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THE INDIAN ECONOMY:

CURRENT SCENARIO, PERSPECTIVES AND


FOREIGN DIRECT INVESTMENT
REGULATIONS
INDIA – REFORMS FIRST
• Political parties across spectrum have been successful in
developing a consensus on economic reforms and the direction
and tenor of reforms has been maintained

• At the central level all major economic reforms have been


initiated

• Further due to the regional competition that exists at the sub


national level, the individual states too have started moving on
the road towards reforms in order to promote growth

• India’s competitive edge is enhanced not only due to the cheaper


costs but also due to availability of skilled personnel
INDIAN REFORMS
THE PHILOSOPHY & BASIS OF OUR
TRANSFORMATION
Achieve macroeconomic stabilisation
by reducing fiscal and BOP deficits

Alter the production structure


by increasing the role of the
markets

Promote domestic deregulation


and trade liberalisation

Strengthen privatisation and


welcome FDI
INDIA: TRACING FIRST GENERATION REFORMS
• Industrial delicensing and simplification and
rationalization of tax structure to promote
investment and expansion.
• Liberal FDI regime to supplement domestic
resources.
• Current account convertibility to have a liberal
trade regime.
• Public sector divestment to ensure government
does what it does best.
• WTO compatibility to plug into the global economy.
SECOND GENERATION REFORMS -
A mix of extensions, revisions & additions

• Public Sector Divestment


• Downsizing Government
• Reducing Fiscal deficit
• Amendments to crucial Economic Statutes
• Financial sector reforms
• Agriculture and Labour reforms
• Power Sector Reforms
• Corporate governance
INDIA – IT’S STRENGTHS
• India today has –
A well diversified industrial base which profits from self-reliance in all
core industries
A large & sophisticated financial architecture. The robust capital
markets today have over 9000 listed companies and boast of a massive
market capitalization
A healthy GDP composition with agriculture contributing 22%, Industry
22% and services, which have gone strength to strength, accounting
for 56% of the GDP
An acknowledged strength in knowledge driven industries like
information technology, biotechnology,pharmaceuticals,entertainment
software etc
ADVANTAGE INDIA
• India has
¾ Over 3 million scientific & technical manpower,

¾ Over 0.6 million S&T post graduates,

¾ Over 0.7 million graduate engineers,

¾ Over 3500 doctorates in sciences every year

• After US, India is home to largest pool of English speaking


scientific manpower
• India’s demographic advantage – In contrast to developed
countries, India will have a younger population for the next 50 years.
Hence India would be the hub for R&D

No wonder industrial giants abroad have recognized the quality and


capability of Indian R&D and are looking to India as a
preferred source for the knowledge worker

9 Global companies like GE have turned to CSIR for technology


development

9 MNC pharma companies have queued up for promising new


designer molecules for drugs and drug delivery systems
WHAT GOLDMAN SACHS HAS TO SAY
ABOUT INDIA
• India has the potential to show the fastest growth over the
next 30 and 50 years

• Growth could be higher than 5% over the next 30 years


and close to 5% as late as 2050

• India has the potential to raise its US dollar income per


capita in 2050 to 35 times its current level

• India’s GDP will exceed Italy’s in 2016, France’s in 2019,


Germany’s in 2023 and Japan’s in 2032
LOOK AT INDIA FOR
9 Knowledge Based Industries

9 ITES / Business Process Outsourcing

9 Manufacturing Excellence

9 Research and Development

9 Infrastructure Sector Opportunities


NEW GENERATION ECONOMIC REFORMS
TELECOM
‰ Telecom sector opened up to the private sector and for
foreign investors with 74% equity cap
‰ As many as 61 million new phones have been added since
1998-99 which is more than thrice the number of lines
added in the preceeding five decades
INSURANCE
‰ Insurance sector was opened up in August 2000.
Insurance Regulatory and Development Authority (IRDA)
regulates the insurance business.
NEW GENERATION ECONOMIC REFORMS
OIL SECTOR

‰ The administered price mechanism in the oil sector dismantled


from April 2002
‰ New Round of NELP has been launched in January 2005.
Process for filing the final bid will be completed by May end.
NELP – V is offering 20 new blocks for exploration, 6
deepwater, 2 shallow water and 12 onshore.
‰ Revised guidelines for laying down pipelines for gas
transportation with national boundaries have already been
drafted.
‰ Government offered 9 blocks for the exploitation of Coal Bed
Methane under the 2nd round of CBM covering the states of
Andhra Pradesh, Chattisgarh, Gujarat, Jharkhand, Madhya
Pradesh, Maharashtra and Rajasthan.
INDIA HAS OPENED UP FOR
FOREIGN DIRECT INVESTMENTS
Liberalization of foreign direct investment norms
Sector Foreign direct investment limits
(%)

Manufacturing, Drugs and Pharmaceuticals, 100%


ISP not providing gateways, Hotels &
Tourism, Courier services

Airports Upto 100% with FDI, beyond 74%


requiring Government approval

Infrastructure related to marketing 100%


of petroleum products

100%
Pipeline sector
INDIA HAS OPENED UP FOR
FOREIGN DIRECT INVESTMENTS
Liberalization of foreign direct investment norms

Exploration or mining of coal or 74%


lignite for captive consumption

Roads and Highways, Ports and 100%


Harbours

Exploration and mining of 74%


diamonds and precious stones

Projects relating to electricity generation, 100%


transmission and distribution (other than
atomic power plants)
INDIA HAS OPENED UP FOR
FOREIGN DIRECT INVESTMENTS
Liberalization of foreign direct investment norms

Banking 74%

Telecom Services 74%

Civil Aviation 49%

Insurance 26%
INTEGRATED TOWNSHIP DEVELOPMENT AND
OTHER AREAS OF REAL ESTATE
LIMITS ON FDI

‰ FDI allowed upto 100% under the automatic


route :
- Townships
- Housing
- Built-up Infrastructure
- Construction Development Projects
INTEGRATED TOWNSHIP DEVELOPMENT AND
OTHER AREAS OF REAL ESTATE

CONDITIONALITIES FOR DEVELOPMENT


OF PROJECTS
- Development of serviced housing projects – a
minimum land area of 10 hectares
- Construction Development Projects – minimum
built up area of 50,000 sqr. mts
- In case of a combination project – any one of the
above condition would suffice
INTEGRATED TOWNSHIP DEVELOPMENT AND
OTHER AREAS OF REAL ESTATE

INVESTMENT / REPATRIATION NORMS

- Minimum capitalization of US$ 10 million for


wholly owned subsidiaries and US$ 5 million for
Joint Ventures with Indian partners
- Funds to be brought in within 6 months of
commencement of business of the company
- Original Investment cannot be repatriated before a
period of 3 years from completion of minimum
capitalization
INTEGRATED TOWNSHIP DEVELOPMENT AND
OTHER AREAS OF REAL ESTATE

COMPLIANCE REQUIREMENTS

- At least 50% of the project must be developed within a


period of 5 years from the date of obtaining all statutory
clearances
- Project shall conform to the norms and standards,
including land use requirements and other statutory norms
prescribed under others laws governing the Real Estate
Sector
- Investor to take all approvals from requisite authorities /
agencies – 8/9 different agencies right now
INTEGRATED TOWNSHIP DEVELOPMENT AND
OTHER AREAS OF REAL ESTATE

MONITORING OF THE PROJECTS

- State Government / Municipal / Local body which


approves the building / development plans would
monitor compliance of the stipulations prescribed
in the FDI regulations
THANK YOU