innovative scientific manpower
Strength National Laboratories
Increasing balance of trade in Pharma sector.
Chemicals and biotechnology
Investment Policy
As referred t in section on Investment Policy
Opportunities
Chemicals
The chemical industry in India is well established and has recorded a steady growth in the overal Indian industrial scenario. The chemical and allied industries have been amongst the faster growing segments of the Indian industry. The Indian chemical industry had a turnover of around Rs. 900 billion in 1996-97. The chemicals industry also accounted for over 10% of total Indian exports during 1997-98. The chemical industry is highly heterogeneous encompassing many sector like organic and inorganic chemicals, dyestuffs, paints, pesticides, and specialty chemicals, Some of the prominent individual chemical industries are caustic soda, soda ash, carbon black, phenol, acetic acid, mathanol and azo dyes.
Currently, there is tremendous scope for growth in chemical sector. The per capita consumption of chemicals in India is well below the prevailing world level. For instance, in sulphuric acid, which is considered the barometer of growth in the chemical industry, the per capita consumption is only about 5kg per annum in India as compared to 40kg in industrially develoed countries.
Biotechnology
The setting up of a separate Department of Biotechnology (DBT) under the Ministry of Science and Technology in 1986 gave a new impetus to the development of modern biology and biotechnology in India. In more than a decade of its existence, the department has promoted and accelerated the pace of development of biotechnology in the country. In India, concerted efforts for over a decade in R&D in the identified areas of modern biology and biotechnology have paid rich dividends. The proven technologies at the laboratory level have been scaled up and demonstrated in field. Patenting of innovations, technology transfer to industries and close interaction with them have given a new direction to biotechnology research.
Necessary guidelines for transgenic plants, recombinant vaccines and drugs have also been evolved. A strong base of indigenous capabilities has been created.
Opportunities
Biotechnology industry serves as a research arm to Agritech, and Pharma industry with increased Potential for strategic alliances.
Global trends show that all large pharmaceutical players are putting their money in healthcare for long term benefits. It is expected that nearly half the drugs in the next decade would be biotech Products.
Tremendous potential in agri business in an agrarion economy like India.
Potential therefore for transgenic seeds, bio-fertilizers etc.
Number of small firms is high, knowledge based, research intensive industry, withlow capital Requirements.
Status and Scope
Sector
Turnover(1997)
Estimated Turnoverfor 2000(million USD)
Estimated Turnoverfor 2005(million)
Healthcare Products
650
800
1,300
Agriculture
480
650
1,110
Industrial Products
556
67
830
Total (including other)
1,790
2,100
3,240
The field of biotechnology both for new innovations and application would form a mojor research and commercial endeavour for socio economic development in this decade.
Infrastructure Sector
Roads
Investment Policy
FDI upto 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours.
Opportunities
Investment worth an estimated US$34 billion needed, till 2005-06, for the development of National and Stte Highways. Of this figure, the requirement of private sector investment is US$8.3 billion.
Opportunities exists in :
Highway construction
Four-Laning of over 35,000 km of National Highways.
Highway related en route activities like restaurants, motels, and rest/parking areas as may be decided by the implementing agency.
Select project opportunities include :
Chennai-Nellor (US$ 350 million)
Bangalore-Chennai (US$ 305 million)
Surat-Manor (US$ 180 million)
Jaipur-Ajmer (US$ 147 million)
Ports
Investment Policy
The principal legislations governing Indian ports are The Indian Ports Act, 1908, and the Major Ports Trust Act, 1963, the Indian Government recently announced a series of measures to promote foreign investment in the port sector as listed below:
No approval required for foreign equity up to 51% in projects providing supporting services to water transport, such as operation and maintenance of piers, loading and discharging of vehicles.
Automatic approval for foreign equity upto 100% in construction and maintenance of ports and harbours, However, if the total foreign equity investment exceeds Rs. 15 billion, the proposal will be referred to the FIPB.
Open tenders are to be invited for private sector participation on a Build-Operate-Transfer (BOT) basis. Evaluation of bids will be based on the maximum licence period will not exceed 30 years and at the end of the BOT period all assets will revert to the port in accordance with the conditions of the agreement.
The Government has announced guidelines for private/foreign participation that permit formation of joint venture between major ports and foreign ports, between major ports and minor ports, and between major ports and companies.
The measures are aimed at attracting new technology, fostering strategic alliances with minor ports to create on optimal port infrastructure and enhancing private sector confidence in the funding of ports.
The guidelines permit the formation of a joint venture between :
a major port and foreign ports for the purposes of constructing new port facilities within existing ports, improving productivity of existing ports, and development of new port ;
a major port trust and a company or a consortium of companies where ;
a company or a consortium of companies, selected through a BOT bidding under the guidelines of private sector participation alliances with a major port trust for improving the viability of the scheme and/or to enhance the confidence of the private sector.
