Investment Opportunities in India

June 14, 2012

Investment opportunities in Indian Retail Sector

Investment growth in India is related to the growth of the economy. India has one of the fastest growing retail markets in the world. The Indian Retail industry has grown at a CAGR of 14.6 per cent for the period FY07-12. With the increase in internet usage, retailing has become more popular as people can get what they want and what they need right at their doorstep. The biggest advantage of going to online retail stores is the price point analysis, massive discounts and fast service.

The contribution of food & grocery segment of Indian retail industry is estimated to have remained the highest at 58 per cent of the total retail sales during FY12, clothing & footwear segment remaining the second-largest contributor occupying 10.5 per cent share and entertainment, books & sports goods equipment segment is estimated to have outperformed the other retail segments, registering a CAGR of 21.3 per cent during the period FY07-12.

In India retail sector is divided into two classes:

Organised Retailing is the one, where trading activities are undertaken by licensed retailers. These are the retailers who are registered for various types of taxes like sales tax, income tax, etc. These include hypermarkets, retail chains and privately-owned large retail businesses. The organised sector accounts for only 2 per cent of the total trade.

Unorganised Retailing refers to the traditional forms of low-cost retailing, such as local kirana shops, owner-operated general stores, paan shops, convenience stores, etc. The sector constitutes almost 98 per cent of the total retail trade in India.

Investment in Retail

FDI in “single-brand” retail: The Indian government has removed the foreign direct investment of 51 per cent in single-brand retail outlets and opened the market fully for foreign investors by allowing the FDI of up to 100 per cent in this area. The retail store with foreign investment can only sell one brand. For example, Nike could only sell the products under the Nike brand.

FDI in “multi-brand” retail: FDI in multi-brand retail generally refers to selling multiple brands under one roof. Currently, this sector is limited to a maximum of 49 per cent foreign equity participation. For example, Wal-Mart, which helps in keeping food and commodity prices under control, shopper’s stop, etc.

Outlook

There are huge business investment opportunities in the retail sector in India. The future of Indian retail industry is very bright because of various trends like- rise in purchasing power of Indian consumer, greater proportion of working women, entry of foreign players in Indian market, private labels, penetration of organised retailing in tier II & III cities, capex plans, etc.

Major challenges in the organised retailing are issues pertaining to – real estate availability, legal and regulatory framework, bank finances for investment, shrinkages, supply chain management, etc.

In the next budget, the retail sector is expecting fiscal incentives that will enable the more growth of this sector. So, there is huge business potential in the retail sector.

FDI is a source of Indian Economic Growth

India is developing into an open-market economy. It is the fourth preferred destination for foreign investment just after the United States, China and Britain. India attracted overseas investment of US $8.1 billion in March, the highest ever monthly inflows. Cumulative FDI inflows for the fiscal 2011-12 amounted to US $36.50 billion.

The Indian economy has continuously recorded high growth rates and become an attractive destination for investment. Government offers various facilities to non-Indian resident to attract foreign investment in India. The factors that attract investment in India are stable economic policies, availability of cheap and quality human resources, and new unexplored markets. The government has taken various initiatives like – allowing foreign education providers to set up campuses in India, FDI in limited liability partnership firms, etc.

Impact of FDI on Indian economy

Foreign direct investment in India has enabled the country to attain a certain degree of financial stability and economic growth with the help of investments in different sectors. After liberalization of trade policies in India, there has been a positive GDP growth rate in country’s economy.

Foreign investment in India helps in developing the economy by generating employment, generating revenues in the form of tax and incomes, development of infrastructure, backward and forward linkages to the domestic firms for the requirements of raw materials, tools, business infrastructure, etc.

How to make FDI in India

Foreign direct investment in India is permitted in the form of financial collaborations, joint ventures, technical collaborations, capital markets and private placements.

Foreign investors are free to invest in India except few areas. There are some activities and sectors which require prior approval of Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) for e.g. manufacture of cigarettes and tobacco, manufacture of electronic aerospace and defence equipments, manufacture of items exclusively reserved for small scale sector with more than 24 per cent overseas investment and all other proposals falling outside notified sectoral policy.

The foreign investors can invest in India in two ways:

Incorporation of an Indian company: The foreign investor can set up a separate legal entity in India under the provisions of the Companies Act, 1956. The foreign investors can invest in such Indian company up to 100 per cent of capital based on sectoral guidelines specified by the Government of India.

Unincorporated entity: A foreign company can operate in India, by establishing a Branch Office of the other place of business (foreign entity), subject to conditions and activities permitted under the Foreign Exchange Management Regulations.

