Investment Opportunities in India

October 30, 2012

FDI in retail sector to create 10 million jobs in India

India has emerged as the fifth most favourable destination for international retailers, outpacing UAE, Russia, Indonesia and Saudi Arabia, according to A T Kearney’s Global Retail Development Index (GRDI) 2012. “India remains a high potential market with accelerated retail growth of 15-20 per cent expected over the next five years,” highlighted the report.

The foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 to June 2012 stood at US$ 42.70 million, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). Cash and carry represents an opportunity worth around Rs 8,250 billion (US$ 154.45 billion) of the Rs 27,500 billion (US$ 514.84 billion) annual retail business in India. Online retail business is another format which has high potential for growth in the near future. India’s e-retail industry is likely to touch Rs 70 billion (US$ 1.31 billion) by 2015, up from Rs 20 billion (US$ 374.43 million) currently, as per an industry body report.

The recently announced FDI guidelines in the Indian retail sector are likely to create 10 million jobs over the next 10 years, according to Indian Staffing Federation (ISF). The report also mentioned that the new job opportunities in the sector will make it the largest sector in organised employment.

The federation has welcomed the new FDI in retail announced by the Government of India. For the record, the Government has announced its decision to allow 51 per cent FDI in multi-brand retail and 100 per cent FDI in single-brand retail. In addition, the Government has also opened up the aviation sector and put up four PSUs for disinvestment.

The ISF said that FDI in retail sector will have a much wider impact on organised employment as compared to what happened in the IT sector over a decade ago. The federation also said that these measures will open doors for the low-skilled people.

It is believed that logistics and supply chain companies are also expected to make rapid progress considering the fact that they will be the link between small manufacturers, farmers and the organised retail chains.

The close integration within the organised retail chains will support the small producers in gaining access to the latest processes, systems and technologies available in the market.

With increasing disposable incomes, expansion of stores and supporting economic factors, retail sector in India is expected to grow to about US$ 900 billion by 2014, according to a report by global consultancy and research firm, PricewaterhouseCoopers (PwC).

The next generation of India’s retail environment is favourable for the rise of luxury goods. Consumer markets in emerging market economies like India are growing rapidly owing to robust economic growth. The retail sector in India is highly competitive because of ever changing consumer preferences and the need for marketing differentiation. The retail enterprises need to focus on costs throughout the consumer value chain because of proliferation of new products and categories and ever increasing demands to optimise value chains.


Invest in the lucrative Energy Sector of India

The energy sector in India is one of the most diversified fields in the world. Sources for power generation range from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources like wind, solar and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to augment further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required.

Renewable energy is the new keyword in Indian energy sector and most of the public and private players are coming up with plans to tap the potential market, on the back of favourable Government policies and initiatives. To tap the underlying potential, various Indian States are focussing on those aspects of energy, in which they have an edge, such as solar power, wind power, hydro power etc.

India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.

Investment Opportunities in Indian Energy Sector

The investment climate is very positive in the power sector. The sector has witnessed higher investment flows than envisaged and offer huge investment opportunities for non-resident Indians (NRIs)/person of Indian origin (PIOs). The Ministry of Power is believed to have sent its proposal for addition of 76,000 megawatt (MW) of power capacity in the Twelfth Five Year plan (2012-17) to the Planning Commission. Energy sector in India is expected to generate revenue of about Rs 13 lakh crore (US$ 246.27 billion) during the Twelfth Five Year plan, according to Shri P Uma Shankar, Union Power Secretary. He said that the Government is looking at revenue estimates of Rs 2.5 lakh crore (US$ 47.36 billion) from transmission and Rs 4 lakh crore (US$ 75.78 billion) from distribution, in addition to Rs 6.5 lakh crore (US$ 123.15 billion) from generation.

The Government has initiated several policies to promote and garner investments from NRIs/PIOs in the power sector. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power. The National Electricity Policy (NEP) in fact, stipulates power for all and annual per capita consumption of electricity to rise to 1,000 units by 2012. Foreign direct investment (FDI) up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.

