- World's largest democracy with 1.2 billion people.
- Stable political environment and responsive administrative set up.
- Well established judiciary to enforce rule of law.
- Land of abundant natural resources and diverse climatic conditions.
- Rapid economic growth: GDP to grow by 8.5% in 2010-11* and 9.0% in 2011-12.
- India's growth will start to outpace China's within three to five years and hence will become the fastest large economy with 9-10% growth over the next 20-25 years (Morgan Stanley).
- Investor friendly policies and incentive based schemes.
- Second most attractive Foreign Direct Investment (FDI) location in the world: India received a total of US$ 25.9 billion of FDI in 2009-10.
- Healthy macro-economic fundamentals: Investment rate is expected to be 37% in 2010-11 and 38.4% in 2011-12 while Domestic Savings rate is expected to be 34% in 2010-11 and 36% in 2011-12.
- India's economy will grow fivefold in the next 20 years (McKinsey).
- Cost competitiveness; low labour costs.
- Total labour force of nearly 530 million.
- Large pool of skilled manpower; strong knowledge base with significant English speaking population.
- Young country with a median age of 30 years by 2025: India's economy will benefit from this "demographic dividend".
- The proportion of population in the working age group (15-59 years) is likely to increase from approximately 58% in 2001 to more than 64% by 2021.
- Huge untapped market potential.
- The urban population of India will double from the 2001 census figure of 290m to approximately 590m by 2030 (McKinsey).
- Progressive simplification and rationalization of direct and indirect tax structures.
- Reduction in import tariffs.
- Full current account convertibility.
- Compliance with WTO norms.
- Robust banking and financial institutions.
"* India's financial year is from April to March. 2010-11 above means April 2010-March 2011."
Indian Economy
India has undergone a paradigm shift owing to its competitive stand in the world. The Indian economy is on a robust growth trajectory and boasts of a stable annual growth rate, rising foreign exchange reserves and booming capital markets among others.
Indian economy is estimated to grow at 8.6 percent in 2010-11 as compared to the growth rate of 8.0 percent in 2009-10. These GDP figures are based at factor cost at constant (2004-05) prices in the year 2010-11.The growth rate of 8.6 per cent in GDP during 2010-11 has been due to the robust growth rates of over 8 per cent in the sectors of manufacturing, construction, trade, hotels, transport and communication, financing, insurance, and, real estate and business services. Agriculture sector registered a growth rate of 5.4 percent in 2009-10. A growth rate of 18.3 percent is estimated for GDP at current prices in the year 2010-11.
Agriculture Sector
The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent in its GDP during 2010-11, as against the previous year’s growth rate of 0.4 per cent.The estimate of GDP from agriculture in 2010-11,according to the Department of Agriculture and Cooperation (DAC),production of foodgrains and oilseeds is expected to grow by 6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture year. The production of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent, respectively, in 2010-11. Among the horticultural crops, production of fruits and vegetables is expected to increase by 4.1 per cent and 3.8 per cent, respectively, during the year 2010-11.
Industry Sector
The growth in GDP for mining and quarrying and manufacturing sectors during 2010-11 is expected to be 6.2 and 8.8 percent respectively over previous year. According to the latest estimates available on the Index of Industrial Production (IIP), the index of mining and manufacturing registered growth rates of 8.0 per cent and 10.0 per cent during April-November, 2010. The estimated growth rate for construction sector is 8.0 percent in 2010-11. The key indicators of construction sector, namely, cement production and steel consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during April- December, 2010.
Services Sector
The estimated growth in GDP for the trade, hotels, transport and communication sectors during 2010-11 is placed at 11.0 per cent, mainly on account of growth during April- November, 2010-11 of 14.9 per cent in passengers handled in civil aviation , 21.3 per cent in air cargo handled and 40.9 per cent in stock of telephone connections. The sales of commercial vehicles witnessed an increase of 34.1 per cent per cent in April-December, 2010. The financing, insurance, real estate and business services sector is expected to show a growth rate of 10.6 per cent during 2010-11, on account of 14.0 per cent growth in aggregate deposits and 22.6 per cent growth in bank credit during April- November 2010 (against the respective growth rates of 18.6 per cent and 10.1 per cent in the corresponding period of previous year). The growth rate of community, social and personal services during 2010-11 is estimated to be 5.7 per cent.
India: An Attractive Destination for FDI
The Indian growth story seems to be on a roll and India has emerged as the fourth largest economy in the world on a purchasing power parity basis. The quality of business environment in India has improved manifolds in the recent years. The strong fundamentals underlying the Indian economy make it an obvious choice for investors all over the world.
