NRI Investment options 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.

Market size of education sector in India

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

In India, the pre-school segment is currently worth US$ 750 million and is expected to reach US$ 1 billion by 2012, said Arun Arora, Chairman, Serra International Pre-Schools.

The market size of K-12 sector is expected to reach US$ 34 billion in 2012, with a rise of 14 per cent, as compared to US$ 20 billion in 2008.

Vocational education/training is gathering huge investments from corporate and private equity (PE) firms as the methodology and technology pertaining to this sector is witnessing significant improvements.

Investment in Indian education sector

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

The Government of India has allowed foreign direct Investment (FDI) up to 100 per cent through the automatic route in the education sector.

Government Initiatives for promoting education sector in India

Some of the initiatives taken by the Government of India for infrastructural development of education sector are as follows:

• The Ministry of Human Resource Development plans to set up ten community colleges in collaboration with the Government of Canada in 2012. The Government of India has decided to set up hundred community colleges this year.
• The Government of Gujarat plans to set up a farming educational institute in collaboration with Israel, offering post-graduation and Ph.D programmes with practical training and degree from Israeli universities.
• The Government of India also plans to set up an Indian Institute of Agricultural Biotechnology at Ranchi with investments of Rs 287.50 crore.

Future of Indian education sector

Consulting firm Technopak is very positive about the growth of the sector and estimates private education sector alone to grow to US$ 70 billion by 2013 and US$ 115 billion by 2018 in its study ‘A Report Card on India’s Education Sector’.

There are clear investment opportunities for private players to enter the Indian education space. The opportunity exists in all three segments – schooling, 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.

India’s education sector 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.

Wealth Management Investment Guide for NRIs

What would you prefer: Rs 1, 00,000 right now or Rs 1, 00,000 five years from now?

It will be better if we should take Rs 1, 00,000 today because we know that there is a certain time value of money. The Rs 1, 00,000 received now will provide us with an opportunity to put it to work instantly and earn a certain return on it.

A single rupee today is worth more than a single rupee a few years down the line. Because of this, people who have surplus funds in the form of savings want to invest so that the value of the funds over the years does not go down.

It is also very important to determine your financial goals. You need to decide which type of investment strategies works for you. Your strategy will determine the extent of your success in the investment world whether you invest in India or overseas markets.

The strategies can differ greatly from a rapid growth strategy where an investor focuses on capital appreciation to a safety strategy where the focus is on wealth protection. The most important part of investment strategies is that it aligns with the individual’s goals and is closely followed by the investor.

Investment options in India

There are various forms of investments options at the disposal of individuals in India. These include real assets like a house, a car, a television, or financial assets like stocks in companies, bonds, units of funds, etc.

Traditionally, term deposits in banks, post office savings schemes, bonds and common stocks are the most accessible forms of investments available to the investors. Term deposits, post office savings schemes and bonds give a fixed return over a period of time.

Several national priority level and state-specific projects are being implemented across the country by the Government of India. 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.

Wealth management services in India

There are individual investment avenues in India that help you enhance your individual wealth. These are offered by eminent banks in India, which have rich experience in servicing overseas Indians. Not only will you get to choose from a wide bouquet of investment products, but these can also be customised as per your individual needs.

Investment Toolkit

In an effort to ease the process of investing into the country, Overseas Indian Facilitation Centre (OIFC) has developed an online ‘NRI Investment Guide‘.

The toolkit provides an entire range of investment guidelines, policies and procedures, suggests the range of compliance requirements and clearances, as desired, in synergy with the investor’s investment preferences. In other words, it is a simple, practical, and realistic online investment guide customised to the needs of overseas Indian investors.

Investment Facilitation Platform of OIFC helps NRI through the complete process of investing, right from choosing the correct investment opportunities and applying right investment strategies to actually making the investment.

Scope of Investment Environment in India

India is in the middle of fast economic and social conversion and it provides a constant, flourishing platform for businesses to grow. It also provides rich investment opportunities to non-resident Indians (NRIs). It is one of the quickest, easiest and successful cost-effective commitment locations to set up a company. In fact, India is the second-most successful location, according to UNCTAD’s World Investment Leads Study 2010-2012.

