Transcript FDI Strategy Paper - Department of Industrial Policy and

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Invest India
Policies & Opportunities
Rajeeva Ratna Shah
Secretary
Department of Industrial Policy and Promotion
Ministry of Commerce & Industry
Government of India
November 3, 2003, Paris
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India – Land of Opportunities
Fourth largest
Economy (PPP) A safe place
to do business
Largest reservoir
of skilled/semiskilled manpower
Long-term sustainable
Competitive advantage
- High growth rate
economy
Largest
democracy –
political stability &
consensus on
reforms
Second Largest
Emerging Market
Liberal &
transparent
investment
policies
Highest returns on
investment; India
19.33%, China
14.25%, Thailand
13.3%
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Strong Macro-Economic Performance
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Sustained Economic growth;
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7% Current Year
8% Next quinqennium / decade
Over 6% - Next 50 Years – Goldman Sachs
Exports growth - over 19 % in 2002-03;
Non Oil imports growing at 31%-Economic vibrancy
Positive balance of trade with USA and China
FII Investment – over US$ 5 billion so far this year
Developed Banking system moving rapidly towards ICT
integrated core banking/net banking
Mature Capital Market – NSE third largest, BSE fifth largest
in terms of number of trades
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Sustained Economic Growth
(Base year: 1993-94 )
9
8
7.8
7
6.5
GDP Growth Rate (%)
7
6.1
5.6
6
4.8
5
4.4
4.4
4
3
2
1
0
1996-97
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1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
Forecast)
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Growing Foreign Exchange Reserves
100
46.64
42.5
80
33.5
35.5
43.6
47.5
75.43
37.2
38
40
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22
26
56
49
45.35
42
35
54.15
60
20
48.8
91.35
28
42.26
21
30
14
7
0
0
1995-96
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1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
(as on
17/10)
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Select Indicators
India: Average Annual Rate of Inflation (%age)
External Debt / GDP Ratio (%age)
22.4
22.2
21
20
00-01
India
8.4
01-02
02-03
1=Low
10= High
00-01
India
7.4
Brazil
7.5
USA
7.4
Mexico
6.6
01-02
USA
7.2
Brazil
6.4
Czrch
6.3
M exico
6.3
02-03
Czrch
5.9
China
4.8
China
4.2
Availability of Qualified Engineers
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99-00
1=Low
10= High
99-00
Availability of Skilled Labour
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Economic Liberalization
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Fiscal Policy Reforms :
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Industrial Policy Reforms :
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Interest rates brought down – Bank rate/Prime lending rate lowered
Banking Sector reforms – prudential norms stiffened
Securatization Act for better security for creditors
Competition law enacted. Competition Commission constituted
Independent regulators in place for Insurance sector (IRA) and Capital Markets
(SEBI)
Exchange Controls relaxed;
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Most items on Open General License, Quantitative Restrictions lifted;
Monetary Policy and Financial Sector Reforms :
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Capacity licensing dispensed with
Compulsory licensing only in 6 sectors: restrictions on grounds of national
security, public health, public safety
FDI policy being progressively liberalized
Trade policy Reforms :
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Stable tax regime with just 3 rates for both Excise as well as Customs duties
Full National treatment for foreign Cos. incorporated in India
Profits and dividends can be freely repatriated;
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Infrastructure Development
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US$ 12 billion Highways Development Programme;
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Over 13,000 Kms of Highways being developed.
US$ 22 billion ‘Sagar Mala’ programme to develop
ports and shipping sector
Modernization of Airports at New Delhi & Mumbai.
World ‘s Fastest growing telecom market with a
unified licensing regime and world class
international and domestic connectivity;
The Electricity Act, 2003 enables captive
generation and trading in electricity;
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Brand India
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R&D base for 100 of Fortune 500 companies;
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Large pool of World class scientific and technical manpower;
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GE’s largest R&D Center outside US;
Indian Institutes of Technology;
Indian Institutes of Management.