A company or a consortium of companies is selected under the scheme of innovative/unsolicited proposals
Oil PSUs/a joint venture company of oil PSUs are/is selected for oil related port facility as a port based industry.
Opportunities
The areas identified for privatisation or investment by the private sector include:
Leasing out of existing port assets
Creating of additional assets :
Construction or operation of container terminals
Construction or operation of break-bulk, multipurpose and specialised cargo berths
Warehousing, container freight stations, Storage facilities and tank farms
Cranage and handling equipment
Setting up captive power plants,
Dry docking and ship repair frailties
Leasing of equipment and floating craft from the private sector
Pilotages
Captive facilities for port based industries.
Civil Aviation
Investment Policy
The momopoly of public sector air carriers ended with the repenling of Air Corporarion Act, 1953 on March1,1994.
Automatic approval for foreign equity participation in Airport infrastructure upto100 percentForeign equity upto 40 per eent; investment by Non Resident Indians upto 100 per cent permitted In domestic air-transport services.Equity from foreign airlines not allowed in domestic air-transport services either or indirectly.Foreign Financial Institutions allowed to hold equity in the domestic air-transport sector provided they do not have foreign airlines as their shareholdersForeign Investors allowed to have representation (upto 33 per cent of total) on Board of Directors of the domestic airline company.Government to consider private sector participation construction and operation new airports on a BOT basis.Minimum fleet size for a scheduled operator raised from the existing 3 aircrafts to 5Management contract with a foreign airline is not permitted
Opportunities
Construction of world class international airports in five cities, permitting upto100% foreign equity investment announced.
Important private sector aided projects; New airport near Kochi (US$ 85.7 million). Projects for development of new airports at Bangalore and Mumbai with private sector participation are under consideration
Other private sector aided airports planned; Ahmedabad airport, Amritsar airport upgration, Chennai cargo complex, new international terminal and a second runway for Delhi airport, runway extension and international block for Jaipur airport
Private Sector-Where?
Restructuring & privatization through long term leaseGreen-field airportsConstruction of terminal/facilitiesGround handling
New Delhi, September 9: Powered by their robust revenue growth and profitability as well as shareholder returns, 12 Indian entities have made it to the list of Asia's 50 best performing companies the maximum for any country in the region.
The list, compiled by US magazine BusinessWeek includes housing finance giant HDFC, automakers Hero Honda and Tata Motors and two other Tata group firms software company TCS and world's sixth largest steelmaker Tata Steel.
Besides, three companies Siemens India (4th), Sterlite Industries (6th) and Cipla (10th) have made to the top ten of BusinessWeek Asia 50, which has been published in the latest September 17 issue of the magazine.
Among these 50 companies, Tata Consultancy Services (23rd) is on top in terms of stock market value with a market capitalisation of about 27.5 billion dollars. Besides, Sterlite, BHEL (44th) and ITC (24th) also figure in the list of top 10 firms in terms of market value.
Why Invest In India
There are several good reasons for investing in India.
One of the largest economies in the world.
Strategic location - access to the vast domestic and South Asian market.
A large and rapidly growing consumer market up to 300 million people, constitute the market for branded consumer goods - estimated to be growing at 8% per annum. Demand for several consumer products is growing at over 12% per annum.
Foreign investment is welcome, approval is required but is automatic in sixty categories of Industries.
Skilled man-power and professional managers are available at competitive cost.
One of the largest manufacturing sectors in the world, spanning almost all areas of manufacturing activities.
One of the largest pools of scientists, engineers, technicians and managers in the world.
Rich base of mineral and agricultural resources.
Long history of market economy infrastructure
Sophisticated financial sector.
Vibrant capital market with over 9,000 listed companies and market capitalisation of US$ 154 billion (March,1996)
Well developed R&D infrastructure and technical and marketing services.
Policy environment that provides freedom of entry, investment, location, choice of technology, production, import and export.
Well balanced package of fiscal incentives.
A sophisticated legal and accounting system.
English is widely spoken and understood.
Rupee is convertible on Current Account at market determined rate.
Free and full repatriation of capital, technical fee, royalty and dividends.
Foreign brand names are freely used.
No income tax on profits derived from export of goods.
Complete exemption from Customs Duty on industrial inputs and Corporate Tax Holiday for five years for 100 per cent Export Oriented units and units in Export Processing Zones.
Corporate Tax applicable to the foreign companies of a country with which agreement for avoidance of Double Taxation exists, can be one which is lower between the rates prevailing in any one of the two countries and the treaty rate.
A long history of stable parliamentary democracy.
