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10/04/23 1
Invest IndiaInvest India
Policies & OpportunitiesPolicies & Opportunities
Rajeeva Ratna ShahRajeeva Ratna ShahSecretary
Department of Industrial Policy and PromotionMinistry of Commerce & Industry
Government of IndiaNovember 3, 2003, Paris
2
India – Land of Opportunities
Second Largest Emerging Market
Largest democracy –
political stability & consensus on
reforms
Liberal & transparent investment
policies
Highest returns on investment; India
19.33%, China 14.25%, Thailand
13.3%
Fourth largest Economy (PPP) -
A safe place to do business
Largest reservoir of skilled/semi-
skilled manpower
Long-term sustainableCompetitive advantage
- High growth rate economy
10/04/23 3
Strong Macro-Economic Performance
Sustained Economic growth; 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
10/04/23 4
Sustained Economic Growth(Base year: 1993-94 )
7.8
4.8
6.56.1
4.4
5.6
4.4
7
0
1
2
3
4
5
6
7
8
9
1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04Forecast)
GD
P G
row
th R
ate
(%
)
10/04/23 5
Growing Foreign Exchange Reserves
2226
30
91.35
75.43
17
42.2638
54.15
45.35
48.846.6443.642.5
37.235.5
33.5
47.5
0
20
40
60
80
100
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04(as on17/10)
0
7
14
21
28
35
42
49
56
Fore
ign
Exch
an
ge R
eserv
es (
US
$ b
illion
)
Exc
han
ge R
ate
(Rs/
US
$)
10/04/23 6
External Debt / GDP Ratio (%age)
22.2 22.421
20
99-00 00-01 01-02 02-03
India: Average Annual Rate of Inflation (%age)
99-00 00-01 01-02 02-03
India7.4
USA7.2
Brazil6.4
Mexico6.3 Czrch
5.9China4.8
Availability of Skilled Labour
1=L
ow
10=
Hig
h
India
8.4 Brazil
7.5USA7.4 Mexico
6.6Czrch
6.3
China
4.2
Availability of Qualified Engineers
1=L
ow
10=
Hig
hSelect Indicators
10/04/23 7
Economic Liberalization
Fiscal Policy Reforms : Stable tax regime with just 3 rates for both Excise as well as Customs
duties Full National treatment for foreign Cos. incorporated in India
Industrial Policy Reforms : Capacity licensing dispensed with Compulsory licensing only in 6 sectors: restrictions on grounds of
national security, public health, public safety FDI policy being progressively liberalized
Trade policy Reforms : Most items on Open General License, Quantitative Restrictions lifted;
Monetary Policy and Financial Sector Reforms : Interest rates brought down – Bank rate/Prime lending rate lowered Banking Sector reforms – prudential norms stiffened Securatization Act for better security for creditors Competition law enacted. Competition Commission constituted Independent regulators in place for Insurance sector (IRA) and
Capital Markets (SEBI) Exchange Controls relaxed;
Profits and dividends can be freely repatriated;
10/04/23 8
Infrastructure Development
US$ 12 billion Highways Development Programme; 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;
10/04/23 9
Brand India R&D base for 100 of Fortune 500 companies;
GE’s largest R&D Center outside US; Large pool of World class scientific and technical manpower;
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;
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
10/04/23 10
Competitive Entrepreneurship
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)
India amongst the leading entrepreneurial hotbeds globally (Red Herring Clubs India with Israel)
10/04/23 11
The Emerging Market: India Traditional & Emerging Focus
Some MNCs?
LocalFirms
FutureOpportunity?
5-10 million, Rich
PPP>$10,000, 50-60 m
PPP $ 3-10,000, 150m
PPP $ 2-3,000, 150m
PPP>$ 2000, 500m
Traditional MNC Business
Model
© C.K. Prahalad
10/04/23 12
India a Preferred VC Destination in Asia-2001Country 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
Sri Lanka $ 0.0 1Source : AVCJ
10/04/23 13
Investing in India – Entry Routes
Automatic Route Prior Permission
Investing in India
General ruleNo prior permission requiredInform Reserve Bank within 30 days ofinflow/issue of share
By exceptionPrior Government Approval needed.Decision generally Within 4-6 weeks
10/04/23 14
Manufacturing Sectors with 100% FDI under ‘Automatic Route’ 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
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
10/04/23 15
Infrastructure Sectors with 100% FDI Under ‘Automatic Route’
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
10/04/23 16
Services Sector with 100% FDI under Automatic Route 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
10/04/23 17
Sectors with Restrictions on FDI
Sectors with limits on FDI Caps Private Banking ( 49%) Insurance (26%) Domestic Airlines (40%) Basic and mobile services (49%) Print Media (26%) Defence production (26%)
Sectors where FDI is prohibited Gambling, betting, lottery Retail Trade Agriculture Plantation, except tea plantation
10/04/23 18
Country wise FDI inflows (Since July 1991)
Singapore3%
Italy2%
France3%
Netherlands5%
USA17%
Mauritius35%
UK7%
Germany5%
Japan8%
Rep. of Korea3%
Others12%
France ranks 7th
10/04/23 19
Investment from France- Sectors(Since July 1991)
Others18%
Electrical Ind.4%
Fuels17%
Chemicals17%
Cement14%
Glass10%
Food Processing7%
Telecom7%Metallergical Ind
6%
10/04/23 20
Some of the French Companies in India
Lafarge Ciments Francis Saint Gobain Compagnie
International L’Oreal France Peugeot Alcatel Spacecom Vetrotex International GAZ de France Schinder Electric
Air Liquide International
Groupe Danone GDF International Radio Telephone Total SA France Telecom Vantico International Essilor International ELF Gas Alstom
10/04/23 21
Intellectual Property Rights-Initiatives
• Modernization/revamping of legislations on Intellectual Property IP; IPR Laws are TRIPS compliant;
• Intellectual Property Appellate Tribunal functional from 15th September 2003;
Major initiative underway at modernizing IP administration; Computerization of IP administration; Digital database library of patent, trademark
& design records; For more information visit
www.ipindia.nic.in.