S&T policy aims at R&D investments of 2% of GDP by 2007
Among the only three Asian countries with super computing
competence
Strong base for manufacturing;
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Bharat Forge world’s largest forging facility
Most major MNC’s like Volvo,GM,GE, Chrysler, Ford,Toyota, Unilever,
Cliariant, Cummins, Delphi sourcing high quality components and
hardware from India
Essel Propack worlds largest manufacturer of laminated tubes(30% of
global market/70% Indian,Chinese market).
Hyundai Motors India – Global base for manufacturing small cars;
Indica(100% indigenous car) being exported to Europe as Rover City.
India exporting steel worth more than US$1 billion to China
Hero Honda world’s largest manufacturer of motorbikes
Precision Automation & Robotics India (PARI) - 20 Fortune 500 clients
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Competitive Entrepreneurship
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Prevalence of foreign technology licensing – Rank 1
Availability of scientist and engineers –
Rank 2
Quality of management schools –
Rank 9
Firm level innovation –
Rank 12
Firm level technology absorption –
Rank 16
Company spending on R&D Rank 32
(Source Global Competitiveness Report, UNCTAD 2003)
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India amongst the leading entrepreneurial hotbeds globally
(Red Herring Clubs India with Israel)
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The Emerging Market: India Traditional &
Emerging Focus
Traditional MNC
Business
Model
Some MNCs?
Local
Firms
Future
Opportunity?
5-10 million, Rich
PPP>$10,000, 50-60 m
PPP $ 3-10,000, 150m
PPP $ 2-3,000, 150m
PPP>$ 2000, 500m
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© C.K. Prahalad
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India a Preferred VC Destination in Asia-2001
Country
Amt. Invested ($min)
No. of Companies
Australia
$ 1,228.8
213
South Korea
$ 1,228.1
169
India
$ 907.6
101
China
$ 628.0
23
Hong Kong
$ 247.5
33
Taiwan
$ 235.7
18
Singapore
$ 186.2
38
Malaysia
$ 65.1
11
Thailand
$ 35.7
10
New Zealand
$ 30.9
17
Indonesia
$ 20.0
3
Philippines
$ 4.8
3
$ 0.0
1
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Sri Lanka
Source : AVCJ
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Investing in India – Entry Routes
Investing in India
Automatic Route
General rule
No prior permission
required
Inform Reserve Bank
within 30 days of
inflow/issue of share
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Prior Permission
By exception
Prior Government
Approval needed.
Decision generally
Within 4-6 weeks
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Manufacturing Sectors with 100% FDI
under ‘Automatic Route’
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Cars and motor vehicles
Refrigerator and fire fighting
equipments
Food processing
Electronic Hardware
Iron and steel
Private Oil Refineries
Agriculture tools and
implements
Fertilizers and pesticides
Pollution control equipments
Tyres and tubes
Packaging products
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Construction Machinery
Domestic air conditioners
Electric motors, industrial
electric furnaces
Mining and Querying
Machinery
Steam engines and turbines
Non-metallic mineral products
Rice, oil mill machinery
Chemical machinery
Drugs and pharmaceuticals
except those requiring
industrial licensing
Medical equipments
Office computing and
accounting machinery
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Infrastructure Sectors with 100% FDI
Under ‘Automatic Route’
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Electricity Generation (except Atomic energy)
Electricity Transmission
Electricity Distribution
Mass Rapid Transport System
Roads and Highways
Toll Roads
Vehicular Bridges
Ports and Harbors
Hotel and tourism
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Services Sector with 100% FDI under
Automatic Route
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Advertising and films
Computer related services
Research and development services
Construction and related engineering services
Pollution control and Management services
Urban Planning and Landscape services
Architectural services
Health related and social services
Travel related services
Road transport services
Maritime transport services
Internal waterways transport services
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Sectors with Restrictions on FDI
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Sectors with limits on FDI Caps
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Sectors where FDI is prohibited
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Private Banking ( 49%)
Insurance (26%)
Domestic Airlines (40%)
Basic and mobile services (49%)
Print Media (26%)
Defence production (26%)
Gambling, betting, lottery
Retail Trade
Agriculture Plantation, except tea plantation
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Country wise FDI inflows
(Since July 1991)
France ranks 7th
Italy
2%
USA
17%
Mauritius
35%
Singapore
3%
France
3%
Netherlands
5%
Others
12% Rep. of Korea
3%
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Japan
8%
Germany
5%
UK
7%
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Investment from France- Sectors
(Since July 1991)
Fuels
17%
Chemicals
17%
Cement
14%
Others
18%
Electrical Ind.
