Transcript FDI Strategy Paper

Investment Opportunities in
India
New Delhi
Sept. 27, 2005
7/17/2015
1
Indian Economy – An Overview
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Economic Growth
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Sustained economic performance
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Exports growth 24% in 2004-05 reaching US$80 billion
Imports growth 35% reaching US$106 billion
Foreign Investment - US$16 billion in 2003-04
Mature Capital Markets
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Services account for over 50% of GDP
Manufacturing sector grew at 9% in 2004-05
Investment
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6.2%
6.9%
5 % p.a.
Trade (2004-05)
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Average since 1991
2004-05
Forecast till 2050 –Goldman Sachs
NSE third largest, BSE fifth largest in terms of number of
trades
Well developed banking system
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2
Fiscal Reforms
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Rationalisation of tax structure – both direct
and indirect
Progressive reduction in peak rates of
duties;
Direct and indirect taxes further reduced this
year
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Peak Custom duty reduced to 15%
Corporate Tax reduced to 30%
Tariff to be aligned with ASEAN levels
Value Added Tax introduced from 1st April
2005
Rupee made fully convertible on trade
account
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India among the
top reformers in
2003: World
Bank’s Doing
Business in 2005
3
‘Made in India’
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Third most attractive destination for manufacturing
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Indian industry equally competitive in a wide range of
manufacturing skill-intensive products:
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Apparels, electrical and electronics components;
speciality chemicals; pharmaceuticals; etc.
Automotive components: Major MNC’s & their OEMs
sourcing high-quality components from India
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ATKearney’s FDI Confidence Index 2004
Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever,
Cliariant, Cummins, Delphi
Indian companies now having manufacturing presence
in multiple countries
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Over 55% of approved outward investment by India
companies in manufacturing activities
4
Human Resources
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India’s competitive edge - its highly-skilled manpower
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Knowledge workers in software industry increased from
56,000 in 1990-91 to 650,000 in 2003;
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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
to reach 2 million by 2008
Due to its young demographic profile, India would
continue to be surplus in working population for a longtime
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5
Competitive Strengths
Rank out of 102 countries
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Availability of scientist and engineers
Quality of management schools
State of cluster development
Quality of scientific research institutions
Government intervention in corporate investment
Quality of educational system
Sophistication of financial markets
Foreign ownership restrictions
3
8
17
20
34
36
37
41
(Source: World Economic Forum’s ‘Global Competitiveness Report, 2003-04’)
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6
Investing in India – Entry Routes
Investing in India
Automatic Route
General rule
By exception
Only information to the
Reserve Bank of India
within 30 days of inflow/
Issue of shares
Decision generally
Within 4-6 weeks
No prior permission
required
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Prior Permission
(FIPB)
Prior Government
Approval needed
7
Policy on FDI
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FDI up to 100% is allowed under the ‘Automatic
Route’ in all activities except:
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Sectors attracting compulsory licensing
Transfer of shares to non-residents under certain
circumstances
Investor having existing venture in same field
Equity/route limit in few sectors under sectoral
policies
Investment made receive National Treatment
Bilateral Investment Promotion and Protection
Agreement with 57 countries
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National and Most Favored Nation Treatment to
investment; Investment protection features
8
100% FDI Under ‘Automatic Route’
Infrastructure Sector
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Electricity generation (except atomic
energy)
Electricity transmission & distribution
Mass Rapid Transport System
Roads and Highways
Toll Roads & Vehicular bridges
Ports and Harbors
Hotel and tourism
Townships, housing, built up
infrastructure and construction
development
Manufacturing Activities
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Services Sector
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All manufacturing activities except
defence items
items reserved for small-scale
sector
Health, education, Research &
Development services
Tourism services;
Consultancy services
Construction & design services.
