India and the Indians have undergone a paradigm
shift. There have been fundamental and irreversible changes in the economy,
government policies, outlook of business and industry, and in the mindset of the
Indians in general.
- From a shortage economy of food and
foreign exchange, India has now become a surplus one.
- From an agro based economy it has emerged
as a service oriented one.
From the low-growth of the past, the economy has
become a high-growth one in the long-term.
- After having been an aid recipient, India
is now joining the aid givers club.
- Although India was late and slow in
modernization of industry in general in the past, it is now a front-runner in
the emerging Knowledge based New Economy.
- The Government is continuing its reform
and liberalization not out of compulsion but out of conviction.
- Indian companies are no longer afraid of
Multinational Companies. They have become globally competitive and some of them
have started becoming MNCs themselves.
- Fatalism and contentment of the Indian
mindset have given way to optimism and ambition.
- Introvert and defensive approach have been
replaced by outward-looking and confident attitude.
- In place of denial and sacrifice, the
Indian value system has started recognizing seeking of satisfaction and
- The Indian culture, which looked down upon
wealth as a sin and believed in simple living and high thinking, has started
recognizing prosperity and success as acceptable and necessary goals.
- Graduates no longer queue up for safe
government jobs. They prefer and enjoy the challenges and risks of becoming
entrepreneurs and global players.
Goldman Sachs Report of 1 October, 2003
"Dreaming with BRICs: The path to 2050" says the following about the future of
- India's GDP will reach $ 1 trillion by
2011, $ 2 trillion by 2020, $ 3 trillion by 2025, $ 6 trillion by 2032, $ 10
trillion by 2038, and $ 27 trillion by 2050, becoming the third largest economy
after USA and China.
- In terms of GDP, India will overtake Italy
by the year 2016, France by 2019, UK by 2022, Germany by 2023,and Japan by 2032.
Chinese GDP could overtake Germany by 2007, Japan by 2016, and the US by
- Among the BRIC group India alone has the
potential to show the highest growth (over 5 percent) over the next 50 years.
The Chinese growth rate is likely to reduce to 5% by 2020, 4% by 2029, and 3% by
Stable country and
- Largest democracy with stable, mature,
vibrant and exemplary democratic governance and institutions.
- Strong and transparent legal and
- Primacy of rule of law and independent
- Numerous watchful and proactive
- Free, vocal, alert and quality media. 5600
dailies with a combined circulation of 60 million, nearly 15000 weeklies and
20000 periodicals in 21 languages.
- Legal protection for intellectual property
- Large and growing market of 1 billion
people of which 300 million are middle class consumers.
- India offers a vibrant market of youth and
vigor with 54% of population below 25 years of age. These young people will work
harder, earn more and demand more from the market and thereby sustaining growth
in the long-term.
- Every month, there is an addition of one
million cell phone subscribers. By December 2005, the total number is expected
to reach 100 million from 29 million in December, 2003.
- The domestic demand is expected to double
over the ten-year period from 1998 to 2007. The number of households with "high
income" is expected to increase by 60% in the next four years to 44 million
- PC sales in 2003-04 is expected to reach 3
million units from 2.3 million in the previous year.
- The fundamentals of the Indian economy
have become strong and sustainable. The macro-economic indicators are at present
the best in the history of independent India with high growth, foreign exchange
reserves, and foreign investment and robust increase in exports and low
inflation and interest rates.
- India is the second fastest growing
economy of the world at present.
- The GDP growth in 2003-04 is estimated to
be around 7%. The growth rate in the second quarter July-Sept.2003 reached 8.4%.
India has recorded one of the highest growth rates in the 1990s. The target of
the 10th Five Year Plan (2002-07) is 8%. While the agricultural and industrial
sectors have continued to grow, the services sector has grown at a significantly
higher pace, and is currently contributing to nearly half of the total GDP.
India's services sector growth of 7.9% over the period 1990-2001 is the second
highest in the world.
- A unique feature of the transition of the
Indian economy has been high growth with stability. The Indian economy has
proved its strength and resilience when there have been crises in other parts of
the world including in Asia in recent years.