Foreign Investments in India

Indian equities have attracted maximum investments by Foreign Institutional Investors (FIIs) as compared to any other Asian market on the back of policy reforms undertaken by the Government of India to promote economic growth. Foreign investors in India remain substantially strong and have invested over US$ 13 billion into Indian stocks till September 2012. Some of the key investments and developments are:

• Overseas investors infused about US$ 645 million from October 1, 2012 to October 5, 2012 itself, while they invested more than US$ 3.5 billion in the month of September 2012, according to data released by capital market regulator, the Securities and Exchange Board of India (SEBI)
• FIIs also infused Rs 1,382 crore (US$ 260.47 million) in the debt market in the first week of October 2012
• As on October 5, 2012, the number of registered FIIs in the country stood at 1,753 while, the total number of sub-accounts were 6,329
• Another statement issued by the Reserve Bank of India (RBI) revealed that foreign exchange reserves stood at US$ 294.81 billion for the week ended September 28, 2012 wherein the value of gold reserves was recorded at US$ 28.133 billion and that of foreign currency assets (FCAs) was at US$ 259.96 billion

The Center for Monitoring Indian Economy (CMIE) projects that FII inflows would strengthen in the second half of FY13 at US$ 11.2 billion as India is looked upon as a viable long-term investment destination on the global canvas. Major FIIs like JP Morgan, Morgan Stanley and Deutsche Bank are believed to drive the positive wave of foreign investments.

Government Initiatives

The Government of India is playing a vital role in attracting and providing an investment friendly climate to foreign investors in India. The policies have been liberalised to entice more and more cost-effective commitment methods. Some of them are as follows:

• The Government has created many policies and schemes to maximize investment opportunities for NRIs in the real estate sector of India
• RBI has allowed, both people residing outside India holding Indian passports and also person of Indian origin (PIO) to invest in residential as well as commercial properties in India
• RBI has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies, under the automatic route purchase of shares
• NRIs/PIOs are permitted to invest in the foreign direct investment (FDI) scheme on a repatriation basis in equity shares/ Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCDs) of an Indian company

Government’s involvement on policies, especially, tax rules and foreign direct investment (FDI) in areas like retail, aviation etc. will play an important part in driving large deals. India’s development tale continues to be unchanged and NRIs/PIOs can look ahead to see better financial commitment options in second half of 2012.

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.

NRIs Investment Options in India

India offers a stable, prosperous foundation to grow one’s business. It offers rich business opportunities and markets to non-resident Indians (NRIs) for new products and services. It is one of the fastest, easiest and lucrative investment destinations in the world to set up business. India is the second-most profitable destination, according to UNCTAD’s World Investment Prospects Survey 2010-2012.

India is in the midst of rapid economic and social transition and is giving a feel good factor to the NRIs, especially the real estate sector. Returns from real estate investments 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 opportunities for NRIs looking to invest in Indian real estate sector. The rules have been liberalised to attract more and more investments. The Reserve Bank of India (RBI) has allowed, both people residing outside India holding Indian passports and also person of Indian origin (PIO) to invest in residential as well as commercial properties in India. The purchase can be done out of funds remitted to India through normal banking channels or funds held in certain types of accounts in India. NRI can freely invest in any partnership or proprietorship firm (not engaged in agriculture/plantation/real estate) on a non-repatriable basis. The sale or transfer of shares and debentures to Indian residents is permissible.

The Government also offers huge investment opportunities in government securities, Unit Trust of India (UTI), National Saving Certificates, shares and mutual funds. NRIs/PIOs are permitted to invest in the foreign direct investment (FDI) scheme on a repatriation basis in equity shares/ Compulsorily Convertible Preference Shares (CCPS)/ Compulsorily Convertible Debentures (CCDs) of an Indian company. They are also permitted to make portfolio investments. The RBI has granted general permission to NRIs/PIOs, for undertaking direct investments in Indian companies, under the automatic route purchase of shares. The ‘24% Scheme’ permits Indian companies, apart from those operating in the agricultural sector, to issue 24% of their debentures and shares to NRIs with repatriation benefits.

The health care sector has also opened new business opportunities for NRIs/PIOs to invest in India because of the rise in disposable income, penetration of health insurance and unhealthy lifestyle of present generation.

With a huge agriculture sector, abundant livestock, and cost competitiveness; India is fast emerging as a sourcing hub of processed food. The food services sector in India is expected to witness a 50 per cent increase in investments in 2012 to about US$ 750 million, as food suppliers and retail companies plan to scale up business and stay competitive by tapping the large potential of the domestic market.

There are many other exciting business opportunities in India, especially, for entrepreneurs dealing in outsourcing technology, internet ventures, software development, e-commerce, etc.

Government’s intervention on policy issues, especially, tax regulations and FDI in sectors like retail, aviation etc. will play an important role in driving large transactions, especially, inbound deals. India’s growth story remains intact and NRIs/PIOs can look forward to see better investment options in 2nd half of 2012.

Investment in Real Estate in India

Indian real estate has huge potential in almost every sector especially commercial, residential, retail, industrial, hospitality, healthcare etc. However, the major real estate developments in India are mainly the townships, residential units, shopping malls, offices, retail stores and commercial complexes.