4%
Metallergical Ind
6%
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Telecom
Food Processing
7%
7%
Glass
10%
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Some of the French Companies in India
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Lafarge
Ciments Francis
Saint Gobain
Compagnie International
L’Oreal France
Peugeot
Alcatel Spacecom
Vetrotex International
GAZ de France
Schinder Electric
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Air Liquide International
Groupe Danone
GDF International
Radio Telephone
Total SA
France Telecom
Vantico International
Essilor International
ELF Gas
Alstom
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Intellectual Property Rights-Initiatives
• Modernization/revamping of legislations on
Intellectual Property IP;
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IPR Laws are TRIPS compliant;
• Intellectual Property Appellate Tribunal
functional from 15th September 2003;
 Major initiative underway at modernizing IP
administration;
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Computerization of IP administration;
Digital database library of patent, trademark &
design records;
For more information visit www.ipindia.nic.in.
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Investment Facilitation
 Foreign Investment Implementation Authority
(FIIA) - to sort out any operational difficulty and
facilitate implementation;
 Last meeting with French investors on 6.10.2003
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‘FDI In India- Policies and Procedures’
 Also available in Spanish, German, French & Italian.
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An Empowered Sub-Committee of the National
Development Council set up on ‘Creating an
investor-friendly climate;
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To focus on removing regulatory barriers to investments.
Web site www.dipp.nic.in
 On-line chat, bulletin board and e-mail;
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India: FDI Outlook
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Rated as the best BPO destination; AT KEARNEY
Best technology licensing regime - UNCTAD’s Global
Competitiveness Report, 2003;
Rated among the most favourite investment
destinations (UNCTAD, JETRO, JBIC, Deutsche Bank,
EIU, etc.)
Major destination for foreign venture capital funds
(Far Eastern Economic Review)
Sixth most attractive investment destination –
ATKEARNEY Business Confidence Index, 2003
Also among the top 10 Tourist Destinations.
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Opportunities and Potential Areas of Cooperation
Power Generation
$ 143 bn
Coal
$ 26 bn
Cross-Country
Pipelines
$ 10 bn
Ports
US $ 20 Billion
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Roads
$ 40 bn
Investment
Requirement
in Energy &
infrastructure
up to 2012
LNG Terminals
$ 10 bn
Transmission &
Distribution
$ 116 bn
Refineries
$ 22 bn
Oil & Gas
$ 100 bn
Railways US
$ 15 Billion
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Investment Opportunities
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Roads:
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Urban Infrastructure:
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Capacity enhancement of highways;
7000 kms of National Highways being offered during
the current year;
Many more opportunities in the States;
Opportunities for equipment manufacturers;
technical support;
Development of townships for the rapidly growing,
increasingly affluent urban middle class;
City level infrastructure; roads, bridges, IT Parks,
sanitation and water supply etc.
Consultancy in urban planning;
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Investment Opportunities
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Ports:
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Power:
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Government of India’s initiative of developing ports
– ‘Sagar Mala’ with an investment of US$ 22 billion;
 Development of Ports;
 Shipping;
Addition of 100,000 MW required over the next 10
years;
 Installed capacity 106,000 MW;
Hydro-electric initiative to develop 50,000 MW;
 Detailed project reports being prepared to
facilitate private investment.
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Investment Opportunities
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Telecommunications
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Cellular phones increasing @ 1.5 million every month;
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Telephone connections to rise to 75 million by 2005 and 175
million by 2010;
Investment Opportunities:
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Setting up manufacturing base. Value added services;
Food Processing
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To increase by 20 million this year; by 100 million in the next 34 years;
Large production of variety of food products;
Investment of US$ 28 billion required to raise food
processing levels by 8-10 %.
Indian’s spend about 50% of household expenditure on food
items.
Demand for processed food rising with growing urbanisation
and income levels.