The power sector in India is witnessing a growth trajectory. The Government has taken several steps required to provide investment opportunities and to develop power sector infrastructure within a short span of time. In fact, the State Electricity Board is going to renovate all the current power plants with the help of private partners.

October 22, 2012

Growing Indian Education sector creating numerous investment opportunities

With increasing population in India, the demand for educational institutes has also augmented. Today, the Indian education sector is one of the biggest education systems in the world. The sector is one of the leading areas for investment opportunities.

The education sector in India is divided into two main segments; the core segment comprises of schools and higher education, while the non-core comprises of coaching classes, pre-schools and vocational trainings.

With a growth rate of 10 to 15 per cent expected over the next decade, the Indian education market has witnessed a series of developments and changes in the last few years. This has resulted in a significant increase in the market size of the education industry compared to previous years.

In fact, the private education sector is estimated to reach US$ 70 billion by 2013 and US$ 115 billion by 2018, according to consulting firm Technopak.

Invest in Indian Education Sector

India has emerged as a strong potential market for investments in training and education sector, due to its favourable demographics (young population) and being a services-driven economy. Further, India’s expanding role in sectors such as software development, generic pharmaceuticals and healthcare, would require the country to invest into learning and training segment as well.

India’s education sector is also considered as one of the major areas for investments as the entire education system is going through a process of reformation, according to a report ‘Emerging Opportunities for Private and Foreign Participants in Higher Education’ by PricewaterhouseCoopers (PwC).

India needs 1.2 million more teachers under the Right to Education Campaign, according to Shri Kapil Sibal, Union Minister for Human Resource and Development. He also added that with 546 million people under 25 years of age, there is huge potential in India in the education sector that needs to be tapped.

The country has been attracting foreign direct investments (FDIs) in education sector as well.

According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI in education sector stood at Rs 1170.09 crore (US$ 221.71 million) in the month of May 2012. The Government of India allowes 100 per cent FDI in education sector through the automatic route.

The country’s fast-growing education sector holds a potential to attract a US$ 100 billion investment over the next five years, driven by demand for skilled professionals and need for infrastructure development, according to research firms such as KPMG.

There is clearly an opportunity for private players to enter the education space. This opportunity exists in all three segments – schools, higher education and vocational training. Some success stories are Manipal University, Amity University and the Indian School of Business. Public-private partnerships (PPP) arrangements, tax concessions for education and encouraging foreign capital to build infrastructure in India would encourage the creation of new capacities by the private sector.

The education sector in India is expected to witness huge investments from PE funds over the next couple of years on the back of increased Government spending and expansion plans of private players.

How and Where to Invest in India?

If you’re thinking about investing in India to make money especially in real estate, you need to first determine your financial goals. Do you need to make money quickly, invest for your children’s college fund, or build wealth for your retirement? Once you determine your financial goals, you need to decide which type of investment strategy works for you.

The proof of an investment strategy is how it performs in bad times, not in good times! Strategy is the key, whether you are planning a war, an election campaign or buying a property. There is no such thing as a generic, one-size-fits-all strategy. It is a statement, not an essay. Not having one, is like driving a car through the woods at night without any lights on. Planning your investments in a way that suits your strategy can enable you to create and maintain a competitive advantage.

Choosing the right investment strategiesis all about matching the right real estate problem with the right investment solution. Your choice of which strategy to implement depends on two factors:

  • The profit outcome you want to achieve (i.e. capital gains and/or positive cash flow returns); and
  • The needs of the person who’ll be paying you money in exchange for the use of the property.

Your strategy will determine the extent of your success in the property investment world whether you invest in India or overseas markets. It is a crucial first step for the novice property investor and something that an experienced investor monitors and reviews in light of its performance. Strategy dictates the Why, When, Where and How of property investment.

Business Investment Opportunities in India for NRIs

In today’s global economy more and more companies are looking behind their countries borders for investment opportunities. These opportunities can be mergers and acquisitions, joint ventures or Greenfield investments. India is gaining more and more respect as a country to invest in, while it has some major advantages.

India is the second-most profitable destination, according to UNCTAD’s World Investment Prospects Survey 2010-2012.

Long-term projects call for large investments, other options include individual investment avenues and products.