- The foreign exchange reserves have reached
a record level of US$ 100 billion as on 22nd December 2003. India is the sixth
largest foreign exchange holder in the world. This is remarkable considering the
fact that the Forex reserves went under US$ one billion in 1991 before the
economic reforms started. This comfortable situation has facilitated further
relaxation of foreign exchange restrictions and a gradual move towards greater
capital account convertibility.
- Given the large foreign exchange reserves,
the Government has made premature repayment of US$ 3 billion of 'high-cost'
loans to World Bank and Asian Development Bank and is considering further
premature payment of other loans.
- The Government has decided to (i)
discontinue receiving aid from other countries except the following five: Japan,
UK, Germany, USA, EU, and the Russian Federation and (ii) to make pre-payment of
all bilateral debt owed to all the countries except the five mentioned
- Since July this year, India has become a
net creditor to IMF, after having been a borrower in the past.
- The Government has written off debts of 30
million US dollars due from seven heavily indebted countries as part of the
"India Development Initiative" announced in this year's budget speech.
- The external debt to GDP ratio has
improved significantly from 38.7% in 1992 to 20% in 2003. This is one of the
lowest among developing economies. External debt in September, 2003 was 112.5
billion US dollarges. Of this long-term NRI deposits is $ 27 billion, commercial
borrowings $ 24 billion, multilateral debt $ 31 billion, and bilateral debt $ 18
- The interest rate continues to be reduced
and is around 6%. This is the lowest in the last thirty years and this is
stimulating consumption and investment.
- After reaching an all-time low of Rs.49.06
per US dollar in May, 2002, the rupee has strengthened against the dollar
reaching a rate of US$ 1 = Rs.45.5 in December 2003.
The inflation rate has been contained to 3.4%
in 2002-03 and is likely to be 4% in 2003-04.
For more information: www.finmin.nic.in
- One of the world's largest food producers
(600 million tones).
- World's largest producer of milk,
sugarcane and tea.
- Second largest exporter of rice, wheat,
fruits, and vegetables. India produces 30 million tones of fruits and 59 million
tones of vegetables.
- Food grain production expected to reach
220 million tons in 2003-4. The buffer stock of food grains has reached a record
volume of 59 million tones in December, 2001 and stood at 25 million tones in
- Diversified and large industrial base,
which is becoming globally competitive. Examples, Tata Steel and NALCO are the
lowest cost manufacturers of steel and aluminium in the world. Moser Baer is one
of the top three manufacturers of CD Roms in the world. Bharat Forge is one of
the leading suppliers to auto giants, such as Ford, General Motors, and
- India's Hero Honda is the world's largest
motorcycle manufacturer with 2002 production of 1.7 million units.
- The Indian companies have drawn up
ambitious plans for expanding and diversifying their manufacturing activities
with about 12 billion dollars in the next three years. Most of the companies
have been able to generate the funds from their own operations. The areas whose
output is being scaled up are automobiles, auto parts, metals, chemicals,
pharmaceuticals and electronics.
- The pharma industry's turnover is expected
to increase to US$ 12 billion by 2008 from US$ 6.3 billion in 2002.
- The pharma industry of India has become a
knowledge-based one and has gained global recognition as a producer of low cost
high quality bulk drugs and formulations. Their turnover is expected to increase
from US $ 6.3 billion in 2002 to US $ 12 billion by 2008. Some of the Indian
companies have gone global with presence in 60 countries, including USA, Europe
and China. India is one of the top ten producers of bulk drugs in the world and
60% of India's bulk drugs production is exported. India has the highest number
of annual bulk drugs filings (77) with USFDA. India is home to the largest
number of pharma plants (61) approved by USFDA outside US.
- The chemical industry is becoming
competitive and has very high growth potential for production for local market
as well as exports. Bayer AG, the German chemical and pharmaceutical company has
identified India as the outsourcing hub for basic and specialty
- There are 150 biotechnology companies
whose business is growing exponentially.
