India

India Investment Opportunities


India has witnessed a systematic transition from being a closed to an open economy since the beginning of economic reforms in the country in 1991. These reforms have had a far-reaching impact and have unleashed its enormous growth potential. The Indian economy has emerged with astonishing rapidity from the slowdown resulted by the global economic downturn. As per the advanced estimates by the Central Statistical Office the turnaround has been fast and strong with GDP growth of 8.6% in 2010-11. Over 300 million Indians (63 million households) are expected to have a household income of over USD6, 000 by 2015 (over USD30, 000 in PPP* terms). India is experiencing a rapid growth in consumer spending. Today, the Indian economy is characterised by a liberalised foreign investment and trade policy which has stimulate a new entrepreneurial spirit creating a vibrant economy supported by rising per capita income.

India’s competitive position

India occupied the 2nd place in FDI inflow in the Asia-Pacific after China in 2010. The top five destination countries (USA, China, UK, India and Germany) together attracted 36% of all global FDI in 2010. In terms of the greenfield FDI projects in 2010, India falls on the 4th position after United States of America, China and United Kingdom (FDI Global Outlook Report 2011).

FDI equity inflows in Indian during April 2010 to February 2011 stood at USD18.35 billion with cumulative FDI inflow of USD145.25 billion from 1991 to February 2011. The largest grabbing sectors are financial and non-financial services, telecommunications, IT, housing and real estate and other manufacturing sector. Among the top investor countries in FDI equity inflow in India, Mauritius occupies the 1st position followed by Singapore, USA, UK and other European countries.
As per the FDI Global Outlook Report 2011, Indian companies established 24% more FDI projects overseas in 2010, making India the ninth largest investor by number of projects in 2010. Indian companies were reported among the fastest growing investors overseas during the same period. Indian companies accelerated investment overseas across different industries, with the biggest growth in the business services, metals, software and IT, and leisure and entertainment sectors.

India’s investment climate

The FDI regime has been progressively liberalised during the course of the 1990s (particularly after 2000) of reform era, with most restrictions on foreign investment being removed and procedures simplified. Since 1991, the country’s foreign exchange reserves have surged from USD2 million to USD297.3 billion in December 2010. Prior to 1991, India had stringent exchange control regulations under the Foreign Exchange Regulation Act, 1973 (FERA). In 1999, the government replaced controls under FERA with regulations under the Foreign Exchange Management Act (FEMA). With the introduction of FEMA in 1999, the objectives of the government shifted from the conservation of foreign exchange of promoting orderly development and management of the foreign exchange market in India. The government permits FDI on an automatic basis, except with respect to a small negative list in the national interest.

The core features of the government’s foreign investment policies and incentives offered are as below:

  • No government approval is required for FDI in virtually all the sectors/activities, except for a small negative list formulated by the government
  • The government has formulated “sector specific guidelines for FDI”, wherein investments upto specified sectoral caps are covered under the automatic route, with a few exceptions
  • FIPB considers proposals for foreign participation that do not qualify for automatic approval
  • Decisions on all foreign investment proposals are usually taken within 30 days of submitting an application
  • Free repatriation of capital investment is permitted, provided the original investment was made in convertible foreign exchange.
  • Use of foreign brand names/trademarks is permitted for the sale of goods in India
  • Indian capital markets are open to FIIs
  • Indian companies are permitted to raise funds from international capital markets
  • Special investment and tax incentives are given for exports and sectors, including power, electronics, software and food processing
  • “Single window” clearance facilities and “investor escort services” are available in various states to simplify the approval process for new ventures.

Under the liberalised policy cover, India has entered various bilateral and regional trading agreements with other countries over the years. Apart from offering preferential tariff rates on the trade of goods among member countries, these countries also enable wider economic cooperation in the fields of trade in services as well as investment and intellectual property, resulting in greater trade liberalisation.

Foreign corporations in India are permitted to open liaison/representative offices in India (subject to obtaining specific approval) by RBI, to undertake liaison activities on their behalf. These offices act as a communication channel between the foreign corporations and Indian customers.

 

India occupied the 2nd place in FDI inflow in the Asia-Pacific after China in 2010. The top five destination countries (USA, China, UK, India and Germany) together attracted 36% of all global FDI in 2010. In terms of the greenfield FDI projects in 2010, India falls on the 4th position after United States of America, China and United Kingdom (FDI Global Outlook Report 2011).

India Investment Story so far

FDI equity inflows in Indian during April 2010 to February 2011 stood at USD18.35 billion with cumulative FDI inflow of USD145.25 billion from 1991 to February 2011. The largest grabbing sectors are financial and non-financial services, telecommunications, IT, housing and real estate and other manufacturing sector. Among the top investor countries in FDI equity inflow in India, Mauritius occupies the 1st position followed by Singapore, USA, UK and other European countries.
As per the FDI Global Outlook Report 2011, Indian companies established 24% more FDI projects overseas in 2010, making India the ninth largest investor by number of projects in 2010. Indian companies were reported among the fastest growing investors overseas during the same period. Indian companies accelerated investment overseas across different industries, with the biggest growth in the business services, metals, software and IT, and leisure and entertainment sectors.