National priority level and state-specific projects are being implemented across the country. These offer huge potential for investors willing to invest in India. The government is in fact, promoting Public Private Partnerships (PPPs) in many projects opening up new vistas in sectors such as infrastructure, education, healthcare etc.

The health care sector of India has also opened new business investment opportunities for Non-Resident Indians (NRIs)/Person of Indian Origin (PIOs) to invest in India because of the rise in disposable income, penetration of health insurance and unhealthy lifestyle of present generation.

The returns from real estate sector in India have consistently performed well and have even outperformed other investment options. The Government of India has created many policies and schemes to maximize business investment opportunities for NRIs/PIOs looking to invest in Indian real estate sector.

Government’s intervention on policy issues, especially, Tax Regulations and foreign direct investment (FDI) in sectors like retail, aviation etc. will play a role in driving large transactions, especially inbound deals.

Infrastructure: The best investment sector in India

Infrastructural development mirrors the overall health of a nation’s economy. Physical infrastructure is directly proportionate to the growth and development of a country. The infrastructure sector in India comprising of roads and urban development, airports, energy, shipping and ports, and electricity has become a key driver of the Indian economy over the last five years.

The Government of India has always been quite forthcoming when it comes to the upgradation of infrastructure. There has been a strong focus on assuring effective implementation of associated projects though budgetary allocations, tariff policies, fiscal incentives, private investment sector participation and public-private partnerships (PPPs).

Infrastructure Development Finance Co (IDFC) Ltd has estimated that India’s spending on infrastructure is 8 per cent of the gross domestic product (GDP) as of March 2011 and it needs to be increased further to over 10 per cent of GDP by 2017 to sustain the growth targets.

Infrastructure sector in India is poised for a big leap and offers significant investment opportunities for US businesses and other investors.

Investment Opportunities for Non-Resident Indians (NRIs)/Person of Indian Origin (PIOs) in Indian Infrastructure

Global private equity (PE) funds looking for high return on investments are going to target Indian infrastructure companies in the coming years, says a report by research agency Preqin. As per the study, India is attracting the highest number of unlisted, closed-end funds that focus on a single country, making it the most preferred choice among emerging investment sectors in India.

Infrastructure PE funds investing in India can choose from sub-sectors such as power, telecom, roads and ports. The Preqin report says 74 per cent of India-focused funds will invest in greenfield projects, 84 per cent in brownfield assets, and 42 per cent will buy out the stakes of other PE funds.

India’s infrastructure sector will approximately entail an investment of US$ 1 trillion over the next five years, according to a report ‘Real Estate and Construction Professionals in India by 2020´ by realty consultant Jones Lang LaSalle. This includes work on the ambitious 7-phase National Highway Development Project (NHDP), India’s largest road project ever. Phase II, III and IV are under implementation. The Government through the National Highways Authority of India (NHAI) is using a variety of contractual structures in moving towards PPP in roads projects.

Investment opportunities for NRIs/PIOs exist in a range of projects being tendered by NHAI for implementing the remaining phases of the NHDP – contracts are for construction or Built-Operate-Transfer basis depending on the section being tendered. Over US$76 billion investment is required over the next 5 years to improve road infrastructure and Road sector investments expected to grow at 19 per cent per annum.

It is also estimated that about 97 million jobs would be created over 2012-22 across different investment sectors in the country due to which, India would potentially need to build an average of 8.7 billion square feet (sqft) of real estate space every year, as per a report by prepared for Royal Institution of Chartered Surveyors (RICS). This would be a great attraction for NRIs/PIOs looking for opportunities to invest in the infrastructure segment.

October 4, 2012

Business Opportunities for NRIs in Indian Market

India is the largest democracy in the world. The country ranks second in the world in terms of total population. The liberalization and globalization of the Indian economy has led to more foreign direct investment (FDI) inflows in Indian markets. As a result, the scope for business in India has increased.

There are plenty of business opportunities in India for Foreign Investors, Non-Resident Indians (NRIs), Persons of Indian Origin (PIO) and Overseas Corporate Bodies (OCBs). The country offers liberal policy regime, along with easy availability of loans, funds and various other initiatives, which makes India a lucrative investment destination for NRIs and PIOs.

