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Foreign
Investment: An Overview
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Indian Cuisine
- Tantalizing taste buds worldwide
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The Great
Rail Journeys of India
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03. INVESTMENT UPDATE |
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Foreign
Investment: AN OVERVIEW
India Chronicle presents an overview
of the investment trends in India today. |
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In the April - August
period of 2005-06 total FDI jumped to 2302 $ million about 156 percent
rise over the previous year. The Foreign Investment Inflows for the
period April - August 2005-06 stood 6,369 million US$ (Direct investment
+ Portfolio investment. The Economic Times of India (Dec 9th, 2005)
featured the news: India has emerged stronger on the global investment
radar in 2005, overtaking the United States to become the second-most
attractive FDI destination in the world. An annual survey of executives
from the world's largest companies ranked India second only to China
in the FDI attractiveness ranking, scoring 1.951 on a scale of 0-3.
The MNCs, which have invested in India include GE, Dupont, Eli Lily,
Monsanto, Caterpillar, GM, Hewlett Packard, Motorola, Bell Labs, Daimler
Chrysler, Intel, Texas Instruments, |
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Cummins, Microsoft,
IBM, Toyota, Mitsubishi, Samsung, LG, Novartis, Bayer, Nestle, Coca
Cola and McDonalds. FII investments in India touched a record US$9.05bn
(on a net basis) on December 12, 2005. This is higher than the '04
figure of US$8.4bn. Foreign funds have been pouring in huge sums of
money into the Indian market over the past three years. They have
pumped in over US$23bn over the past three years as India is emerging
as a major investment destination for both Asian investors and US.
FIIs bought shares worth US$ 862.94 million in the first quarter (April-June
05) and US$ 3.73 bn worth shares in the second quarter (July-September
2005). A BS Research Bureau study, based on BSE-500 index companies,
shows that FIIs bought 803 million shares in April-September 2005.
Between January 5 and February 14, 2005, FIIs invested more in Indian
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equities than in Korean or Taiwanese equities.
While the Korean market received over US$1 billion, Taiwan had US$947
million, India's share amounted to US$1.1 billion.
Companies that have seen a major jump in FII holding include TASC
Pharma (22.3 per cent ), IFSL (16.3 per cent), Shringar Cinema (14
per cent), S Kumar Nationwide (13.35 per cent), Four Soft (11.9
per cent), Alok Industries (11 per cent) and Sesa Goa (10 per cent).
Bill Gates, Chairman of Microsoft Corp, the world's largest software
company, said that the company will invest US$ 1.7 billion in India
over the next four years to expand its operations.
The IT sector saw phenomenal growth in
FDI in 2005 with $6.5 billion of investment. The total investment
in IT bypassed the India's ITeS exports in 2004 ($5.7 billion) and
was 48.3% of total IT exports.
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Investment
Opportunities and Trends
India Today offers multiple opportunities
for investment. Special incentives and tax-breaks are given for certain
sectors such as power, electronics, telecom, software, hydrocarbons,
R&D and exports. Here are some thrust sectors: -
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Infrastructure
The Government is focusing on expansion and modernization of
roads and has opened this up for private sector participation.
48 new road projects worth US$ 12 billion are under construction.
Development and upgradation of roads will require an investment
of US$ 24 billion till 2008. Private sector participation in
road projects is expected to grow significantly. The Government
has announced ambitious plan to add around 1,00,000 MW of additional
generation capacity by the year 2012. To attract private investment
of such magnitude, Govt. of India had taken various steps to
provide for an adequate administrative & legal framework.
Special incentives and tax-breaks are given for certain sectors
such as power, electronics, telecom, software, hydrocarbons,
R&D and exports.
Railways:
The railway sector will need an investment of US$ 22 billion
for new coaches, tracks, and communications and safety equipment
over the next ten years. A 10 year Corporate Safety Plan of
the Indian Railways envisaging an expenditure of US $ 7.24 bn.
besides development of appropriate technology for higher level
of safety in train operation. Metro Rail Corporation projects
worth US $ 12.84 bn in cities like Delhi, Bangalore, Hyderabad,
Chennai, Ahmedabad and many other cities are on target. The
Union railway minister projected a requirement of Rs 40.92bn
for important railway projects in the North East and Jammu and
Kashmir, mega bridge projects at Bogibeel in Assam, Munger bridge
over Ganga, Patna bridge over Ganga and Kosi bridge as well
as for the Sudoor Gram Sampark Yojana. Upgradation and modernization
of airports will require US$ 33 billion investment in the next
ten years.