- The auto parts industry has emerged as one
of the country's fastest-growing manufacturing sectors and a globally
competitive one with a turnover of US$ 5.1 billion in 2002. This is expected to
reach US$ 6.5 billion in 2005. 'Bharat Forge' of India is the world's largest
manufacturer of front axles for trucks. India has emerged as an outsourcing
center for auto parts. Visteon and Dellphi, the world's largest component
manufacturers have entered India for production. Toyota is opening a
transmission parts unit in India. Volvo and GM have set up purchasing offices. A
rising share of Indian auto parts exports goes to original equipment
- Tata Motors have developed cars based on
indigenous design and 100 per cent of Indian parts and have established
themselves as one of the leaders in Indian automobile industry. It is creditable
that they have got a four-year contract for supply of 100,000 cars to UK under
the brand "City Rover". Tata is opening a manufacturing plant in Germany for
supply of auto parts to Ford.
- Hyundai has made India as the hub for
their worldwide exports of small cars.
- India's Hero Honda is the world's largest
motorcycle manufacturer with 2002 production of 1.7 million units.
- India is the second largest cement
producer in the world with 110 million tons.
- India is the world's premier center for
diamond cutting and polishing. Nine out of every 10 stones old in the world pass
- India has a large entertainment industry
which produces 800 movies per year overshadowing Hollywood. The turnover is
expected to reach US$6.7 Billion in 2005 from US$5.7 billion in
The number of foreign tourists who visited
India in 2003 was 2.75 million. The foreign exchange earnings from tourism
reached US$ 3.7 billion.
IT and related
- Vibrant capital market comprising 23 stock
exchanges with over 9000 listed companies. Bombay Stock Exchange is the second
largest after NYSE. Stock market trading and settlement system are of world
class. Indian stock market considered as having the greatest long-term potential
- Sound banking system with a network of
70,000 branches, among the largest in the world. Bank deposit is roughly half of
GDP - among the highest in the world.
- According to Credit Lyonnais (CLSA), India
is the stock market with the greatest short-term and long-term potential in
- Market capitalization of stocks traded on
the Indian bourses touched an all-time high of US$ 270 billion. Of this, the
holding by promoters is about fifty per cent. The number of companies with a
market capitalization of over US$1 billion is 48. Of these, 24 companies have
reached market caps of US$ 2 billion in 2003.
- India is the best performing market among
major countries since the current boom started in May 2003.
- BSE Sensex increased by 70% from January
to December 2003 and it is widely expected to repeat this performance in
- India has the third largest investor base
in the world.
- India's stock market trading and
settlement systems are world class.
- There are 70,000 bank branches in India -
among the highest in the world.
- There are 186 branches of foreign banks
operating in India.
- India has emerged as a global player in
Information Technology with software exports of 9.8 billion US Dollars in
2002-03. The revenue from exports of IT and related services is expected to
reach US$ 57 billion by 2008, according to a Me Kinsey report.
- Of the Fortune 5000 companies 220
outsource their software from India.
- 80 out of world's 117 SEI CMM level-5
companies are from India.
- The domestic BPO sector has been growing
at 60-70% annually and its turnover in 2002-03 reached US$2.4 billion from
US$565 million in 1999-00. It is projected to increase to US$4billion in 2004
and US$ 12.3 billion by 2006 and provide employment to about a million people
from its current level of 200,000. Offshore outsourcing from USA to India is
expected to reach US$ 5.8 billion by 2005, US$ 15.9 billion by 2010 and US$ 33.2
billion by 2015. The outsourcing includes a wide range of services including
design, architecture, management, legal services, accounting and drug
development. Indian companies offer contract research in development of new
molecules and clinical research trails.
- India's IT and IT-enabled services exports
go to 133 countries. Indian IT companies train people in 55 countries. NIIT
alone has 100 training centers in China.
- Business Week of 8th December 2003 quotes
Chris Disher of Booz Allen Hamilton Inc as saying "There is just no place left
to squeeze costs in the US and that is why every CEO is looking at India and
every Board is asking about it.
- The BPO operations of GE capital in India
save the company US$340 million a year.
- There are about 200 call centers in India
with a turnover of US$ 2 billion and a workforce of 150,000. Two third of this
are captive centers run by foreign firms, such as GE Capital, and American
- Well-organized educational system, with
internationally recognized excellence in some areas of higher education. 250
universities and over 10000 higher educational institutions producing a million
graduates including 200,000 engineers per year.
- Second largest reservoir of knowledge
resource- engineers, scientists, managers and skilled personnel and the largest
pool of IT manpower in the world. It is estimated that there are 150000 IT
professionals in Bangalore as against 120,000 in Silicon Valley.