Who can invest in India?

A non-resident of India (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy under automatic or government route plans.

Qualified financial Investors (QFIs) are permitted to invest through SEBI registered Depository Participants only in the equity shares of listed Indian companies through recognised stock exchanges in India under various SEBI guidelines.

Foreign institutional investors are allowed to invest in the capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs can acquire shares or debentures of Indian companies with the help of stock exchanges in India.

May 22, 2012

India becoming NRI’s Favorite Investment Destination

India is the fourth preferred destination for FDI just after the United States, China and Britain. Government offers several facilities to Non Resident Indians (NRIs) to attract foreign investment in India.

NRIs are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, NRIs can acquire shares/debentures of Indian companies with the help of stock exchanges in India.

The growth of nation comprises of various amendments of acts and policies, investment favorable taxation and other documentation process for starting a company, availability of human resources, etc. All these factors attract NRIs investment in India. The two most attractive features of the Indian market are high potential of the domestic market driven by an emerging middle class and cost competitiveness.

Investment Options

The RBI allows Non Resident Indians to hold accounts in Indian banks as business investors in India. There are different types of saving and deposit investment schemes based on the type of account. Joint holding is also allowed in these accounts subject to certain limitations. This can be a good investment option for NRIs who have parents or blood relatives in India.

RBI has also granted general permission for NRIs investment in India, who are willing to invest money in shares of growing companies in India. They have an option to invest in mutual funds, fixed deposits, shares and debentures of companies, etc. The limit of investment, type of company and few other factors are subject to regulations of RBI and SEBI.

The NRIs are also allowed to invest in Government securities and National Savings Certificate. They can also convert their money into property (except the agricultural land), so that it remains as a security on long term basis while the value of the investment grows with time.

Benefits for NRI Investors:

  • Taxation policy in India has been changed to favor NRIs to invest in India
  • Various provisions have been made to benefit NRIs
  • Loans are provided to NRI against deposit schemes to construct homes in India
  • With advancement in technology, mode of transaction has leaped a step ahead through demat accounts, internet banking facility etc.

Major Points for Investment:

  • NRIs can directly invest in the Indian companies equity market using their own demat account or broker account.
  • They can deal with only one bank at a time.
  • NRIs can trade only in delivery-based transactions. Intraday trading (buy and sell on the same day) is not allowed for them.
  • They will be allowed to invest only up to 5 % of the paid up capital of the company.
  • NRIs need to have 100% funds at the time of buying. No exposure is given to NRIs.
  • They need to have 100% stock available to them while selling. No short selling allowed.

It is very important to choose the best broker for NRIs investments in India. So that, all the NRI services that are to be availed are of high quality.

Investment Opportunities in India

Investment refers to the concept of delayed consumption, which involves purchasing an asset, giving a loan or keeping funds in a bank account with the aim of generating future returns.

India has become one of the fastest growing economies. Investment growth in India is related to the growth of the economy. These days, people are getting more money as compared to the previous years. So, most of the investors look for emerging markets like India, where the growth rate is higher than the developed economies.

Today, it is very difficult to choose a sound investment plan so, most of the investors come with a question in mind “where to invest in India”.

There are various business investment opportunities available in both government and private sector according to risk, return, taxation, duration, etc.

Various Investment options in India

Short Term Investments options:
Bank Fixed Deposits: FD is the opportunity for retirees to diversify their investment portfolio. It is a very safe investment option in India as it generates stable income. It has low risk appetite. The period of ideal investment is 6-12 months.
Money Market Funds: They offer better returns than savings account without compromising on liquidity. The primary objective is to protect one’s capital and maximize returns.
National Saving Certificate (NSC): It is backed by the government of India, so it is a safe investment method. Minimum amount is Rs.100 and there is no upper limit.

Long Term Investment options:
Gold: Investors generally buy gold as a hedge or safe haven against any economic, political or social crises. Gold is not the right option for investment in short run because it doesn’t pay any return or interest. But, in the long run, investing in gold is no doubt, a profitable option as it can be quickly converted to cash.
Real Estate: In India, real estate has become one of most successful business investment opportunity in the last few decades. It has huge prospects in sectors like commercial, housing, hospitality, retail, manufacturing, healthcare etc.
Investment in Stock: Stocks are shares of a company. When you invest in a company’s stock or buy its shares, you own a part of a company. It is the major investment option in India in long run.
Public Provident Fund (PPF): This includes fixed-income investment for high tax payers with low risk.
Mutual Funds: Investing in mutual funds is also subject to market risks but the return is good.
Life insurance policies, bonds, debentures, etc.