Airports:
Airports Authority of India has set a target of investing 1
billion dollars for modernization of airports. There is potential
for investment in the expansion and modernization of ports,
inland navigation and maritime transport. The Government has
taken up the US$ 22 billion 'Sagarmala' project to develop the
Port and Shipping sector under Public-Private Partnership. 100
percent FDI is permitted for construction and maintenance of
ports. The Government is offering |
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incentives to investors.
While the government will take care of 15 per cent of the investment,
the rest will come from the private sector. The investment requirements
in the maritime sector are estimated at US$22 billion.
Power:
The Ministry of Power has formulated a blueprint to provide
reliable, affordable and quality power to all users by 2012.
This calls for investment of US$ 73 billion in the next five
years. Opportunities are there for investment in power generation
and distribution and development of non-conventional energy
sources. There is potential for investment in urban infrastructure
projects. Water supply and sanitation projects alone offer scope
for annual investment of US$ 5.71 billion. The entire gamut
of exploration, production, refining, distribution and retail
marketing in the oil & gas sector presents opportunities
for FDI.
Minerals:
India has an estimated 85 billion tons of mineral reserves remaining
to be exploited. Potential areas for exploration ventures include
gold, diamond, copper, lead, zinc, cobalt, silver, tin etc.
There is also scope for setting up manufacturing units for value
added products.
Telecom Sector:
The telecom market, which is one of the world's largest and
fastest growing, has an investment potential of US$ 20-25 billion
over the next five years. The telecom market turnover is expected
to increase from US$ 10 billion in 2004 to US$ 13 billion by
2007.
Information Technology:
The IT industry and IT-enabled services, which are rapidly growing
offer opportunities for FDI. India has emerged as an important
venue for the services sector including financial accounting,
call centers, and business process outsourcing. There is considerable
potential for growth in these areas. Biotechnology and Bio informatics,
which are on Government's priority list for development, offer
scope for FDI. The industry has crossed $I billion dollar mark,
with a growth rate of 36.55 per cent.
Auto Component Industry:
The Indian Auto component industry, currently estimated at US
$63 billion industry, is expected to "triple" in less
than eight years time |
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to US $17 billion
by 2012.The Indian auto industry with a turnover of US $ 12
billion and the auto parts industry with a turnover of US$ 3
billion offer scope for FDI. The Government is encouraging the
establishment of world-class integrated textile complexes and
processing units.
Food Processing Industry:
In India the Food Processing Industry is relatively nascent
and offers opportunities for FDI. It accounts for Rs 1,280 billion
(US$29.4 billion), in a total estimated market of Rs 3,990 billion
(US$91.66 billion). There is a rapidly increasing demand for
processed food caused by rising urbanization and income levels.
To meet this demand, the investment required is about US$28
billion. Food processing has been declared a priority sector.
The outlay in the Food Processing Sector has been increased
from US$19.5 million in 2004-05 to US$41.35 million the next
year, more than twice the earlier amount. The government is
also considering investing US$22.97 million in at least 10 mega
food parks in the country besides working towards offering 100
per cent foreign direct investment and income tax benefits in
the sector.
Healthcare Industry:
The Healthcare industry is expected to increase in size from
its current US$ 17.2 billion to US$ 40 billion by 2012. Healthcare
spending in the country will double over the next 10 years.
Private healthcare will form a large chunk of this spending,
rising from Rs 690 billion ($14.8 billion) to Rs 1,560 billion
($33.6 billion) in 2012. This figure could rise by an additional
Rs 390 billion ($8.4 billion) if health insurance cover is available
to the rich and the middle class. With the expected increase
in the pharmaceutical market, the total healthcare market could
rise from Rs 1,030 billion ($22.2 billion) currently (5.2 percent
of GDP) to Rs 2,320 billion ($50 billion)-Rs 3,200 billion ($69
billion) (6.2-8.5 percent of GDP) by 2012. The Government has
recently established Special Economic Zones with the purpose
of promoting exports and attracting FDI. These SEZs do not impose
duty on imports of inputs and they enjoy simplified fiscal and
foreign exchange procedures and allow 100 per cent FDI. The
travel and tourism industry, which has grown to a size of US$
32 billion, offers scope for investment in hotels, resorts and
tourism infrastructure. |
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