- The Indian Institute of Technology and
Indian Institute of Management have acquired global recognition for their
talents and high quality. Multinational corporations do campus recruitment at
- Foreign universities and business schools
have started thinking about opening branches and research centers in India.
Michigan Business School of Economics in exploring possibility of offering
courses in India in collaboration with our Indian institutions.
- Well-developed R&D infrastructure with
1,500 research facilities. The Indian Council of Scientific and Industrial
Research (CSIR) won 145 US patents in 2002.
- India has joined the select club of
countries with advanced technologies in some areas such as space research,
atomic energy, supercomputing and oceanography. One among the six countries
which have capabilities of satellite launching, production and use of these
technologies for development.
- Indian companies and labs filed for 1700
patents in 2003 (from 1200 in 2002) with the US Patent and Trade Mark Office.
The number filed in India has reached 15,000 in 2003.
- Other than USA and Japan, the only other
country, which has built super computer indigenously, is India.
- According to OECD India has spent US$ 19
billion in 2000-01, putting it among the top ten countries with the highest
- India has become a major provider of
biotech information to clients around the world. Sequencing genes and delivering
genomic information for big Pharma companies is the next boom industry. India
has become one of the prime forces in the development and manufacture of genomic
drugs. There are about 170 biotech companies in India.
- India has become a major provider of
biotech information to clients around the world. Sequencing
- There are over 100 MNCs who have set up
R&D centers in India, including GE, Bell Labs, Du Pont, Daimler Chrysler,
Eli Lilly, Intel, Monsanto, Texas Instruments, Caterpillar, Cummins, GM,
Microsoft and IBM. The R&D Centre of GE in Bangalore is the largest outside
USA employing 1600 researchers and investment of US$ 80 million. The number of
patents in USA by the Indian entities of some of the MNCs (upto September, 2002)
are as follows: Texas Instruments - 225, Intel - 125, Cisco Systems - 120, IBM -
120, Philips - 102, GE - 95.
- Cummins of USA use its R&D Centre in
Pune to develop the sophisticated computer models needed to design upgrades and
prototypes electronically and introduce 5 or 6 new engine modes a year.
- Business Week of 8th December 2003 has
said "Quietly but with breathtaking speed, India and its millions of world-class
engineering, business and medical graduates are becoming enmeshed in America's
New Economy in ways most of us barely imagine". It has quoted Paul Saffo of the
Institute For the Future in Menlo Park, California as saying "Now Indians are
taking the lead in colonizing cyberspace". The magazine has concluded that
Indian brainpower is already reshaping corporate America.
- CNBC TV of USA in a series of commentaries
on India on 20th October 2003 had the following to say, "For American CEOs
trying to grow their companies, the issue is whether they embrace globalisation.
If they do, they must have a presence in India".
"Scott R.Baymam President & CEO of GE
India in an interview to NBC TV on 20th October 2003 has said "we are using
India to maintain GE's global competitiveness through India's huge intellectual
Quality of Indian
- It is not just the low-cost which is
driving India's exports. Quality of Indian products has come to be recognized
globally. Apart from the ISO certification got by over 5000 companies, some
Indian companies have won special recognition for excellence in quality. For
example, 5 Indian companies have won the Deming Prize for total quality
management while 8 more are preparing for the honour next year. Another 18
manufacturing plants of 10 Indian companies have been recognized by the Japanese
Institute of Plant Management for excellence.
- 80 Indian software companies of India have
attained the "SEI-CMM (Software Engineering Institute's Capability Maturity
Model) Level-5" out of the total of 117 global companies.
- India has the largest number of annual
bulk drug filings (77) with USFDA. India is home to the largest number of pharma
plants approved by USFDA outside USA. Indian pharma companies have also got
certification from European and Australian drug authorities.
- India registered the third highest growth
(14%) in exports in the world after China (22%) and Czech Republic (15%) in
2002. Despite the appreciation of Rupee, the exports in the period April-March
2003 increased by 8.8% in dollar terms reaching US$36.5 billion. Imports for the
same period increased by 21% to US$47.7 billion.