The major growth has come due to increasing purchasing power, favourable demographics, existence of customer friendly banks & housing finance companies, professionalism in real estate and favorable reforms initiated by the government to attract global investors.

Real estate investment in India is primarily a long term investment providing low liquidity to an investor. Investors can look at renting out their property to bring consistency in revenues. This can also reduce the burden of EMIs for a property purchased on a loan. According to a survey conducted by ASSOCHAM, 65 per cent of working individuals prefer real estate as a mode of long term investment.

There are many banks and financial institutions that provide loans at attractive rate of interest to the builders. For example, HDFC Property Fund, Kotak Mahindra Realty Fund, and India Advantage Fund (ICICI), provide the funds for real estate development to the builders and developers for construction.

NRI real estate business is also on the rise in India. Recession had negligible impact on this sector. Therefore, the sector is opening up more and more investment opportunities for both domestic as well as foreign investors. The real estate sector is extremely a profitable venture, as the profits of investors have almost doubled or have derived 100 per cent profits in the residential segment.

The preferable time horizon for investment in real estate is four to seven years for better returns. The industry is popular for providing the second largest employment just after agriculture. One of the major reasons for this development is the policies taken by the Government of India.

Reforms initiated by the Indian Government

The Government including reserve bank of India (RBI) and Foreign Exchange Management Act (FEMA) has liberalised the rules and regulations for the NRIs to make investment in real estate. India has emerged as a top-most favourable destination for foreign direct investment (FDI) in the world with 100 per cent relaxation of FDI regulations in real estate.

The Government of India has now allowed international and domestic companies to operate real estate funds through private equity funding. RBI has also decreased its rate of interest in the home loan division.

Tax Advantages

People can avail the huge tax benefits on investing in real estate:

• Tax exemption is available on re-investment of sale proceeds of property in eligible possibilities.
• Tax benefit is available on interest on housing loan raised in India.

Nowadays, real estate investment in India is more productive and revenue generating in comparison to other businesses. India is a safe investment destination for real estate sector with assured returns of 10 to 12 per cent.

Business Opportunities in HealthCare Market in India

The healthcare sector in India is growing fast. The sector is currently estimated to be worth US$ 65 billion and is expected to reach US$ 100 billion by 2015, according to the rating agency Fitch. The growth in the sector comes due to- increasing population, growing lifestyle-related health issues, economic treatment, rising incomes, government initiatives, etc.

India is the first country to have a large number of multinational healthcare providers. This rapidly developing industry in India has led to a qualitative shift in patient demands. This has resulted in centers of medical excellence developing and acquiring the latest medical equipment to treat their domestic and international patients.

Due to the development in the rural areas, people even in the villages are now become more conscious about their health issues. They are opting for more health benefits for safe and diseases free existence. This will create huge investment opportunities in the sector.

Opportunities for investment in Healthcare

Healthcare infrastructure: A huge amount of private capital will be required in the coming years to meet infrastructure needs of healthcare in India. An additional 2 million beds are required for India to bridge the gap and prepare for demand estimations in 2025. The government is expected to contribute only 15-20 per cent of the total, providing a vast opportunity for private players to fill the gap.

Diagnostic & Pathology Services: High cost difference in India allows for outsourcing of pathology and laboratory tests by international hospital chains

Telemedicine: There is a vast opportunity for investment in telemedicine as it provides rural areas access to better quality healthcare.

Medical tourism: Medical tourism in India has also received a boost with the arrival of patients from different countries. According to industry estimates, the market size of medical tourism is estimated to be around US$ 2.5 billion and is growing at over 25 per cent per annum. Hence, create enormous investment opportunities in India.

Contract Research: Contract research is a rapidly growing segment in the Indian health care industry. Foreign players are entering into contract research to reduce their operational and clinical cost.

Health Insurance: Increasing healthcare cost and burden of new diseases along with low government funding has raised the demand for health insurance coverage. Less than 15 per cent of the Indian population is covered through health insurance. With the increasing demand for affordable quality healthcare in India, the penetration of health insurance is poised to grow rapidly in the coming years.

Major Growth Drivers

• 100 per cent FDI is permitted for all health-related services under the automatic route.
• Lower tariffs and higher depreciation on medical equipment.
• Income tax exemption for five years to hospitals in rural areas, Tier II and Tier III cities.
• Increasing penetration of health insurance.
• High-growth in medical tourism.

India: Hotspot Investment Destination for Foreign Investors

India is the largest democracy in the world. It ranks second in terms of population. The policy of liberalization has transformed the prospects for the Indian economy. Today India is one of the favorite destinations for global investments. The major investors in India are Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany, etc. Foreign direct investment (FDI) in India went up by 31 per cent to US$ 27.5 billion last year. The sectors that attracted maximum FDI last year include services (financial and non financial), telecom, housing and real estate, and construction and power.