10/04/23 22
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
‘FDI In India- Policies and Procedures’ Also available in Spanish, German, French &
Italian. An Empowered Sub-Committee of the
National Development Council set up on ‘Creating an investor-friendly climate;
To focus on removing regulatory barriers to investments.
Web site www.dipp.nic.in On-line chat, bulletin board and e-mail;
10/04/23 23
India: FDI Outlook
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.
10/04/23 24
Investment
Requirement
in Energy & infrastructur
e
up to 2012
LNG Terminals$ 10 bn
Refineries$ 22 bn
Coal $ 26 bn
Transmission & Distribution
$ 116 bn
Oil & Gas$ 100 bn
Cross-Country Pipelines$ 10 bn
Opportunities and Potential Areas of Cooperation
Railways US
$ 15 Billion
Ports
US $ 20 Billion
Power Generation $ 143 bn
Roads$ 40 bn
10/04/23 25
Investment Opportunities Roads:
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; Urban Infrastructure:
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;
10/04/23 26
Investment Opportunities
Ports: Government of India’s initiative of developing
ports – ‘Sagar Mala’ with an investment of US$ 22 billion;
Development of Ports; Shipping;
Power: 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.
10/04/23 27
Investment Opportunities Telecommunications
Cellular phones increasing @ 1.5 million every month; To increase by 20 million this year; by 100 million in the
next 3-4 years; Telephone connections to rise to 75 million by 2005
and 175 million by 2010; Investment Opportunities:
Setting up manufacturing base. Value added services; Food Processing
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.
10/04/23 28
Skilled knowledge workforce
India’s competitive edge is its manpower
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
10/04/23 29
ICT opportunities
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;
62 SEI/CMM level 5 companies, two third of world’s total. 250 Fortune 500 companies clients of Indian firms;
• Opportunities : JV/FDI • 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
10/04/23 30
India - The Backoffice hub
India has become the most preferred destination – Outsourcing trend increasing
GE,TI, Intel, CISCO, Microsoft, Dell, Sun Micro, Oracle, LG, Ford, American Express and other financial sector companies;
Customer needs are being met
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
565930
1495
2400
0
500
1000
1500
2000
2500
3000
1999-2000 2000-01 20001-02 2002-03U
S$
Mil
lio
n
10/04/23 31
Impact*
Insurance
Retail financialservices / Retailbanking
Pharmaceuticals
Telecom
Airlines
Automotive
0.8-1.8
1.5-2.5
5.0-6.5
8.0-12.0**
10.0-15.0
Key opportunity areas 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
Overall cost savingPer cent
1.0-2.040-60% cost saving for processes offshored
Cost savings by off shoring BPO services to India
10/04/23 32
Country Advantage Likely to be Comoditized
Task aggregationAnd process level
improvement
45-55
1530-35
Country advantage(45-55% savings)
Vendor advantage(30-40% savings)
OriginalCostbase
FactorCostSavings
AdditionalTelecom& manage-ment costs
Off-shoreLocationcost
Consoli-ation,Standar-Dization& superiorskills
TaskReengineering
Econo-mies ofscale
ProcessReengine-ering
New costbase
Task migration Task levelimprovement
100 60-65
10-15 8-135-7
3-5
Does notInclude gains fromOver-delivery and
continuousimprovement
10/04/23 33
Joint Venturing opportunities in Biotech
India’s inherent strengths 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 : Joint Ventures in Biotech based new drugs /
pharmaceuticals
10/04/23 34
Global Business Leaders - Bullish On India’s Potential
“India is a developed country as far as intellectual capital is concerned”
“India can be a major part of Dell’s operations and we are looking to capitalize on India’s human capital”
“We are expanding our presence in India to take advantage of the ample R&D talent available”
“India is handling the most sophisticated projects in the world..I am impressed with the quality of work”
JACK WELCH, GE JOHN CHAMBERS, CISCO
MICHAEL DELL, DELL BILL GATES, MICROSOFT
10/04/23 36