- Indian pharma exports are expected to
increase five fold from US$ 1.5 billion in 2002 when patents expire for drugs
worth US$ 55 billion in the next five years.
- Garment exports are expected to increase
from the current level of US$6 billion to US$25 billion in seven years.
- India's exports grew by 19.2% in 2002, in
a subdued year for the world economy.
- India exported 126,000 motorcycles and
53,000 passenger cars in the first six months of 2003-04.
- Exports of auto parts are expected to
increase from US$ 800 million in 2002 to US$ 1.3 billion in 2005.
- Trade with China is expected to reach US$
10 billion in the next three years from less than US$ 1 billion in 2000. India
exports to China increased by 85% in the first nine months of 2003 to US$2.95
billion and imports US$1.59 billion.
- There are 16 companies whose exports are
over US$ 40 million, 15 companies over US$ 10 million and 150 companies over US$
- Indo-ASEAN trade has increased from US$2.9
billion in 1993 to billion in 2002-2003. India's goal is to take this to US$30
billion by 2007.
- European Union is the largest trading
partner of India with 11.3 of exports from India and 12.5 billion dollar of
inputs in 2002-3. USA is the second largest partner, accounting for 10.8 billion
dollars of exports and 4.4 billion dollars of imports of India in
More information on trade on: www.commerce.nic.in
- As of 1 December 2003, Indian construction
companies are executing overseas projects worth US$ 4 billion. Two thirds of
this is turnkey projects.
- In 2003, Indian contractors got 110
contracts worth US$ 1100 million.
- The projects being undertaken by Indian
companies includes power, oil, and gas pipeline, LNG terminals and transmission
lines besides civil construction. One of the major ongoing projects is a gas
pipeline project of US$ 105 million in Tanzania being done by
- FDI approved in 2003 (January-November) is
US$ 5 billion as against US$ 4.66 billion in 2002-03.
- FDI inflows approved in the period April
1991-April 2003 stood at US$ 76.8 billion, of which US$ 33.37 billion has
already been realized. USA accounted for $ 16 billion (24.9%). The other major
investor countries are Maldives, UK, Japan, South Korea, Germany, Netherlands,
Australia, France, Malaysia, and Singapore.
- FII investment increased by almost ten
times in 2003 to US$ 7.59 billion, of which US$ 6.5 billion went into equities.
In 2002, FII investment was US$739 million. Cumulative FII investment since the
equity market was opened in the early 1990s is $ 21 billion. The number of
registered FIIs in India is 517.
- According to FDI Confidence Index of AT
Kearney (September, 2003) global investors upgraded India from 15th to sixth
most attractive FDI destination worldwide in 2003. Manufacturing investors rank
India among the top six most preferred investment locations, while service
sector investors ranked India as the fourth most attractive destination. India
remains as the leading global hub for offshore business processing.
- FIIs are buying into the equities of
Indian companies. For example 40% of the stock of Infosys is held by global
- Indian companies have started venturing
into other countries for production, acquisitions, and even research and
development. Investment abroad by Indian companies in 2002-03 was US$ 1048
- Indian firms have about 440
investments/joint ventures in UK, mostly tech-oriented. India is the eighth
largest investor in UK.
- Indian companies have acquired 120 foreign
firms in the period 2001- 2003 worth US$ 1.6 billion.
- Seven Indian companies are listed in NYSE
and three in NASDAQ. There are over 15 companies listed in LSE.
While the acquisition of foreign companies
started off in the IT and related services sector, it has now spread to other
areas. Some of the important recent acquisitions are:
Indianisation of the
- A.V. Birla group has presence in 18
countries and has overseas revenue of US$ 1.8 billion excluding their exports of
US$ 900 million. Their overseas employees total 12,000 in 20 countries. They
have announced purchase of two copper mines in Australia for US$ 80 million.
They have recently acquired a Carbon black manufacturing unit in China.
- ONGC Videsh has invested $ 720 million or
a 25% stake in the Greater Nile Oil Project in Sudan, and US$ 1.74 billion in
the Sakhalin project in Russia. The company has investments/plans for investment
in Vietnam, West Africa, Angola, Myanmar, Libya, Indonesia, etc.
- Tata Motors paid $ 118 million to buy
Daewoo commercial vehicle Company of Korea. Tatas are negotiating acquisition of
a steel mill in Korea.