Investment options depending upon goal:

  • Investment for safety – money market mutual funds, bank deposits, etc.
  • Investment for income – company deposits, government securities, treasury, preferred stocks, etc.
  • Investment for growth – equity mutual funds, domestic and overseas stocks, etc.
  • Investment to fight inflation – gold, real estate, bonds, etc.

Investment from Tax Perspective:

One can minimize the tax liability on salaries by investing in eligible investments qualifying under Sec 80C. It includes investment in PF contribution, PPF investments, infrastructure bonds, mutual funds, life insurance premium, repayment of housing loan principle, PO deposits, etc.

So, there are innumerable investment opportunities available in India. All, one needs to check is, his interest, risk appetite, and investment tenure.

Investment Strategies in Indian Economy

India is growing at a faster pace and brimming with investment opportunities. Recently, American Express predicted that India’s 100,000 ‘dollar millionaires’ will grow by 12.8% a year for the next three years. As per McKinsey Global Institute, the average Indian’s income will triple by 2025. The country is set to capture 1% of global trade soon, while merchandise exports have grown to an average of 24% a year over the past four years, according to Economy Watch. Goldman Sachs predicts India will rise to be the third largest economy in the world by the year 2035.

After the independence, strong socialistic and economic reforms, the economic growth climbed steadily. Also, after 1991 the embracement of open market principles for international completion and foreign investment, business in India today offers great investment opportunities for domestic and international sectors. Strong foreign fund buying has kept the share market chart favorable in spite of recent fluctuation in world stock market.

Currently, there are vast investment options in infrastructure, petrochemicals, pharmaceuticals, and telecommunication and service industries. Considering the nature of business, the Investment Strategies are designed accordingly.

The exact way through which financial planning is carried out can vary from one individual to another. This is mainly because of the potential of income and the risk bearing capacity. It is very natural that based on the income and risk appetite, one would invest.

A well-planned investment strategy is essential before having any investment decisions. A business strategy is generally based upon long run period. Thus, a balanced investment strategy, is generally required in the process of investment, which possesses long time period and some risk tolerance. There are numerous investment opportunities in India for you today as the economy of India is building strong, and you should capitalize on them. While some of them are long-term projects and call for large investments, other options include individual investment avenues and products.

India with a quite matured capital market backed by liberal policies and strong banking system has turned to a profitable business ambiance both for domestic as well as overseas investors. Both Mutual Fund and Equity Fund investments suggest a favorable and significant return. Considering the service industries like hotels, restaurants, placement concerns, Indian scenario is enviable. Along with development and advancement as mentioned before the infrastructure industry in India is booming, which can accommodate both types of investors. As far as investment strategies are concerned, they vary from one to another business. Business strategies always have to take into account government policies, restrictions and relief.

In a nutshell, today India can boast of enriched business environment and its economy guaranteeing high return and offering employment to huge work force.

May 8, 2012

Indian Economy – A Basket of Business Opportunities

The population of India is estimated at over 1 billion, and continues to grow every year. The Indian economy is the fourth largest economy of the world, when we talk in terms of Purchasing Power Parity (PPP). The economic reforms initiated since 1991, have been providing an investor-friendly environment through a liberalized policy framework spanning the whole economy. These reforms have helped India in becoming more prominent in undertaking importing and exporting activities, and other such forms of overseas businesses.

More than 10 per cent of the employed population works in industrial fields, and these include manufacturing and production of textiles. Process outsourcing is another business in India in which economy has grown drastically over the years. Residents of India are fluent in English, they have good communication skills for doing customer service, they are conversant in tech support, and other similar service industries, so the Business Process Outsourcing (BPO) segment has good scope in India. In fact, out of the top fifteen outsourcing companies across the globe, seven of the large firms are located in India.

India also produces a good amount of agricultural products, along with development in segments such as logging, fishing, and forestry. Investment is increasing as banks have become more stable and secure, which was also part of the economic reform. India’s growth rate is approximately 7% on an average, and has greatly reduced the amount of poverty among its residents over the years. The constant growth of main industries has given more individuals the opportunity to have stable employment.

India is one of the most sought after destination for business and investment opportunities. The reasons behind this are:-

  • Extensive manpower base
  • Diversified natural resources, and
  • Strong macro-economic fundamentals

Over the last ten years, the Indian Economy has seen a paradigm shift and is on a robust growth trajectory. The Indian economy today claims of an increasing annual growth rate, deep capital markets and liberalized foreign direct investment (FDI) regime. India is one of the few economies to have withstood the recent global financial crisis and its gross domestic product (GDP) has been constantly growing in excess of 8 per cent per year. The country’s GDP has been growing at an average rate of 8.6 per cent for the last five years. India’s GDP growth projection is 8.5 per cent for FY11.