Some of the promising sectors where NRIs may invest include power, pharmaceuticals, mining, hotel & tourism, coal & ignites and other infrastructural projects. NRIs can also invest directly in Indian real estate except buying agricultural lands or plantations. They can look at huge number of central and state sponsored projects in key infrastructural sectors like education, healthcare and construction for higher returns.

Business Opportunities in India

Some of the major factors that help businesses in India to flourish include:

  • High number of people with disposable income, emerging middle class, low cost competitive workforce, and investment friendly policies
  • Availability of rich natural resources
  • Availability of a considerable section of population proficient in English
  • A well-established banking system consisting of public and private banks and other financial institutions
  • Competitive advantage in Information Technology, which can be used to enhance productivity in Industries
  • Improved infrastructure for business ventures

Steps for NRIs /PIOs to start business in India

  • Applying and getting PIO card (Person of Indian origin) – to make investments in properties, etc
  • Getting permanent account number (PAN card) from the Indian tax department, making it smoother to undertake all business and investment transactions above Rs. 50,000
  • Selecting a right and highly profitable business in India among various available options
  • Selecting an experienced person/ business professional to plan business and investments
  • Selecting a business partner in India and start a business

Investors can also take the help of business incubators and facilitators to become established and sustainable during their start-up phase. Business incubators are programs designed to nurture the development of entrepreneurial companies. They provide the companies with business support services, business advice, assistance with business planning, market and international networks, and also help in obtaining finance. Incubators usually offer companies rental space with flexible leases, basic office services and access to equipments all under one-roof. Successful completion of a business incubation program increases the chances of a start-up company to stay in business in India for long term.

Government Initiatives

To attract foreign investment into India, the Government is offering several facilities to NRIs, PIOs and OCBs. The economic reforms have brought policy changes in terms of ease of entry, investment, location, usage of technology, import and export. These changes have created an investment-friendly environment, which results in more business opportunities in India.

NRIs are permitted to open bank accounts in India with funds remitted from abroad, foreign exchange brought in from abroad or with funds legitimately due to them in India, with authorized dealer.

Further, the Reserve Bank of India (RBI) has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies under the automatic route.

Foreign direct investments opportunities for NRIs in India

India is fast gaining importance world-wide as the country has become an investment hub over the last decade. Global investors have retained their faith in the investment opportunities in India even during the toughest of the times of the Indian Economy. Non-resident Indians (NRIs) keep looking for the investment opportunities in India. As a result, India enjoyed high foreign inflows and investments when rest of the world was struggling to even survive.

India is projected to scale higher growth in the years to come. According to Mr Brad Wall, Premier of Saskatchewan, Canada, ‘India is one of world’s fastest growing significant economies’.

According to a UN report, India is the third most favored destination for investment after China and the US for major global companies. The report further expects that foreign investments in India could increase by more than 20 per cent in 2012-13.

Consolidated Foreign Direct Investment Policy of India

The Indian government is continuously working towards increasing investment opportunities for NRIs and foreign direct investment (FDI) flows into the country. The country enjoyed the second highest growth in FDI inflows in the world during 2011, which eventually generated over two lakh jobs. According to the Ernst & Young’s (E&Y) 2012 India Attractiveness Survey, investors view India as an attractive investment destination. India stands as the fourth most attractive destination for FDI in the survey’s global ranking.

India received FDI worth US$ 2.21 billion in February 2012, registering an annual growth of 74 per cent. Cumulative inflows for April-February 2011-12 stood at US$ 28.40 billion.

India has already emerged as one of the most preferred destinations for foreign investment and this eminent position will need to be sustained, according to a report by Department of Industrial Policy and Promotion (DIPP). The Indian government is therefore, doing every bit to ensure this. The Government of India has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible. This framework is embodied in the Circular on Consolidated FDI Policy, which may be updated every year, to capture and keep pace with the regulatory changes effected in the interregnum. The DIPP and Ministry of Commerce & Industry make policy pronouncements on FDI through Press Notes/ Press Releases which are notified by the Reserve Bank of India (RBI) as amendments to the Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA 20/2000-RB dated May 3, 2000).