- Ranbaxy, the largest Indian pharma
company, gets 70 percent of its one billion dollar revenue from overseas
operations and 40 percent from USA. It exports to 70 countries, has ground
operations in 25 markets and manufacturing in seven countries including China.
Recently it has bought a French Pharma Company RPG Aventis for US$80 million. It
has earlier acquired companies in UK and Germany.
- Workhardt derives 55% of its revenue from
- Bharat Forge acquired German firm Carl Dan
Peddinghaus Gmbh for US$ 28 million. Sundaram Fasteners is buying a precision
forging unit in UK.
- Reliance has paid US$ 207 million for the
acquisition of Flag Telecom.
- TVS group has set up a motorcycle plant in
China and is planning to set up two units in ASEAN region.
- Mahindra & Mahindra has established a
subsidiary in USA and is producing 8,000 tractors per year. They have a 20%
market share in 25 States ion the 20-60 HP segment.
- Videocon is planning to set up a
compressor unit in China, with an investment of US$ 30 million.
- Indorama which already has resins in
Indonesia, Thailand, USA and Romania is planning to set up another plant in
Lithuania with an investment of US$ 80 million.
- Aurobindo Pharma has bought a pharma unit
in China. Cadilla has bought the formulations business of a French company.
- WIPRO has acquired a USA-based consulting
company Nerve Wire for $ 18.7 million.
- Tata Tea has bought Tetley of UK for 260
- Amtek is negotiating purchase of a UK auto
parts GWK for US$ 40 million.
- Tata Consultancys has set up a software
development center in Shanghai. Tatas are keen to set up hotels in China. They
have set up a software development centre in Uruguay with an investment of US $
- Infosys is buying an Australian Software
firm for US$23 million.
- Taj and Oberoi are expanding their
overseas presence including in Dubai, Marrakech, Shanghai and
integration and Free Trade Agreements
- While India is being globalized, there is
also a quiet Indianisation of the Globe. There are about 20 million people of
Indian origin outside India. Some of them have become Presidents and Prime
Ministers and many have become CEOs of top MNCs particularly in USA. One third
of Microsoft employees, one quarter of IBM and one sixth of scientists of Intel
are Indians. Four out of 10 Silicon Valley start-ups are run by Indians. The
Indians are among the richest immigrant group in USA. The Indians are no longer
content to work as employees, they are becoming entrepreneurs. The second
largest producer of steel in the world is an Indian Mr. L. N. Mittal.
Mittal'smLNM group has units in 11 countries, including USA, Canada, Germany and
France and employs 120,000 people from 45 nationalities. It is among the largest
steel producers in USA, the second largest in EU and the largest in Central and
East Europe. The founder of hotmail is a young Indian, Sabeer Bhatia.
- The success of these overseas Indians has
inspired those in India and made them more confident, ambitious and outward
- Indian students are the largest in number
among foreign students in USA.
- India has started pursuing a strategy of
regional integration and bilateral FTAs and PTAs. India has already signed a FTA
with Sri Lanka, which has become a successful trendsetter. Now India is moving
to the next stage to sign a Comprehensive Economic Cooperation Agreement,
covering services and investment. PTA with Afghanistan has been signed.
Negotiations for FTA with Bangladesh have been started.
- A treaty was signed on 6 January, 2004,
establishing a South Asian Free Trade Area among the seven countries in the
region. It will become operational by January, 2006. Tariffs will be brought
down to 0.5% in the next 7-10 years. India is committed to a South Asian Union
as the ultimate objective, and favours common currency for south Asia.
- As part of the "Look East " policy, India
concluded negotiations for FTA with Thailand in October 2003. Negotiations are
going on for a Comprehensive Economic Cooperation Agreement with Singapore.
Economic Cooperation between Bangladesh, India, Myanmar, Sri Lanka and Thailand
(BIMST-EC) is progressing.
- India signed an agreement with ASEAN in
October 2003 to establish a Free Trade Area in 10 years covering goods, services
and investment. Progressive tariff reduction under Early Harvest Programme will
begin in November 2004 and tariff elimination will be completed by October
- India is studying the possibility of trade
and economic cooperation agreements with China, which is emerging as a major
trade partner of India. Ratan Tata in an interview to NBC TV on 20.10.03 "I ask
myself what would happen if India and China could themselves create an economic
bloc of their own with two billion people". Who knows?
