Investment Opportunities in India

July 2, 2013

Investment options in Indian energy sector

Energy plays a key factor in determining the economic development of all countries. The Indian energy sector has witnessed a rapid growth in order to meet the demands of a developing nation. Areas like resource exploration and exploitation, capacity additions, and energy sector reforms have been revolutionized.

Energy sector in India comprises of both non-renewable (coal, lignite, petroleum and natural gas) and renewable energy sources (wind, solar, small hydro, biomass, cogeneration bagasse etc.).

India has retained its position in top five world wind energy markets in 2012. The country remained the third largest market for new turbines in 2012 with capacity addition of 2,441 megawatt (MW), according to World Wind Energy Report 2012. World’s wind turbine capacity addition grew at 19 per cent to 44,609 MW.

Major investments in Indian energy sector

The investment climate is very positive for investors in India. The power sector has witnessed a surge of higher investment flows than envisaged. The Ministry of Power has set a target for adding 76,000 MW of electricity capacity in the 12th Plan (2012-17) and 93,000 MW in the 13th Plan (2017-22).

Some of the major investments in the Indian energy sector:

  • National Aluminium Company Ltd (Nalco) has set up its second wind power plant in Jaisalmer district of Rajasthan with a capacity of 47.6 MW. The Rs 283 crore wind power project is being executed through Gamesa Wind Turbines Private Ltd
  • Coal India Ltd (CIL) plans to invest Rs 340 crore to embark on the second round of exploration at Mozambique coal blocks
  • Jakson Power Solutions has won two new orders for installing solar rooftop systems in Bengaluru and Pune. The first order is to set up the 80 kilowatt peak (KWp) solar rooftop unit with a facility of battery back-up at Karnataka State Disaster Management Centre, Bengaluru, said Mr Sundeep Gupta, Joint Managing Director, Jakson Power Solutions
  • Vikram Solar plans to put up a 10 MW power plant at Tamil Nadu (TN) under the second phase of the state’s solar policy
  • Mytrah Energy Ltd plans to acquire 59.75 MW of existing operational wind power assets in Tamil Nadu (TN) and Maharashtra. The company expects to have a capacity of 370 MW against previously anticipated 334 MW by 2013 wind season

Government Initiatives to promote investments in the energy sector

The Government has initiated several policies to attract investors in India to invest in the Indian energy 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.

Some of the major investments taken by the Government of India to garner investments in the energy sector are as follows:

  • Foreign direct investments (FDI) up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading
  • Under the Union Budget 2013-14, the Government of India has approved a scheme for the financial restructuring of DISCOMS to restore the health of the energy sector in India
  • In a boost to power firms with plans to set up units in Special Economic Zones (SEZ), the Government has exempted them from the positive net foreign exchange (NFE) obligation applicable to regular units in such enclaves

Investment options in India, one of the most attractive economies in the world

The Indian economy continues to grow at a good pace and holds a strong position. Indiaís economy is amongst the largest in the world on the basis of purchasing power parity (PPP). It is today one of the most attractive destinations for business investment opportunities with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. During April-January 2012-13, India received foreign direct investments (FDI) worth US$ 30.82 billion while FDI equity inflows during January 2013 stood at US$ 2.16 billion, according to latest data released by the Department of Industrial Policy and Promotion (DIPP).

India is the third-most attractive destination for FDI in the world. Indian markets have significant potential and a favorable regulatory regime for foreign investors, according to a survey titled World Investment Prospects Survey 2012ñ2014 by UNCTAD.

“We are keen to see FDI investment to surge in India and to that end, a favourable business climate will be helpful in going forward. We are encouraged to see there is a continued path towards fiscal consolidation,” according to Ms Christine Lagarde, Chief, International Monetary Fund (IMF).

Changes made by the Mr P Chidambaram, Union Minister for Finance, Government of India, in the Union Budget 2013-14 can greatly benefit high net worth individuals looking to invest in India, where returns on investments are higher than in any other market.