9
Recent Policy Initiatives
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FDI up to 100% allowed under the automatic route
for development of townships, housing, built up
infrastructure and construction development
projects
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FDI in domestic airlines increased to 49% and
allowed under automatic route
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Fresh guidelines for investment with previous joint
ventures in same field issued
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Transfer of shares from residents shareholders put
on automatic route
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India: FDI Outlook
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Third most attractive investment destination –
AT Kearney’s FDI Confidence Index, 2004
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Among the top 3 investment ‘hot spots’ for
the next 4 years
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Second most attractive destination for manufacturing and
telecommunication services
UNCTAD & Corporate Location – April 2004
Most Preferred Off shoring destination - AT
Kearney’s 2004 Offshore Location Attractiveness
Index
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11
Civil Aviation
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Investment Policy
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In the airports, FDI up to 100% permitted
In domestic airlines, FDI up to 49% permitted
subject to no direct or indirect equity participation
by foreign airlines
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100% investment by NRIs
Investment Opportunities
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Modernisation of International airports at Delhi,
Mumbai, Chennai and Kolkata
Modernisation of non -metro airports
Private sector participation is allowed in support
services and aircraft manufacture
12
Civil Aviation
Project on Offer
Development of Metro and non Metro Air ports
1. Modernisation of Chennai Airport
US $ 444 million
2. Modernisation of Kolkatta Airport
US $ 177 million
3. Modernisation of Delhi Airport
US $ 666 million
4. Modernisation of Mumbai Airport
US $ 555 million
5. Development of 25 non Metro Airports
US $ 888 million
6. Development of Greenfield Airport at Goa
US $ 340million
7. Development of Greenfield Airport at Pune
US $ 340 million
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Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987
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Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987
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Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987
Civil Aviation
Airports – Traffic Projections
Passenger
• By 2010: 90-100 million (59 million domestic passengers & 35
million intl. Passengers)
Cargo
• By 2010: 3360 thousand tonnes Airports – Traffic Projections
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Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987
Special Economic Zones
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Policy
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Duty free zones, deemed foreign
territories
FDI up to 100% permitted in
almost all manufacturing activities
Transfer of goods from DTA to
SEZ treated as exports,
Units to be net foreign exchange
earner within 5 years. No export
commitments
No limits on DTA sales
Can be set up in the public,
private or joint sector
Single Window Clearance System
New Law
on SEZ
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Incentives
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For developer: Income tax
exemption for a block of 10 years
in 15 years
For units: 100% Income Tax
exemption for first 5 years, 50%
for next 5 years and 50% of the
ploughed back export profits for
next 5 years
Exemption from indirect taxes;
excise, sales, services tax, etc.
Freedom to raise ECB with out
any maturity restrictions
17
Thank You
Visit at: www.dipp.nic.in
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Telecommunications
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60
Among the fastest growing telecom markets
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6
50
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Cellular phones increasing by 2 million every month
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No. in million
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40
19.5
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30
48.7
20
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5
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10.5
2.4
5.5
1.5 3.1
1.6
2000
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2001
2002 2003
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2004
20 million broadband subscribers by 2010
Investment Opportunities
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To reach 200 million in 3 years
Lowest mobile tariff in the world
Share of privet sector 46%; expected to cross 50%
by year end
Tele-density of 9, expected to be 20 in next three
years
New Broad Band Policy envisages:
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17.7
28.2
0
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550,000 km of optical fibre cable laid
Setting up manufacturing facilities;
Supply of hand sets and equipments
Telecom & Value added service.
2005
(up to
April)
19
Roads
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Policy:
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FDI up to 100% is permitted for construction and
maintenance of roads, highways, vehicular bridges, toll
roads, vehicular tunnels.
Ten year tax holiday for road and highway projects;
Investment Opportunities
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India has a road network of 3.3 million kilometers
18,000 km of highways being developed under National
Highway Development Programme;
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Investment US$20 billion envisaged
Projects for 10,000 km would be on offer
Major programmes being taken up
Many more opportunities in the States;
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Ports
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Policy & Incentives
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Public-private partnership
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FDI up to 100% permitted for construction and
maintenance of ports and harbours.
Ten year tax holiday
12 major ports, 185 minor ports
12 private/ captive projects with investment of
US$ 600 million completed
24 projects with investment of US$1.6 billion
under implementation/award
Investment requirement of US$22 billion to
develop maritime sector
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Ports & Shipping
Inland waterways
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Tourism
Investment Policy
•
FDI up to 100% is allowed under the automatic route in townships, housing,
built-up infrastructure and construction development projects including
housing, commercial, premises, hotels, resorts, hospitals, educational
institutions, recreational facilities etc.
Projects on Offer
•
International Trade cum Convention Centre , Jaipur
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Development of Tijara Fort, Alwar
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Private sector would require to restore the Fort and develop interior & surroundings
of the fort, would be provided for long term lease
Estimated cost Us $ 5.5 million
Time frame for implementation 18 months
Championship Golf Course, Udaipur, Jodhpur or Jaipur
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Offered to private sector for designing, finance, construct, operate and maintain the
facility
Estimated cost Us $ 22 million
Time frame for implementation 18 months
Land would be acquired and offered on long term lease
Estimated cost Us $ 5.5 million excluding land cost
Time frame for implementation 18 months
International Convention Centre , Bangalore
Karnataka Govt would acquire the land for investors
 Facilities to be provided in convention Centre : Exhibition space of 50000 sq Mt, food
court, Conference Hall & suites, Convention Centre, shopping malls, health club, golf
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Contact person: Mr. Amitabh
course, % & 7 star hotels, handicraft village, multiplexes etc.