- There are prospects for economic
cooperation with the Gulf Cooperation Council. PTA with Iran is under
consideration. Framework agreements for cooperation have been signed with South
African Customs Union and COMESA in Africa and with MERCOSUR and Andean
Community in South America and these should lead to FTA Agreements. Negotiations
will start soon on a Comprehensive Economic Cooperation (including FTA) with
- India has formed a strategic trilateral
group IBSA (India, Brazil and South Africa) with the two emerging powers of
Africa and Latin America to promote economic, commercial and political
cooperation and to advance their common interests globally.
- To facilitate and complement the trade
flows; India is now focusing on integration of rail and road linkages in its
extended neighborhood. India- Myanmar- Thailand trilateral highway (work on this
1360 km. Highway will start in 2005) and Delhi- Hanoi railway are being planned.
India has started building a transport corridor through Iran to
- India has announced "open skies" policy
for air traffic with Sri Lanka, Thailand, and also with ASEAN countries, as part
of regional integration.
India has increased its aid to other
developing countries. Under the ITEC programme about 3,000 foreign candidates
are trained in various fields ranging from IT to water management. Scholarships
are also given to some countries. India has set up Technical and Entrepreneur
Training Institutes in some countries. From time to time India gives food aid to
needy countries. India gives Lines of Credit to a number of countries. India has
announced 200 million dollars of Lines of Credit to NEPAD in Africa.
Reforms and Liberalization
- Since 1991, India has undertaken
far-reaching economic reforms of deregulation and liberalization, which have
unleashed the enormous growth potential of the economy.
- The consumers and public have realized the
benefits of liberalization through increase in the choice and quality of
products and decrease in prices. The business and industry have also adjusted
themselves with the liberalization and globalization. These have been
encouraging factors for the Government's further liberalization programmes.
- The unprecedented high level of foreign
exchange reserves, the upward trend in FDI inflows and the general growth of the
economy have given more confidence and encouragement to the policy-makers in the
acceleration of economic reforms and liberalization. Both at the central and
state levels and across political parties, in general, there is consensus on
further economic liberalization. The reforms programme and the market-oriented
policies of the Government are irreversible.
- Peak customs duty has been brought down to
25% for all products except agro and dairy products. Customs and excise duties
on a number of items were reduced in January, 2004. The Government is committed
to reduce the tariffs further.
- Licensing has been removed from all but
six sectors. The Government is determined to remove any remaining roadblocks -
real or perceived. India has one of the most transparent and liberal FDI regimes
among the emerging developing economies.
The new electricity bill passed in 2003 has
paved the way for the growth of a dynamic market driver power sector.
- 100% FDI is allowed in most sectors except
telecommunications (49%), insurance (26%), banking (74%), aviation (40%), and
small-scale industries (24%). FDI in excess of 24% is permitted in small-scale
industry at 50% export obligation.
- Special incentives and tax-breaks are
given for certain sectors such as power, electronics, telecom, software,
hydrocarbons, R&D and exports.
- Indians can remit (January 2004
announcement) upto US$ 25,000 every year without the need for any
- The policy-makers have learnt lessons from
early experience and are continuously engaged in the process of simplifying
procedures and deregulating the market.
- Government has been divesting its stake in
public sector undertakings in the light of the redefinition of its role from
being a provider of goods and services to that of a policy-maker and
facilitator. Between 1991-2002 the Government has privatized assets worth US$
- At present the Government is considering
disinvestments of the Shipping Corporation of India, State Trading Corporation,
Metals and Minerals Trading Corporation, among others. One of the biggest
privatization programmes that the Government has initiated is the leasing of
international airports at the four metropolitan cities of Delhi, Mumbai,
Chennai, and Kolkata.
- The Government has lifted the restrictions
on large imports of oil and food grains which were earlier imported only by
public sector corporations.