Key sectors in India where foreign investors can invest

India has become a trillion dollar economy with a self-sufficient agricultural sector, a varied industrial base and a well-established financial and services sector. There are numerous sectors that offer lucrative business opportunities in India. Some of the key investment sectors are:

  • Aerospace & Defence
  • Automotive
  • Banking
  • Biotechnology
  • Information Technology
  • Insurance
  • Power
  • Real Estate
  • Retail
  • Telecommunications

Government Initiatives in supporting business investments opportunities in India

In order to enable investors to have the complete benefit of available business opportunities in India, the Government of India has taken following initiatives:

  • The Government of India has relaxed in expense ratios for mutual funds and the prospects of higher FDI limits in insurance sectors could unlock huge opportunities in these investment sectors.
  • The Government has allowed Qualified Foreign Investors (QFIs) ó individuals, groups or associations ó to invest directly in Indian equities and bond markets.
  • To encourage the micro, small and medium enterprises (MSMEs), the Government of Tamil Nadu (TN) has announced a special component package, which includes creation of an additional land bank for setting up new industrial estates in the state, increase in subsidy for machinery purchases and creation of a single window clearance committee to facilitate speedy approvals for industrial estates, said Ms J Jayalalithaa, Chief Minister of Tamil Nadu (TN).

Investment facilitation in India

The Ministry of Overseas Indian Affairs in partnership with Confederation of Indian Industry (CII) has set up an Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, to facilitate non-resident Indians (NRIs), overseas corporate bodies of overseas Indians and non-resident Indians who want to invest in India.

In order to ease the process for foreign investors to invest in India, OIFC has developed an online toolkit – Investment Guide to India. The toolkit serves as a simple, practical and stage-wise investment guide for the non-resident Indians wanting to invest in India.

Investment opportunities in Indian states

India is one of the oldest civilisations in the world with diverse cultural heritage. It is divided into twenty eight States and seven Union Territories (UT). Each and every Indian states and UTs has a unique demography, history, language etc. which provides various investment opportunities. These states/UTs are blessed with large number of tourist places – beautiful landscapes, wildlife and forests, hills, plateaus, valleys, monuments, forts, palaces, temples, etc. Tourism is the major source for investments in Kerala.

States and UTs of India are also gifted with distinct inherent strengths – from abundant supply of mineral resources and large forest reserves to the availability of good fertile lands, which are suitable for growing variety of agricultural and horticultural crops.

Several global majors are present in these States which brings large investments into the country. These companies/ industries are confined to iron and steel, cement, textiles, agro-processing, mineral-based industries, drugs and pharmaceuticals, chemicals, electronics, automobiles, etc. Pharmaceuticals and automobiles are the major source of investments in Gujarat.

Information technology (IT) is now being recognized as an essential part of the economy by the various State Governments, thereby attracting new players into the market. IT revolution is committed to provide good governance that ensures transparency, reduction in transaction costs, efficiency and citizen centric delivery of public services. Therefore, the Government is making all efforts to facilitate the growth of such industries and promote overall development of the economy.

Major investment states of India

Haryana: Due to its strategic location, Haryana has been recognised as a business-friendly State. Panipat, Rohtak, Gurgaon, Faridabad and Sonepat have a special potential for accelerated socio-economic development. Land and water are the important resources of the State, making it an agriculturally rich State. Large number of food grains and horticultural crops are produced, by using available irrigation facilities.

Kerala: The State of Kerala constitutes one of the most advanced society of the country. Its literacy rate is the highest among the Indian States. The State has several advantageous features – pro-active administrative set up, simple and transparent procedures for investment, rich natural resource base, educated and hardworking manpower, including the highest density of science and technology personnel, etc. The Government has taken several policy measures and incentives for attracting investments in Kerala.

Punjab: Punjab is a land of numerous opportunities which are embedded in its advantageous position. These include:

  • Simple and responsive administrative set-up
  • Educated and professional work force with abundance of skilled workers
  • Strong agricultural and industrial base
  • Efficient infrastructural set up including transportation, telecommunication, stable and cheap power

Gujarat: Gujarat is the leading industrialized State of India. It houses a number of multinational corporations, private sector companies, public sector enterprises and a large number of medium and small scale units. It is a manufacturing powerhouse with world-class production capabilities. Textiles, petrochemicals, pharmaceuticals are some of the few sectors which attracts investment in Gujarat. The State is also known for its entrepreneurial spirit as well as robust social and physical infrastructure.