Kant, Joint Secretary, Ministry
 Estimated cost Us $ 111 million
of Tourism,
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Urban Infrastructure
FDI Policy
 FDI upto 100% is allowed in townships, housing, built-up
infrastructure and construction development projects
Opportunities
 Us$ 26 billion proposed to be invested in next 5 years in
urban infrastructure in 60 cities as a part of National
Urban Renewal Mission
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The Mission covers physical infrastructure such as water,
lighting, sanitation, energy & housing.
 CII
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Petroleum Refining
Status
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Total 18 refineries with production of 116 million tonnes (April- Feb.
2004-05) in terms of crude through put.
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by the year 2006-07 demand is expected to increase to 155 million tonnes
per annum.
FDI Policy
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FDI is permitted up to 100% under automatic route in private sector
Indian companies
Investment opportunities
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Additional refining capacity of about 110 million tonnes per annum
excluding EOUs is planned for implementation by the end of tenth
plan( 2002-07)
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Investment requirement of over US $ 22 billion.
Opportunity for the transfer of technologies for upgrading the bottom
of the barrel and to meet the predominant demand for middle
distillates and also to improve the quality of petroleum products to
make them environment-friendly and globally competitive.
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Banking Sector
Status
 No of Scheduled Banks: 362( As on March 2003) *
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Indian Private Sector Banks: 30 (market share: 10%)
Foreign Banks: 36 (market share: 12%)
FDI Policy
 FDI up to 74% from all sources under automatic route is
permitted in Private Sector Banks subject to conformity of
guidelines issued by RBI
 Foreign Bank can also establish as branch or Wholly owned
subsidiary
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* Source: Indian bank Association
http://www.indianbanksassociation.org/home/
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Textiles
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Indian textiles sector:
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Turnover US$37 billion;
Exports US$13 billion;
Investments of US$11 billion in the last five years;
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India is 2nd largest producer of cloth and 3rd largest
producer of cotton yarn;
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Textiles sector has the potential to reach US$85
billion by 2010
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Exports can reach US$50 billion
Garments to account for 50% of exports;
Investment required US$30 billion
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Pharmaceuticals
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Indian Pharmaceutical : A US $ 4 billion industry (retail sales)
Exports: US $ 3.18 billion (2003-2004)
The country ranks 4th worldwide accounting for 8% of world’s production by
volume and 1.5% by value.
Opportunities
 Due to rising costs of R&D overseas, greater tendency towards outsourcing
and networking.
 Increasing competence in molecular biology, immunology and biotechnology
 Potential for clinical research and initiating clinical trials
 An efficient and cost effective source for procuring generic drugs especially
the drugs going off patent in the next few years.
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Biotechnology
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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Biotech based new drugs / pharmaceuticals
Bio-technology parks get all facilities of 100% EOU
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Food Processing
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Third largest producer of food items
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Opportunities in food processing sector
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Largest milk producer
Largest livestock population;
2nd largest in fruits & vegetables
50% of household income spent on food items
With increasing income levels and urbanisation fast
growth in demand of processed food expected; over
250 million strong middle class
Low levels of value addition in food sector: only 7%
New Integrated Food Law being enacted
Investment of US$ 28 billion required to raise food
processing from 2% to 8-10%.
Investment opportunities in
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Processing of fruit & vegetable, meat, fish & poultry,
milk products, packaged food & drinks.
Establishing infrastructure, cold chain, etc.
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Power
Projects on offer
 Bairabi dam Hydro Electric project (80mw) –Mizoram
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Athirapilly Hydro Electric project (160 MW) Kerala
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Ministry of environment and forests has granted environment
clearance to the project.
CEA has issued techno economic clearance of the project
Ministry of environment and forests has granted environment
clearance to the project.
Techno economic clearance of the project has been accorded
Matnar Hydro Electric Project (60 MW) Chhattisgarh
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Environment and forest clearances are yet to be obtained.
Techno economic clearance of the project has be accorded
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Contact person: Mr. Dev Dutt, Under Secretary, Ministry of Power,
TeL; 23715507
Power
Projects on offer
Private
Sector Hydro Electric
Projects
•Dhamwari Sunda (70 MW) Himachal Pradesh
by M/s Dhamwari Power Company Ltd
economic clearance of the project has been
accorded
•Alliain Duhangan (192 MW), Himachal
Pradesh , by M/s A.D. Hydro Power Ltd
•Karcham Wangtoo (100 MW) Himachal
Pradesh by Karcham Hydro Corporation Ltd.
•Srinagar (330 MW), Uttaranchal by M/s
Alaknanda hydro Power Co. Ltd.
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Contact person: Mr. Dev Dutt, Under Secretary, Ministry of Power,
TeL; 23715507