Although the infrastructure of India has not
kept pace with the times, there are ambitious plans for improvement.
investment in India
- The "Golden Quadrilateral" Plan (5850 Kms
costing US$ 5.5 billion) for linking the four metropolitan cities of Delhi,
Mumbai, Chennai, and Kolkata with modern highways is expected to be completed by
2004. North South (Srinagar to Kanyakumari) and East-West (Silchar to Porbendar)
highways with a length of 7,000 kms are also under construction.
- Ports and terminals are being modernized
and services are privatized.
- The Prime Minister announced "Sagar Mala"
project in August, 2003 for expansion and modernization of ports, inland
navigation and maritime transport. This involves an investment of US$ 22 billion
in a period of ten years. While the Government will take care of 15% of the
investment, the rest will come from the private sector. The cargo handling
capacity is expected to increase to 565 million tones in 2006-07 from 412
million tones in 2002-03.
foreign investment in India
- 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 will grow
- 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.
- Upgradation and modernization of airports
will require US$ 33 billion investment in the next ten years.
- There is potential for investment in the
expansion and modernization of ports. The government has taken up a US$22
billion 'Sagarmala' project to develop the Port and Shipping sector under
Public-Private Partnership. 100 percent FDI is permitted for construction and
maintenance of ports. The government is offering incentives to investors.
- The Ministry of Power has formulated a
blueprint to provide reliable, affordable and quality power to all users by
2012. This calls for investment of US$ 73 billion in the next five years. The
gap between demand and production of power is around 10000 MW. 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 present opportunities
- India has an estimated 85 billion tones of
mineral reserves remaining to be exploited. Potential areas for exploration
ventures include gold, diamonds, copper, lead zinc, cobalt silver, tin etc.
There is also scope for setting up manufacturing units for value added
- 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$ 8.6 billion in 2003 to US$ 13 billion by 2007. Mobile
telephony has started growing at the rate of 10-12 million subscribers per
- 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
- Biotechnology and Bioinformatics, which
are in the government's priority list for development, offer scope for FDI.
There are over 50 R&D labs in the public sector to support growth in these
- The Indian auto industry with a turnover
US $ 12 billion and the auto parts industry with a turnover of 3 billion dollars
offer scope for FDI.
- The government is encouraging the
establishment of world-class integrated textile complexes and processing units.
FDI is welcome.
- While India has abundant supply of food,
the food processing industry is relatively nascent and offers opportunities for
FDI. Only 2 percent of fruits and vegetables and 15 percent of milk are
processed at present. 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$28 billion. Food processing has been declared as
a priority sector.
- The Healthcare industry is expected to
increase in size from its current US$ 17.2 billion to US$ 40 billion by 2012.
- The Government has recently established
Special Economic Zones with the purpose of promoting exports and attracting FDI.
These SEZs do not have duty on imports of inputs and they enjoy simplified
fiscal and foreign exchange procedures and allow 100% FDI.
- The travel and tourism industry which has
grown to a size of US$ 32 billion offers scope for investment in budget hotels
and tourism infrastructure.
Special Economic Zones
- Foreign investment can be done in the
Automatic Route up to 100 per cent without need for any approvals. The investor
has to keep the Reserve Bank of India informed.
- The sectors not open to foreign investment
are retail trade, housing and real estate, agriculture and lottery and gambling.
- There are maximum limits on foreign
investment. Some of these are being increased.
- Prior approval of the government is needed
for those cases, which need industrial license and those involving investment
beyond the maximum limits. Such cases are cleared by the Foreign Investment
Promotion Board in a transparent, efficient, time-bound and predictable
- The Department of Industrial Policy and
Promotion is the nodal agency for information and assistance to foreign
investors. Their website www.dipp.nic.in has comprehensive information for
foreign investors and gives weekly update on proposals for foreign investment
under consideration. It also gives information on projects available for foreign
investors and contains online applications for clearances.
- The Various state governments in India
offer competitive incentives and attractions to foreign
The Government has allowed SEZs (the Export
Processing Zones have now become SEZs) for production and services for exports
since April, 2000. A whole host of tax and other benefits are given for units in
SEZs. Even the Labour Law has been made flexible in these zones.
There are 14 functioning SEZs and approval
has been given for another 14. These account for 22% of annual exports. The
Government is allowing opening of more SEZs. 100% FDI is permitted.
More information on: www.sezindia.nic.in