Andhra Pradesh: Andhra Pradesh is the resourceful land of minerals which includes coal, oil and natural gas, bauxite, limestone, gold, diamonds and much more. It is an agriculturally-prosperous State, endowed with fertile land, water and conducive agro-climatic conditions. It is among the largest producers of food grains, fruits, vegetables, cotton, maize, dairy and poultry products in the country.

June 3, 2013

March 28, 2013

Growing prospects in Indian electronics industry

The growing sales figure for the consumer electronic goods, a flourishing telecom/networking market and noteworthy growth in the use of portable/wireless products are some of the significant trends observed in India at present and they are providing stimulus to the growth of the electronics design industry to a greater scale.

India has a well-developed electronics design industry, with 120 design units and is ranked the second among the US, the UK, Germany, Sweden, China, Taiwan and Israel in terms of design revenues.

Electronics is essential for setting up technology infrastructure, and semiconductors are the main component of electronics products. Electronics sales in India, which totalled US$ 40.7 billion in 2009, will touch US$ 400 billion by 2020. At present, local manufacturing accounts for about 40 per cent of consumption and it could increase to 80 per cent by 2020.

The key drivers for the electronics market in India include telecom infrastructure equipment, wireless handsets, notebooks and other IT and office automation products, set-top boxes and smart cards. Growth sectors including health care equipment, automotive, consumer goods and industrial goods—all of which increasingly use electronics—are also expected to boost electronics consumption in India and open up more investments opportunities for non-resident Indians (NRI).

Investment options in electronics industry of India

In India, after Bangalore, Noida has become a hub for electronics design industry with many major players setting up their offices and research and development (R&D) centres in the city. Global MNCs such as Freescale, Mentor Graphics and Interra Systems are some of the major companies in Noida.

The Government of India is continuously making efforts to boost Indian electronics industry and is attracting foreign and local players to invest in electronics sector of the country. For the purpose, the Government has set up an Empowered Committee that would invite a preliminary Expression of Interest (EoI) from potential technology providers and investors.

100 per cent FDI in India under the automatic route is allowed in semiconductor fabrication to promote electronics manufacturing in India.

The Union Cabinet has approved a proposal to offer financial assistance for the development of electronics manufacturing clusters (EMCs), to aid the growth of the Electronic System Design and Manufacturing (ESDM) sector in India. The scheme is expected to help flow of investment for development of the ESDM sector.

The Government is also formulating a special incentive package to encourage local manufacturing of electronic goods. The package includes reimbursement of indirect taxes, and a subsidy of 20 per cent on capital expenditure made by high-tech manufacturers in special economic zone (SEZ) units.

Future of Indian electronics sector

The growing tablet market; increasing notebook penetration coupled with widespread demand for flash memory and desktops from e-Governance programmes will drive the growth of the Indian semiconductor market.

“Semiconductors and electronics are at the heart of technology driven products that will drive the US$ 400 billion Indian electronics market by 2020. ISA is committed to working with all the stake-holders from industry, academia and government to enable the eco-system that will convert this opportunity into reality,” as per Dr Pradip K Dutta, Chairman ISA and Corporate Vice-President & Managing Director, Synopsys India.

FDI in India in the electronics sector is very crucial for the development of the IT and the ITES sector in India.

The robust growth in the Indian semiconductor design industry has opened up a lot of opportunities to invest in electronics sector of India.

Booming Indian Economy offering huge investment options for NRIs

India’s economy is amongst the largest in the world on the basis of Purchasing Power Parity. It is today one of the most attractive destinations for business and investment opportunities with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. In FY 2011-12, the country attracted foreign direct investment (FDI) of around US$ 46.8 billion in various sectors.

The country’s strong fundamentals such as a growing middle class population, cost competitiveness and strong domestic consumption have made it a preferred destination for MNCs from across the world.

