31/05/2014 1 Invest India Policies & Opportunities Rajeeva Ratna Shah Secretary Department of Industrial Policy and Promotion Ministry of Commerce & Industry.

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

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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

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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

$)

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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

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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;

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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;

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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

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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)

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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

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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

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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

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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

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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

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Country wise FDI inflows (Since July 1991)

Singapore3%

Italy2%

France3%

Netherlands5%

USA17%

Mauritius35%

UK7%

Germany5%

Japan8%

Rep. of Korea3%

Others12%

France ranks 7th

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Investment from France- Sectors(Since July 1991)

Others18%

Electrical Ind.4%

Fuels17%

Chemicals17%

Cement14%

Glass10%

Food Processing7%

Telecom7%Metallergical Ind

6%

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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

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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.

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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

‘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.

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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;

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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.

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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.

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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

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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

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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

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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

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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 35

Thank YouThank You

Visit us at www.dipp.nic.in E-mail at [email protected]

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