India’s economy has strong fundamentals and is host to several prominent global corporate giants that are leaders in their respective fields. According to the Global Competitiveness report 2010-11, India ranks 51st among 139 countries. India ranks higher than many countries in key parameters such as market size (4th) and innovation (39th). It also has a sound financial market (17th).

According to UNCTAD’s World Investment Prospects Survey 2010-2012, India is the second-most lucrative destination for FDI in the world. Indian markets have significant potential and offers prospects of high profitability and a favorable regulatory regime for investors.

The Better Part of Foreign Investment in India

In the last few years India has witnessed a major change in its economic environment, on the back of foreign investments into India. The huge foreign capital investments have bought India considerable financial benefit. Markets are expanding in India, trade policies are being liberalized and there had been further development in technology and telecommunication as well. After China, India is now growing in popularity with a huge amount of foreign capital coming in. Foreign investors are putting in money in fields like telecommunication, infrastructure, computer hardware and software, information technology and hospitality.

Investors from abroad have been providing huge financial help to companies, corporations, business and organizations and here lies the significance of foreign direct investments (FDI) in India. India is growing in opportunities because of huge foreign investment. There are some automatic routes for making the investment and one can even invest through several processes undertaken by the Government. One can go for several joint ventures if one wants to be an effective direct foreign investor. One can really make a favorable fortune if one invests in sectors like real estate education, biotechnology, alternative energy sectors and other specialized fields.

With the route of foreign investments into India, companies can start a new venture and at the same time opt for business expansion. Thus, this is a better way to start and grow big at the same time. There are several advantages of a direct foreign investment in India. Wages in India are cheap and this is the reason more number of people would want to start here.

There are special investment privileges being offered at the place and this is the reason the concept of FDI in India is gaining immense popularity. Moreover, the investors would get a tariff-free access to the Indian markets and this is a real advantage for them. The investors can even enjoy tax exemptions at the place and this is the reason investors would want to put in money at the place more than once.

When talking about foreign investments into India one may focus on other aspects as well. With the entry of huge capital, there are industries in India which have been breathing fresh lease of life. They were at the verge of being extinct and due to the efforts of some foreign investors they have gained life once again. In fact, the legal aspects in India are quite flexible for foreign investors to operate and this is the reason it has been possible for people to make a fortune in this part of the world. Moreover, as India is rich in human resource, so starting anything new seldom faces hindrance over here. Therefore, with right training and correct infrastructure India will continue to be a favorite to the investors involved in legitimate investments.

The Scope of Foreign Direct Investment in India

The foreign direct investment into India is a process for facilitating people to invest in India. If you are really interested in doing business in India with the help of foreign capital then make sure that you are investing in the right source and you can do this in a number of ways. Even when India was going through tough times, it was still a good financial breeding ground for all foreign investors. They have never felt the pressure as their genre of investment has always been unleashed for the purpose of ushering more capital within the country.

There have been several Indian infrastructures who may have suffered in the field of production and manufacturing due to lack of essential capital. However, a good way for them to survive is by offering FDI equity to companies or individuals who would be interested in making huge capital investments.

Foreign direct investment in India is done in several ways. Investment can take place through effective financial collaborations. In this case the common interest is the yearly financial turn over and to make this work out two or more companies come in association and they share much in contributing towards a common financial consensus. The effort has to be there from both the ends, from the part of the investor and also from the part of the collaborator. When collaborating, you can keep the leadership factors aside and think about a healthy togetherness contributing towards a bigger financial platform.

As a way towards FDI equity is also a joint venture and a technical collaboration. Once the company delivers the plan of taking things technically ahead then other can contribute in a different way. It is more technical and less of financial collaboration.

Foreign direct investment in India is not permissible in all industrial sectors as it is not allowed in the domain of arms and ammunition. You cannot invest in the field of atomic energy. You cannot invest anything related to railway and transport and you cannot even put your money in the field of coal and lignite. It is even not permissible to invest money in matters of metal mining. Thus, keeping aside these domains you still have a huge scope for investment.