Being the world’s largest democracy with over 1.2 billion people means a plethora of business opportunities for its people. The country also offers innumerable investment opportunities for NRIs. Combined with young skilled manpower along with a well established judicial and stable government conducive to business, are all positive points towards India’s business potential.

Additionally, strong growth across diverse parameters like being the 2nd most attractive FDI destination, steady Infrastructure & GDP growth and being one of the largest economies of the world reinforce the strength of India’s economy. All this translates to the availability of new investment opportunities for NRIs in India spanning all sectors of the Indian economy.

Key Sectors

The various key investment sectors in India offering lucrative business opportunities are Aerospace & Defence, Automotive, Banking, Capital markets, Life Sciences, Information Technology, Insurance, Media & Entertainment, Mining & Metals, Oil and Gas, Ports, Power and Utilities, Real Estate, Retail and consumer products, Roads and highways, and Telecommunications.

Growth Potential in key sectors

Indian tax climate is considered to be reasonably favourable and India has continued to be an attractive investment destination, according to a survey conducted by Deloitte Touche Tohmatsu Ltd (Deloitte). The investment sectors in India are witnessing new heights in terms of contribution both from the domestic front as well as from the foreign land.

  • The pharmaceutical market of India is expected to grow at a compound annual growth rate (CAGR) of 14-17 per cent over 2012-16 and is now ranked among the top five pharmaceutical emerging markets globally
  • India’s IT and business process outsourcing (BPO) sector exports are expected to increase by 12-14 per cent in FY14 to touch US$ 84 billion – US$ 87 billion, as per National Association of Software and Services Companies (Nasscom)
  • Indian manufacturing and natural resources industry plans to spend Rs 40,800 crore (US$ 7.53 billion) on IT products and services in 2013, a growth of 9.1 per cent over 2012, according to Gartner. The telecommunications category remains the biggest spending category and it is forecast to reach Rs 13,200 crore (US$ 2.43 billion) in 2013
  • The electronic system design and manufacturing (ESDM) sector of India is projected to reach US$ 94.2 billion by 2015 from US$ 64.6 billion in 2011, according to a report by the India Semiconductor Association (ISA) and Frost & Sullivan
  • The luxury car market of India is set for growth over the medium and long term, according to Mr Philipp Von Sahr, President, BMW Group India. The market is about 30,000 cars a year and is rising steadily, Mr Sahr added

March 20, 2013

Indian retail market opened more doors for NRIs

The recent wave of reforms by the Government to incentivise foreign direct investment (FDI) in various sectors is bringing a new zeal to the investment options in India. One of the most debated reforms is the policy for allowing 51 per cent FDI in multi brand retail.

Retail Market in India

The Indian retail industry has experienced growth of 10.6 per cent between 2010 and 2012 and is expected to increase to US$ 750-850 billion by 2015. Food and Grocery is the largest category within the retail sector with 60 per cent share followed by Apparel and Mobile segment.

Within the organised retail sector, Apparel is the largest segment. “Food and Grocery” and “Mobile and telecom” are the other major contributors to this segment.

Evolution of the FDI policy in multi brand retail

The Government of India had been considering opening up the multi brand retail sector to FDI for some time. They had released a discussion paper in 2010 on the topic and had extensively gathered public, academic and industry views on the issue. In November 2011, the Government came out with its proposal for the new FDI policy. However, unable to achieve political consensus on the issue, they had to shelve their plans for the enactment of the policy. Finally, the Government decided to pass the new FDI policy on multi brand retail in September 2012 to increase investment options in India.

The FEMA notification issued by the Reserve Bank of India permitting FDI in the retail sector was laid before the Houses of Parliament and the same has been cleared without any modification.

The changes in some of the policy conditions indicates government intention to attract more NRIs to invest in retail sector of India and provide a window to foreign retailers to cultivate/ grow the SME segment.