There is ample reason for India's viability as a destination for foreign investment. In addition to the above-mentioned macroeconomic indicators, higher disposable incomes, emerging middle class, low cost competitive workforce, investment friendly policies and progressive reform process all contribute towards India being an appropriate choice for investors.
The government of India has put in place a liberal and transparent FDI policy. In the post liberalization era, a number of initiatives have been taken to attract FDI in several sectors. This includes opening of many new sectors to FDI, raising FDI equity caps in sectors already opened and procedural simplification. Today, the FDI policy in India is widely reckoned to be among the most liberal in the emerging economies and FDI up to 100% is allowed under the automatic route in most sectors and activities.
The Indian Government is committed in its efforts to maintain a healthy growth rate and provide a conducive policy environment to the enterprises, both public and private, to invest and grow their business in the country. To this end, the Government has liberalized the foreign investment regime substantially over the last decade. Today, foreign direct investment is allowed in almost all sectors barring a few sensitive areas such as defence. Further, FDI is allowed in most of the sectors under the automatic route, except a few, where approval from the Foreign Investment Promotion Board (FIPB) is required. India's foreign trade policy has been formulated with a view to invite and encourage FDI in India. The process of regulation and approval has been substantially liberalized. The Reserve Bank of India has prescribed the administrative and compliance aspects of FDI.
FDI can be divided into two broad categories: investment under automatic route and investment through prior approval of Government. The pickup in FDI inflows further reflects growing investor interest in the Indian economy on the back of strong fundamentals and simplified procedures.
The FDI policy rationalization and liberalization measures taken by the Government have resulted in increased inflows of FDI over the years. FDI equity inflow in the month of February 2011, stood at US$ 1.3 billion.During the financial year 2010-11 (April 2010 to February 2011), FDI worth US$ 18.3 billion was attracted in India. Cumulative amount of FDI from (August 1991 to February 2011) registered in India stood at US$ 145.2 billion.
Sectors with large FDI inflows in India
During 2010-11 (April 2010-February 2011), services sector attracted 21 percent of the total FDI equity inflow into India,while computer software and hardware attracted second largest amount of FDI with 8 percent share during the same period.Telecommunications was the third highest sector attracting FDI with 8 percent of total inflows followed by housing and real estate and construction activities which garnered 7 percent shares each.
Sources of FDI in India
During 2010-11 (April 2010-February 2011), Mauritius was the top investing country for India with 42 per cent of the total inflows. Singapore was second with 9 per cent share, U.S.A stood third with 7 per cent share.U.K and Netherlands were on fourth and fifth places with 5 per cent and 4 per cent shares respectively.
FDI can be divided into two broad categories: investment under automatic route and investment through prior approval of Government. The pickup in FDI inflows further reflects growing investor interest in the Indian economy on the back of strong fundamentals and simplified procedures.
Foreign Institutional Investment (FII) in India
In addition to FDI, Foreign Institutional Investment (FII) is also flowing into India. Qualified foreign entities (other than those predominantly owned by non resident Indians) seeking to undertake portfolio investments in India are regarded as Foreign Institutional Investors (FIIs). Eligible institutional investors that can register as FIIs include asset management companies, pension funds, mutual funds, banks, investment trusts, nominee companies, incorporated/institutional portfolio managers, power of attorney holders, university funds, endowment foundations, charitable trusts and charitable societies.
Indian States and Union Territories
The country houses 28 states and 7 union territories. Each of the Indian state and union territory of India is blessed with several investment opportunities depending on their geographical location and availability of natural resources. These opportunities are further enhanced by the rapid technological advancements taking place in almost all states that enhance the ability to innovate and grow. There exists plethora of diversified investment opportunities across India and the respective state Governments are taking progressive steps such as development of powerful infrastructure and formulating conducive and stable policies to harness the same. The state Governments have devised investor friendly policies in terms of incentives and concessions offered for several sectors such as biotechnology, infrastructure and information technology among others to promote FDI into their respective states. A healthy competition has emerged among states to attract investment in their states and this has proved to be beneficial for the potential investor.
States of India
A small brief of the investment opportunities available in some of the Indian states is given here:
Andaman and Nicobar: Tourism, I.T., Handicrafts, High value added Agro Products, Fisheries, Coir, Hydro Carbon Energy, Shipping Sectors including Transshipment ports and Service Industry.
Andhra Pradesh: Biotechnology, tourism, food and agro based industries, and information technology.
Arunachal Pradesh: art and craft industries, tourism and educational services.
Assam: IT Sector, Tourism, Agro- Horti & Food Processing Sector, Bamboo Industries and Bio Technology Sector.
