Investment Opportunities in India

April 30, 2010

2010 trends for foreign direct investment into India

With the release of the simplified compendium on foreign direct investment (FDI), several processes on FDI and associated routes of investment too are being ratified with a view to expedite the process of inflows into India.

The overseas Indian investors too would find it simpler to access nodal bodies and invest in India. However, a note of caution – the Reserve Bank of India too is attempting to regularize certain sections in Foreign Exchange Management Act (FEMA) which also allow NRIs, routes to invest in India. Its contention is that NRIs tend to invest much more than the cap allowed in the sectors through these other routes, thereby exceeding allowed limits for FDI. The government may also remove the liberties provided to NRIs in sectors such as aviation, real estate etc.

Also, more reforms—to make investing in India a simpler process—such as FDI in multi-brand retail, defense production, agriculture etc are. In the discussion stage and the government intends to bring out concrete policies in this direction. Proposals can also be sent to DIPP online. This facility will enable all overseas investors to speed up their investment proposals.

Significantly, as per the latest FDI estimates released by Department of Industrial Policy and Promotion (DIPP), the government nodal agency, the non-resident Indians (NRIs) have contributed FDI inflows worth about US$ 41.78 million in December 2009 through the automatic route, almost 2.71 per cent of the total FDI inflows in the same month. Total NRI FDI inflows through the period April-December 2009-10 stood at US$ 320.05 million.

According to DIPP, Mastek Ltd., Wire Wireless (i) Ltd, Orbit Corporation Ltd and Bang Overseas Ltd were some of the Indian companies that received NRI contributions through the automatic route in December 2009. Meanwhile, Jones Lang LaSalle Meghraj, a property advisory firm, remarked in its March global market perspective report, that the previous two months saw high networth individuals (HNIs) as new investors in Indian real estate. Many wealth managers such as Barclays recommend that banking, infrastructure and real estate would be major avenues for foreign investment in 2010. Continued flow of foreign capital in the form of FDI, FII investments, NRI remittances and export earnings are hence expected to continue strengthening of the rupee in 2010.

The states of Karnataka and Gujarat are now preparing for major events to be held for attracting investments into the State for different investment sectors. These states are extending all cooperation to investors through their Global Investor Meet in June 2010 and Golden Jubilee celebrations starting May, respectively. These events are expected to garner major inflows from investors, both domestic as well as overseas.

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April 23, 2010

Indian economy throwing open several investment opportunities in the new fiscal

The post-budget impact on the Indian economy is beginning to become visible as several sectors have shown increased investments and markets in India too have responded positively. A whole plethora of investment opportunities have opened up and foreign direct investment too have been welcomed in many sectors. India has also been recently rated amongst the top three preferred investment destinations in a report by Vale Columbia Centre for sustainable development issues, based upon foreign accruals in both 2008 and 2009.

The Finance Minister’s statement that India can look forward to double-digit and sustainable growth is not unfounded. The engineering and construction sector accrued the enviable largest portion (35.5 per cent) of the total inflow of orders worth Rs 92,290 crore in the last quarter of 2009-10. It was followed closely by power sector with 34.4 per cent. Analysts say that the trend is likely to continue with continued inflows in the next few quarters in infrastructure sectors such as roads and power.

There is clear indication of an upsurge in the economy too, with the gain in services, such as banking and hotels, coming in after the Purchasing Managers’ Index for manufacturing rose for the 12th straight month in March. This along with increase in imports also indicates a substantial rise in demand. Crisil Ratings too in its latest report has said that infrastructure-related industries like power equipment, steel, cement, construction, healthcare, education and financial services will see high demand growth in the medium-term and companies in such sectors are expected to witness robust growth in the current fiscal.

Meanwhile, corporate India has raised via its public offerings funds worth Rs 47,800 crore in the previous fiscal. Players including Larsen & Toubro—which is incidentally the first private engineering major to attain a cumulative Rs 100,000 crore-plus order book—and IVRCL have heavy orders up to next two years.

Analysts also feel that continued flow of foreign inflows in the form of FDI, FII investments, NRI remittances and export earnings is expected to continue strengthening of the rupee.

Further, sales zoomed in the last quarter of FY2010 in sectors such as automobiles leading India into the top league of car manufacturers. A recent survey by CSM Worldwide Inc shows that global auto majors such as Hyundai, Renault Nissan and Ford have already made or are making heavy investments into huge factories in India. Auto plants of Maruti at Gurgaon and Hyundai at Tamil Nadu have been ranked amongst the top ten globally.

All in all, a two-way growth both in demand and supply is offering several investment opportunities which will boost the economy in the coming quarters of the next fiscal.

April 1, 2010

Investing in India means adopting a bold strategy

The investment scenario in India speaks volumes about the steady inflows of foreign direct investment (FDI) into India. Despite the global economic downturn, investment inflows have been pouring into the country in encouraging numbers. Total FDI inflow during April-December 2009-10 was US$ 21.5 billion as compared to US$ 21.15 billion during the corresponding period of 2008-09.

Investing in India is now one of the most acceptable norms world over with investors from foreign venture capital funds to overseas individual investors taking interest. In fact, a recent report by a leading economist from Goldman Sachs, Brent Ciliano, indicated that investment opportunities in India are aplenty and investors from the US should adopt bold investment strategies by including the Indian market in their portfolios.

Opportunities in healthcare, education, manufacturing, infrastructure and services sectors are growing steadily. The services sector has in fact, been garnering maximum FDI inflows consistently over past two years.

As a part of the agenda of the government of India to promote the inflows, the department of Industrial Policy and Promotion (DIPP) too has been reworking and redrafting the foreign direct investment policies into a single user-friendly framework. The framework is expected to be released by end March, 2010, as recently announced by Mr Anand Sharma, Union Minister of Commerce and Industry.

The government recently in February 2010 in a significant move also allowed the Foreign Investment Promotion Board (FIPB), under the commerce ministry, to clear foreign direct investment (FDI) proposals of up to Rs 1,200 crore. Previously, the total project cost, including the foreign equity inflow, was taken into consideration in deciding whether the proposal is to be put up for Cabinet Committee of Economic Affairs (CCEA) consideration. The new move will now allow only the proposals involving a foreign equity inflow of more than Rs 1,200 crore to be evaluated by CCEA. The Home Minister P Chidambaram said the relaxation would hasten the process and expedite FDI inflow into India.

Of late, investment experts such as Stephen Dover, managing director and international chief investment officer for Franklin Templeton Investments’ Local Asset Management groups, have agreed that India’s favorable demographics provide boost in consumption. Dover also remarked that the exchange rate is freer in India and that the company would make a long-term bet on India rather than China.

The positive and strong post-budget rally, after the budget was announced in the last week of February 2010, too has seen the net inflows into India from foreign institutional investors touch US$ 2-billion this fiscal. India has been one of the better performing emerging markets, owing to increased quantum of FII inflows, especially in the past few weeks.

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