Policy Implications

The FDI policy conditions will have a different impact on the various sub-segments of the retail industry in India. A policy condition might have a low impact in one segment but could be a major stumbling block for another segment. Implications of each FDI policy condition in Mass Grocery, Apparel and specialty stores such as Beauty & Wellness and Consumer Electronics are:

  • Minimum FDI of US$ 100 million: Minimum FDI of USD 100 million and a constraint of maximum 51 per cent stake of the foreign entity imply that the minimum investment required by both, the foreign and the Indian partner together, is more than Rs 1000 crore
  • 50 per cent of FDI in backend infrastructure in three years: Minimum investment of Rs 220 crore-Rs 250 crore is to be invested in backend infrastructure in the first three years to invest in retail sector of India. However, different retail segments have dynamic requirements of backend infrastructure
  • 30 per cent of sourcing from “small” industries: This policy constraint implies that retailers should have at least 30 per cent sales from private label brands or unbranded products sourced from small industries

Policy conditions of 50 per cent investment in backend and 30 per cent sourcing from small industries are the two most difficult conditions to be met for FDI in multi brand specialty retail such as Consumer Electronics, Beauty & Wellness etc.

March 4, 2013

Booming healthcare sector of India: A great opportunity for NRIs to invest

The Indian healthcare industry was US$ 65 billion during 2011-12 and is expected to reach US$ 280 billion by 2020. Large investments by private sector players are likely to contribute significantly to the development of India’s hospital industry, which comprises around 80% of the total market, according to the report ‘Indian Hospital Services Market Outlook’ by consultancy RNCOS. As per estimates by ratings agency Fitch, the sector is poised to grow to USD 100 billion by the year 2015.

Growth drivers of Indian healthcare sector

  • Increase in patients population, increasing lifestyle related health issues
  • Faster diagnosis leading to early treatment, awareness on preventive healthcare disorders
  • Affordable treatment costs
  • Thrust on medical tourism
  • Improving health insurance penetration
  • Increasing disposable income
  • Medical insurance and mandatory wellness checks by corporate houses
  • Government initiatives and focus on Public Private Partnership (PPP) models

Opportunities in healthcare industry of India

The Indian healthcare sector is ripe for the expansion and significant growth due to the reasons mentioned above. One of the main factors is increase in the space of medical tourism in India. Medical tourism in India is growing at a compounded annual growth rate of over 27 per cent during 2009-2012. Medical tourism market is valued to be worth USD 310 million and is expected to generate USD 2.4 billion by 2013 and is growing at 30 per cent a year.

It has created excellent investments opportunities for the non-resident Indians (NRIs) to provide much needed managerial and financial support. The following sectors have significant opportunities for the investors:

  • Hospitals and Infrastructure: There is tremendous demand for tertiary care hospitals and specialty hospitals in India. There is a gap between the availability of the beds and required beds in the hospital in India which has made NRIs to invest in healthcare.
  • Health Insurance: The percentage of the Indian population that has been covered under health insurance is unfortunately very insignificant. Though there is increase in number of health care insurance policies over past few years, majority of the population remains without any coverage. Growing size of middle class population in India that spends on healthcare has led to the emergence of health insurance market.
  • Technology driven services: Significantly low presence of physicians in rural and semi-urban areas has led to the limited access to proper healthcare facilities for the people living in these areas. Telemedicine is considered to be one of the solutions to this lacuna in accessibility to health care services in rural and semi-urban areas. Growth of IT sector in India which plays crucial role in telemedicine has led to invest in healthcare sector.

Public-private partnership model in Indian healthcare

Private healthcare is coming forth as one of the fastest growing sectors in India, with chain hospital explorations into various cities (such as metros and tier II cities across the country), private players seeking accreditation and developing new healthcare models in recent days. Further, various states have launched innovative initiatives to attract PPP investments into healthcare space. These Public Private Partnership initiatives may help in improving the infrastructure and healthcare provision in the country for the needs raised.

Future of healthcare in India

There is a huge investment opportunities here for India, to maximise the use of diagnostics within the healthcare environment. We have got very good high-end labs, which are equivalent to any country around the world, said Mr Lance Little, Chairman and Managing Director, Roche Diagnostics India and South Asia.

December 27, 2012

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