Investment Opportunities in India

July 2, 2013

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.

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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.

December 27, 2012

Investment opportunities in energy and telecommunication sector of India

The Government of India has accepted Telecom Regualtory Authority of India’s (TRAI) recommendations on ‘Approach towards Green Telecommunication’ and has decided to promote the use of green energy in the telecommunication sector setting broad directions and goals to achieve desired reduction in carbon emission through use of renewable energy technologies and energy efficient equipment. Department of Telecommunications has issued directions to the licensees for implementation with immediate effect. These directions stipulate inter-alia that at least 50 per cent of all rural telecom towers and 20 per cent of the urban towers are to be powered by hybrid power (renewable energy technologies and grid power) by 2015 while 75 per cent of rural towers and 33 per cent of urban towers are to be powered by such systems by 2020.

Telecommunication sector of India

Telecommunication in India is the second-largest in the world with 951.3 million subscribers as of March 2012. India is expected to feature among the top 10 broadband markets by 2013.

In terms of subscriber base, Bharti Airtel made the lead in the month of July 2012 with 188.8 million subscribers followed by Vodafone with 154.9 million. Idea Cellular added 455, 912 subscribers to have 117.6 users and State-run Bharat Sanchar Nigam Ltd (BSNL) added 471,552 users to have 98.75 million subscribers. Tata Teleservices has a total number of 77.8 million subscribers, while Uninor has 44.5 million.

Since the introduction of the New Telecom Policy in 1999, telecommunication in India has witnessed huge investment opportunities, especially in the wireless segment. The industry has evolved as a basic infrastructure on the similar lines of electricity, roads, water etc.

The Government of India is also focussing on improving rural tele-density and broadband connectivity, effective expansion of the networks with efficient utilisation of scarce spectrum and ensuring equal sharing of highly capital intensive infrastructure.

Indian Energy Sector

The Indian energy sector is one of the most diversified sectors in the world. Energy in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable non-conventional sources like wind, solar and agriculture and domestic waste. Energy sector in India has been growing at a rapid rate and is expected to increase 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.

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.

The investment climate is very positive in the Indian energy sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth FiveYear Plan (2017-2022).

The Government has initiated several policies for energy sector in India to promote and garner investments from NRIs/PIOs. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power.

November 28, 2012

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.

August 29, 2012

Investment Trends in India

India has grown as one of the significant economies in the world having immense potential for long-term growth. Indian economy is developing at a faster pace and is brimming with investment opportunities. As per McKinsey Global Institute, the average Indian’s income will triple by 2025. This will result in more investment in the coming years.

India: Investment Potential

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

Investment for saving purpose in future is certainly a good idea. There are large numbers of companies that offer plenty of opportunities for different individuals. India with a matured capital market, backed by liberal policies and strong banking system has turned to a profitable business ambience both for domestic and international businessmen.

Entry strategies for global investors in India

The various entry strategies for foreign investors in India have helped to bring in huge amounts of FDI into India. Some of the investment strategiesinitiated by Indian government are:

  • A foreign company can start its operations in the country by setting up a new company according to the Companies Act 1956. The foreign direct investment of 100 per cent has been allowed by the Government of India in such companies.
  • An international company can start its operations in India by forming joint collaboration with an Indian company.
  • An international company can start its operations in India by setting up their branch office, representative office, and project office.
  • A foreign company can start its operations in India by establishing a wholly owned subsidiary in the sectors, where foreign direct investment up to 100 per cent is permitted under the FDI policy.

Areas of Investment

The scope for business in India is enormous and has led to more investment options in India. Some key areas like infrastructure, petrochemicals, power, automobile, electronic hardware, etc. are receiving attention not only for foreign but for domestic ventures also.

Further, there are various exciting opportunities for conducting business in India, especially, for entrepreneurs dealing in outsourcing technology, internet ventures, software development, e-commerce, etc. People can also find a niche market in India where they can sell various products like health care products.

Major initiatives in India

There are various initiatives taken in India that provide a liberal and investor friendly environment:

  • Simplified investment procedures
  • Liberalised trade policy and exchange regulations
  • Intellectual property rights
  • Enactment of competition law
  • Financial sector reforms

There is no dearth of investment options in India after the investment under the automatic route has been allowed by the Government. The Government has also revised its policy regarding FDI in Indian companies engaged in retail trade. Foreign investors will now be permitted, subject to certain conditions, to own up to 100 per cent of single-brand retail trading companies in India.

June 27, 2012

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.

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