Key Foreign Direct Investments in India

  • The Government of India has approved 21 FDI proposals worth Rs 2,410 crore (US$ 436.01 million) including that of Pfizer Inc and Sterlite Networks on September 11, 2012.
  • The Government of India has approved 14 FDI proposals worth Rs 1,584.11 crore (US$ 280.91 million), including that of Abhijeet Power Ltd to bring in FDI worth Rs 674 crore (US$ 119.51 million) and CLSA Singapore’s proposal to invest Rs 225 crore (US$ 39.89 million) on July 23, 2012
  • FDI inflows worth US$ 341.49 million were recorded in the drugs and pharmaceuticals sector between April 2009 to February 2012. At present, the Government of India allows 100 per cent FDI for both greenfield and existing projects in the sector, according to Mr Jyotiraditya Scindia, Minister of State for Commerce and Industry.

The foreign direct investments policy of the India helped in generating huge investment opportunities in India for NRIs.

Why should NRIs and PIOs invest in Indian Aviation sector?

Infrastructure sector, not only is the backbone of an economy, but also plays a vital role in India’s social and cultural segments. It contributes significantly to the growth of gross domestic product (GDP), while creating opportunities for employment and investment.

Infrastructure in India will require US$ 1.7 trillion investment in the next 10-years, according to investment banking company Goldman Sachs. With a view to streamlining and simplifying the appraisal and approval process for public private partnership (PPP) projects, a Public Private Partnership Appraisal Committee (PPPAC) has been constituted under the chairmanship of Secretary, Department of Economic Affairs and Secretaries of Planning Commission, Department of Expenditure, Department of Legal Affairs and the concerned Administrative Department as its members.

Global private equity (PE) funds looking for high return on investments are going to target Indian infrastructure companies in the coming years, says a report by research agency Preqin. The Preqin report says 74 per cent of India-focused funds will invest in greenfield projects, 84 per cent in brownfield assets, and 42 per cent will buy out the stakes of other PE funds.

Major sections pertaining to infrastructure in India include roads, ports, aviation, energy and railways.

Aviation in India

The aviation industry in India is one of the major economic drivers for prosperity, development and employment in the country. The rapidly expanding aviation sector in India handles about 2.5 billion passengers across the world in a year; moves 45 million tonnes (MT) of cargo through 920 airlines, using 4,200 airports and deploys 27,000 aircraft. Today, 87 foreign airlines fly to and from India and five Indian carriers fly to and fro from 40 countries.

India is the 9th largest aviation market in the world as per a report, Indian Aerospace Industry Analysis, published by research firm RNCOS. The Indian Aviation sector grew around 13.6 per cent year-on-year in FY 2010, which was amongst the highest globally.

India is expected to be amongst the top five nations in the world in the next 10 years in the aviation sector. On the sidelines of the International Civil Aviation Negotiation (ICAN) Conference, Ms Pratibha Patel, former President of India, highlighted that currently, India is the ninth largest civil aviation market in the world.

Latest Developments in Indian Aviation Sector

  • The Bengaluru International Airport, along with Chatrapati Shivaji International Airport, Mumbai, has been presented with certificates in recognition of their achievements under the various levels of Airport Carbon Accreditation by Airports Council International (ACI). Bengaluru airport, which is the busiest in South India, has been given a certificate for carbon reduction. Mumbai airport on the other hand has been awarded the certificate for mapping carbon emissions
  • The first ‘Made in India’ helicopter cabin is ready to take off in global skies. The cabin has been manufactured by the Tata Group in Hyderabad and has been fitted in the helicopters by the US-based firm Sikorsky. In India, Sikorsky has so far supplied six ‘executive transport’ category helicopters to some of the commercial establishments in Mumbai
  • The Government of India has allowed 100 per cent foreign direct investment (FDI) for green field airports, via the automatic route. Moreover, foreign investment up to 74 per cent is permissible through direct approvals while special permissions are required for 100 per cent investment

The aviation industry in India is exploring opportunities to improve connectivity and is also looking at enhancing the number of Indian carriers to various countries. Massive investments in airport infrastructure have led to world class airports which have become the symbol of India’s growth story.

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