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Skilled knowledge workforce
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India’s competitive edge is its
manpower
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Over 380 universities (11200
colleges)
1500 research institutions
Over 200,000 engineering graduates
Over 300,000 post graduates from
non-engineering colleges
2,100,000 other graduates
Around 9,000 PhDs
Knowledge workers in software and
service industry increased from
6,800 in 1985-86 to 650,000 in
2003
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ICT opportunities
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India’s inherent strengths
IT Industry US $ 14 billion; growing at 50% p.a.
 Exports US $ 10 billion
 2008 exports target : US $ 60 billion , to be 35% of India’s total
exports;
Job creation: a million direct & 2-3 Million indirect;
High quality standards;
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62 SEI/CMM level 5 companies, two third of world’s total.
250 Fortune 500 companies clients of Indian firms;
• Opportunities : JV/FDI
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Multi purpose smart cards with PKI protection
Health informatics and telemedicine network
Setting up a deep submicron fab facility
Collaborative ICT research in language technologies / next generation
communication / Internet technologies
• Joint Software development in super computing applications in fluid
dynamics, structural mechanics, bioinformatics, nanoinformatics, etc
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India - The Backoffice hub
India has become the most
preferred destination –
Outsourcing trend increasing
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Customer needs are being met
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GE,TI, Intel, CISCO, Microsoft, Dell,
Sun Micro, Oracle, LG, Ford, American
Express and other financial sector
companies;
Large pool of skilled English speaking
workforce – skills and scalability,
24x7 support
Productivity and quality enhancement
Conducive policy environment and
Government support
Highly improved telecom
infrastructure
Call center career is aspirational
unlike a low choice in the West
Indian ITES-BPO Industry
3000
2400
2500
US$ Million
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2000
1495
1500
1000
930
565
500
0
1999-2000
2000-01
20001-02
2002-03
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Cost savings by off shoring BPO services to
India
Key opportunity areas
Impact*
Overall cost saving
Per cent
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Insurance
10.0-15.0
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Retail financial
services / Retail
banking
Pharmaceuticals
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8.0-12.0**
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5.0-6.5
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Telecom
1.5-2.5
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Automotive
Airlines
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1.0-2.0
0.8-1.8
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40-60% cost
saving for
processes
offshored
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Claims processing
Servicing
Call centre operations
Call centre operations
Loan processing
(consumer, corporate,
mortgage)
Research and
development
Call centre operations
Billing
Engineering and
design
Accounts payable/
receivable
Revenue accounting
Call centre operations
Frequent flyer
programmes
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Country Advantage Likely to be Comoditized
Country advantage
(45-55% savings)
100
60-65
10-15
Original
Cost
base
Factor
Cost
Savings
Additional
Telecom
& management costs
Task migration
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Vendor advantage
(30-40% savings)
45-55
Off-shore
Location
cost
8-13
5-7
ConsoliTask
ation,
Reengi
Standar- neering
Dization
& superior
skills
Task level
improvement
Does not
Include gains from
Over-delivery and
continuous
improvement
3-5
Economies of
scale
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Process
Reengine
-ering
30-35
New cost
base
Task aggregation
And process level
improvement
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Joint Venturing opportunities in Biotech
India’s inherent strengths
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Rich Biodiversity
Large reservoirs of valuable diagnostic and clinical data
Vibrant and inventive pharmaceutical industry
World class network of educational and research institutions
Known strengths in mathematics, logic and computational skills
Super Computing and Software strengths enable extensive use
of bio-informatics in new drug discovery
Opportunities :
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Joint Ventures in Biotech based new drugs / pharmaceuticals
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Global Business Leaders - Bullish On India’s Potential
“India is a developed
country as far as
intellectual capital is
concerned”
JACK WELCH, GE
“India can be a major
part of Dell’s operations
and we are looking to
capitalize on India’s
human capital”
MICHAEL DELL, DELL
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“We are expanding
our presence in India
to take advantage of
the ample R&D talent
available”
JOHN CHAMBERS, CISCO
“India is handling the
most sophisticated
projects in the world..I
am impressed with the
quality of work”
BILL GATES, MICROSOFT
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Thank You
Visit us at www.dipp.nic.in
E-mail at [email protected]
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