April 13, 2012

Taking a Leap with Standard Investment Opportunities

Recently there has been a major shift in Indian fiscal system. Several elements in the global fiscal changes are affecting Indian economy to a great extent. Recession has a great role to play here and it has enhanced the scope for India to help the east gather the necessary experience. Now recession has moved to the west and the Indian finance is having a good come back home. However, the Indian economy is changing façade quite quickly and true investment opportunities are giving Indian financial scenario a stable ground.

Investments are huge when the NRIs are returning to the country. They return with a favorable amount of foreign capital and the intent to start something new in India. People are selling their oversea assets and they are trying to return with proper investment ideas. They have the mind to alter the face of Indian economy. To do this enough capital is not the only catalyst; you must have a good plan towards financial expansion. After recession when Indian commerce was striving to survive, the investors took matters in hand and they tried to return with good hopes for their native land.

The kinds of investments in India are always controlled by the Indian exchange control laws. Making an investment is not an easy thing to do. All contributions are largely influenced by the Foreign Exchange Management Act (FEMA). However, Reserve Bank of India remains as the authoritative head. The FEMA is the tried best in managing all aspects like bank deposits, foreign exchange, shares, securities, government bonds and direct foreign investments. The network is ever expanding and whenever there is a change, a global notification is issued for the benefit of all people.

Regarding matters related to investment opportunities the FEMA will not permit investors to enter all genres. Moreover, the residential status of an investor depends on several things. His retention would be judged based on his intention. How much he wants to get attached to India is a major deciding factor. For a foreign investor to start business in India, his number of residing days in India comes within the count. To be considered as a worthy investor he must have a recent threshold of 182 days. This makes him eligible to invest in Indian economy at large.

Investing in a foreign land is more flexible when compared to the Indian structure. In India things are bit rigid. There is lack of flexibility in matters of international transactions in India. However, the non-resident Indians enjoy certain advantages in this case.

If you are returning to India permanently you can still retain your property which you own aboard. The property can be your legally earned asset or you can even inherit the property from someone who stays abroad. In both cases you can still enjoy your possessions.

The returning Indians have to do two more things. A person coming back to his native land can still hold on to his overseas bank account but for this the person must acquire RBI’s permission. After you settle down in India and acquire the status of a resident it is important that you re-designate your bank account. You have to make the process happen through a proper application. The banker would only ask for a proof to show that you are currently employed in India. In fact, investment opportunities in case of the non resident Indians are surely endless.

March 23, 2012

Indian Economy and its Different Phase for Growth

The economy of Indian subcontinent was as low as the other developing countries and it has come up slowly and steadily as time went by. Being a huge expanse, the Indian population has got varied resources and type of people. The Indian Economy has grown since the time of the Indus valley civilization. The days during the rule of the East India Company had been a serious downturn as the villages grew dependent on the East Indian merchants and had stopped normal farming activities. The raw materials were bought at much cheaper rates than from any other countries and the finished goods were forced down to the people of this continent at an exorbitant rate.

The Business in India started to grow when India got Independence and started to work hard to develop the economy to be self-reliant. There came up different policies and plans that helped in the growth of the economy. The main support was from agriculture and then the other side was the industry that was formed for extracting raw materials. Then industry started to grow from the knowledge of manufacturing from the raw materials. The Gross Domestic Product was calculated at 2.3% in the year 1951-52. The current GDP is at 9% as calculated for the year 205-06.

The trade and manufacturing industry came up and then came the foreign investments for liberalised trade and other reforms started to support the economy to flourish. The Indian Economy started to gain momentum as Government came up with new and better ideas and the policies that they introduced helped the economy to be liberalized. The reforms started from this point and the economic growth started with the introduction of trading of the popular brands. The foreign investment in India started and kept on growing at a steady rate. This diverse economy has helped the national and the global economy too.

The current trend shows that there are few Businesses in India that are good for the entrepreneurs and few such businesses are tourism and the automobile business. Indian population love to move around and thus the national spots and few International spots are good for the Indian citizen and there are foreign tourists who visit India to explore its beaches and deserts, mountains and wild life and hill stations and rural villages , all of which have so much to offer to the tourists towards full enjoyment . The industry related to the automobiles and the automobiles parts are a good source of income for the world over and India has got a good chunk of the industry thriving in Indian market.

The textile market has been a strong point for Indian market from the past and as days passed by, the industry has come up with modern style and apparels, textures and colors and new ideas. The other such zones that have opportunity for the Indian Economy are export of software to the foreign countries and the engineering goods for entrepreneurs having rising demands for such products. A few challenges like a huge population, unemployment and poverty are still there to hamper the growth of the economy but as there has been a steady growth in so many sectors, the Indian businesses will keep prospering the economy of the country in the days to come.

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