Bihar:Agro based industries, sericulture, chemical industry, tourism, biotechnology, pharmaceutical, etc.
Chhattisgarh: Processing of medicinal, aromatic and dye plants, Automobile, auto components, spares and cycle industries, Manufacturing of plant, machinery & engineering spares, pharmaceuticals, etc.
Delhi: computer software, IT enabled services, electronics and high tech industries and small-scale industry.
Goa: Pharmaceuticals, Drugs and Biotech Industries, Food processing and Agro based Industries, IT and IT-enabled services, Eco tourism/Heritage tourism/Adventure tourism/Event tourism/Medical, Tourism and Entertainment Industry.
Gujarat: Agro Based and Food Processing Industry, Chemical and Allied Industry, Information Technology, Mineral Based and Allied Industries, Plastic and Allied Industries, Port Related activities and infrastructure and Textile Industry.
Haryana: Agro based and Food Processing Industry., Electronics and Information & Communication Technology, Automobiles & Automotive Components., Handloom, Hosiery, Textile and Garments Manufacturing., Export- Oriented Units, Footwear, leather garments and accessories.
Himachal Pradesh: units based directly on horticulture produce, mineral water bottling, automobile manufacturing units, cold storage units, electronic units, floriculture, handicrafts, precision industries, etc.
Jammu and Kashmir: food processing, agro based industries, floriculture, information technology, sports goods industry, etc.
Jharkhand: mining and mineral based industry, agro based industries, sericulture, engineering, auto components, tourism, ceramics, sports goods, etc.
Karnataka: informatics, computer software, IT enabled services, telecom, auto and auto components, food processing, floriculture, biotechnology, tourism, infrastructure projects, etc.
Kerala: Mineral and Clay based products, Agriculture and Horticulture Produce, Traditional Industries, Tourism, Auto Components, Marine Products and Agro Processing industries.
Madhya Pradesh: agro- processing industries, cement, textiles and apparels, tourism, power, education, information technology, etc.
Maharashtra: auto industry, biotechnology, floriculture, food processing, textiles and leather.
Manipur: agro based industries, handicraft industries, sericulture, tourism, telecommunications, petrochemicals and pharmaceuticals.
Meghalaya: Minerals based industries, Horticulture and agro based industry, Power Generation, Export Promotion Industrial Park (EPIP), Tourism, Biotechnology- based units, Electronics and information technology and Tissue culture and orchid units.
Mizoram: bamboo and timber based industries, food processing, agro-horticulture sector, mines and minerals, handloom, handicrafts, tourism, etc.
Nagaland: food-processing industry, agro based industry, tourism, mineral based industry, pharmaceuticals, etc.
Orissa: mineral and mineral based industries, agro and food processing industries, Information technology, tourism, biotech, pharma, handicrafts, handlooms, chemicals and fertilizers, etc.
Punjab: agriculture, dairy and poultry products, meat processing, leather industry, sports goods, textiles, light engineering goods, etc.
Rajasthan: IT and ITeS, biotechnology, agro based industries, power sector, education, urban infrastructure, tourism, gems and Jewellery, etc.
Sikkim: eco-tourism, handicrafts and handlooms, floriculture, biotechnology, etc.
Tamil Nadu: engineering, automobiles and components, software and ITeS, biotechnology, health care, pharma, tourism, textiles, etc.
Tripura: natural gas, food processing, rubber, tea, handicraft, bamboo, handloom, tourism, information technology, etc.
Uttar Pradesh: power, food processing, agro based industries, animal husbandry, engineering, horticulture, etc.
Uttarakhand: hydropower, floriculture, horticulture, agro based and food processing industries, information and communication technology, etc.
West Bengal: agri business, tourism, information technology, metals, petrochemicals, leather, food processing, etc.
Union Territories of India
Delhi: computer software, IT enabled services, electronics and high tech industries and small-scale industry.
Andaman and Nicobar: Tourism, I.T., Handicrafts, High value added Agro Products, Fisheries, Coir, Hydro Carbon Energy, Shipping Sectors including Transhipment ports and Service Industry.
Puducherry: information technology and software development, electronics, agro processing, textiles, leather products, light engineering and tourism.
Sectoral Opportunities
Vast investment potential exists in sectors such as biotechnology, retail, real estate, roads and highways, power, telecommunications, civil aviation, special economic zones, healthcare among others.
These investments are encouraged by the facts that India has a large pool of skilled and competitive manpower, huge research and development base, Government support and conducive policies, growth in the Indian domestic market owing to higher disposable incomes, abundant natural resources required to set up industries, etc.