The government has come up with several incentives like import of capital goods at concessional customs duty, liberalisation of external commercial borrowing norms, tax holiday to encourage investments, etc. “The government should allow 100 per cent FDI in sectors like domestic airlines and insurance sector to boost inflows and generate employment, “as per Rajiv Kumar, Secretary General, FICCI. Sectors like automobiles, chemicals, food processing, oil and natural gas, petrochemicals, power, services and telecommunications have witnessed tremendous investments.

Investment options in India

There are number of options available for foreign investment in India for both short term and long term. The major options are real estate, bonds, mutual funds, money markets, gold, and financial assets (non-marketable, LIC policies & equity shares). Today, there are businesses and industries that are even 100% open for such investment. Some of the sectors that are still not open for foreign investment include, rail transport, lottery business, tobacco business, certain agricultural activities, atomic energy, mineral oils, etc.

Who can invest in India?

There are following categories of non-Indian resident who may invest in the capital of Indian Company:

• A non-resident entity (other than citizen of Pakistan)
• A citizen or entity of Bangladesh under Government route.
• NRI resident as well as citizen of Nepal and Bhutan on repatriation basis.
• Sebi registered NRIs through a registered broker on recognised India stock exchange.
• Foreign venture capital investor registered by Sebi.
• An FII (foreign institutional investor) may invest in the capital of an Indian company under the portfolio investment scheme.

Business Opportunities in India

There are various factors that create favorable business opportunities in India are:

• There are huge business opportunities in Indian retail sector as people have become more conscious about branded products. Improvement in purchasing power and huge middle class population results in the growth of the economy.
• India’s competitive advantage in information technology can be used to enhance productivity in industries.
• Availability of large number of technical manpower has led to the expansion of manufacturing base across different industries.
• India’s rich natural resources, availability of better infrastructure, well established banking system, better agriculture, etc. have created more investment opportunities.
• The capital markets in India are one of the fastest growing markets in the world, attracting huge investments from foreign institutional investors.
• The economic reforms have brought in policy changes in terms of freedom of entry, investment, location, usage of technology, import and export. These changes have created an investment friendly environment.

Increasing Investment Opportunities in India

India has become one of the fastest growing economies. Investment growth is eventually linked to the growth of the economy. So most of the investors look for emerging markets like India, where the growth rate is higher than the developed economies. Investing in India is becoming a big attraction for the foreign investors especially due to the booming Indian economy.

Every individual wants to invest his/her money in the right means. There are various wonderful investment options in India. The challenge is to find out the right option that can not only offer flexibility, but also provide good returns in the future.

Top investment options in India

Bank Fixed deposits (FD)
This is considered to be a safe investment and generates stable income. The minimum tenure of FD is 15 days and maximum 5 years and above. Senior citizens get special interest rates on fixed deposits. The period of ideal investment is 6-12 months.

National Saving Certificate (NSC)
It is one of the safe investment options in India backed by government. The lock-in period is 6 years. Minimum amount required is Rs100 and there is no upper limit. Since the NSC comes under section 80 C, it also entitles the individual to get tax deductions up to Rs 1Lac

Public Provident Fund (PPF)
PPF is also monitored and backed up by the government of India. A minimum investment of Rs 500 and maximum Rs 1, 00,000 is required to be deposited in a fiscal year. This includes fixed-income investment for high tax payers with low risk. Any individual in India can invest in this scheme and can earn a handsome tax free return. The lock-in period is 15 years and the interest rate is 8.8 per cent calculated annually.

Stock market
Investing in share market is another investment option to get more returns. But share market investment is volatile to market conditions. Investing in the stock markets potentially yield higher profits.

Mutual Funds
Mutual Fund companies collect money from investors and invest in share market. Investing in mutual funds is also subject to market risks but return is good.

Other investments
There are various other options for business investors in India like real estate, gold and private equity available in the country. One needs to be sure of the authenticity of the organisation, interest rates, benefits and conditions before investing.

Foreign Investment in India

Foreign direct investment (FDI) in India is possible through automatic route (which does not require any approval) and government route (which requires approval).There are set of guidelines provided by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (sebi) for NRI investment in India.

The government of India has created a favorable climate for foreign investors like tax exemptions, benefits from the state and central government bodies, etc. A foreign company could invest in India either by having a wholly owned subsidiary i.e. by having a joint venture with an Indian company or by having a branch office.

There are various investment options and opportunities available in India. However, it is important to invest in that instrument which suits the individual in terms of investment amount and risk.

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.