INTRODUCTION

Prior to understanding the economic progress of India, it is vital to first identify the current economic status of India so that it is easy to retrace the process leading to the current status. India presently enjoys the status of an attractive emerging market. However, this status has been the result of numerous economic reforms adopted over the years. India intent to open its markets to foreign investment can be traced back to the economic reforms adopted during two prime periods- preindependence and post independence. Pre- independence, India was the supplier of foodstuff and raw materials to the industrialised economies of the world and was the exporter of finished products- the economy lacked the skill and means to convert raw materials to finished products. Post independence with the advent of economic planning and reforms in 1951, the traditional role played changes and there was remarkable economic growth and development. International trade grew with the establishment of the WTO. India is now a part of the global economy. Every sector of the Indian economy is now linked with the world outside either through direct involvement in international trade or through direct linkages with export and import transactions of other sectors in the economy. Development pattern during the 1950-1980period was characterised by strong centralised planning, government ownership of basic and key industries, excessive regulation and control of private enterprise, trade protectionism through tariff and non-tariff barriers and a cautious and selective approach towards foreign capital. It was a quota, permit, licence regime which was guided and controlled by a bureaucracy trained in colonial style. This inward thinking, import substitution strategy of economic development and growth was widely questioned in the 1980’s. India’s economic policy makers started realising the drawbacks of this strategy which inhibited competitiveness and efficiency and produced a much lower growth rate that was expected. Consequently economic reforms were introduced initially on a moderate scale and controls on industries were substantially reduced by 1985 industrial policy. This set the trend for more innovative economic reforms and they got a boost with the announcement of the landmark economic reforms in 1991. After nearly five decades of insulation from world markets, state controls and slow growth, India in 1991 embarked on an accelerated process of liberalization. The 1991 reforms ensured that the way for India to progress will be through globalization, privatisation, and liberalisation. In this new regime, the government is now assuming the role of a promoter, facilitator and catalyst agent instead of the regulator and controller of economic activities. India has a number of advantages which make it an attractive market for foreign capital namely, political stability in democratic polity, steady and sustained economic growth and development, significantly huge domestic market, access to skilled and technical manpower at competitive rates, fairly well developed infrastructure. FDI has attained the status of being of global importance because of its beneficial use as an instrument for global economic integration.

Economic Reforms Of 1991
India has been having a robust economic growth since 1991 when the government of India decided to reverse its socially inspired policy of a retaining a larger public sector with comprehensive controls on the private sector and eventually treaded on the path of liberalization, privatisation and globalisation. During early 1991, the government realised that the sole path to India enjoying any status on the global map was by only reducing the intensity of government control and progressively retreating from any sort of intervention in the economy – thereby promoting free market and a capitalist regime which will ensure the entry of foreign players in the market leading to progressive encouragement of competition and efficiency in the private sector. In this process, the government reduced its control and stake in nationalized and state owned industries and enterprises, while simultaneously lowered and deescalated the import tariffs. All of the reforms addressed macroeconomic policies and affected balance of payments. There was fiscal consolidation of the central and state governments which lead to the country viewing its finances as a whole. There were limited tax reforms which favored industrial growth. There was a removal of controls on industrial investments and imports, reduction in import tariffs. All of this created a favorable environment for foreign capital investment. As a result of economic reforms of 1991, trade increased by leaps and bounds. India has become an attractive destination for foreign direct and portfolio investment.

FOREIGN DIRECT INVESTMENT
Nature of FDI
FDI include the following:  Reserve bank of India’s automatic approval for equity holding upto 51%  Foreign investment board’s discretionary approval route for larger projects with equity holding greater than 51%  Acquisition of shares (since 1996)  RBI’s non-resident Indian schemes  External commercial borrowings (ADR/GDR route)

Foreign Direct Investment and Indian Policy
Emerging markets pose a significant potential for foreign investment both direct and portfolio. Foreign direct investment (FDI) is defined as the investment of foreign assets into domestic structures, equipment and organizations. However, it doesn’t include foreign investment in the stock markets. FDI is thought to be more beneficial to a country than its investment in equity of its corporations because equity is considered to be potential ‘hot money’, which can leave at the first sign of trouble. On the other hand FDI is durable and generally useful whether things go well or badly. China currently ranks first among the top ten countries for foreign direct investment among developing countries in 2001. Mexico, Singapore, Brazil are also among the top ten. India although is also an attractive destination for foreign investment, it is not in the front line. This is a stark reality despite the fact that the Indian economic, political and social conditions stable. India is one of the largest economies of the world. Its strategic location in the sub-continent provides it with continued access to South–Asian markets and middle-east markets. The country also enjoys a huge consumer markets. Fast moving consumer goods find a significant market share in India, providing a market conducive to trade and finance. India is also an attractive destination for foreign investment because of its access to skilled labour at competitive costs. Being the one of the largest manufacturing sectors of the world, it has a market conducive to trade and production. India also has in place well established legal and accounting system to ensure proper administration of foreign capital to key sectors. Also, the stability of the political environment is another factor which makes India an attractive destination for foreign capital.

Sulphur. FDI potentially brings new and emerging technologies to emerging and developing markets. thereby leading to efficiency and creation of competitive and open markets in sectors originally within the folds of state and central control.Why FDI?  Traditionally. Implications of Foreign Direct Investment Foreign direct investment affects economic growth through increased investment in the country. Copper and Zinc.National defence and security is solely within the control. aviations. government revenue. FDI often depends on a country’s political attempts to reduce risks. Chrome. Gold. foreign investment is seen as a way of filling in gaps between the domestically available supplies of savings. this subject is under the sole control of the Central Government. and human capital skills and the desired level of these resources necessary to achieve growth and development targets.. . Diamonds. Manganese. The Constitution of India stipulates 3 lists for legislation of numerous subjects namely the Central list. telecommunications etc. Location advantage: in particular include natural resources and highly cost effective skilled labour force. regulation and supervision of the Central Government  Atomic Energy: Due to its impact on national security. the following sectors cannot benefit from inflows of FDI:  Arms and Ammunition:. Another direct consequence of enhanced inflows of FDI is the positive impact on improvement in technology and infrastructure. and this can contribute to economic growth and development in the long run. Atomic Energy finds a mark on the Central List and the Central Government has so sole control on legislation. Gypsum. Factories set up by MNC’s act as a nucleus of growth. FDI can generate healthy competition in the recipient countries. the Government of India has permitted FDI in crucial sectors such as power. An increase in the inflows of FDI would essentially increase foreign savings and consequently would result in increased investment in the country. State list and the Concurrent List.  Railway Transport  Coal and Ignite  Mining of Iron. Improved Technology also enhances the productivity of domestic enterprises and industries.     Mechanics of FDI: Foreign investment in India is permitted through the following modes:  Through the route of foreign collaborations  Through Joint ventures and technical collaborations  Through capital markets via euro issues  Through private placement or preferential allotment Although. foreign exchange. An industrial enterprise established by a foreign company gives birth to several other enterprises which would supply inputs to the parent company.

and agencies that have been constituted to ease the flow of FDI.Policy Regime Control and restraints on foreign investment has long been the subject of controversy and major political debate in India. if the cost of shipping material is high.  The Reserve Bank of India (RBI) – the apex central bank of India. citizens too deserve to be clued in on them government bodies are doing. grants automatic approval for all industries with respect foreign technology agreements and collaborations. Technology influences every aspect of global market place. particularly with the advent of electronic business exchanges.  The licensing requirement which required industrial enterprises to apply for and obtain industrial licences was abolished to enhance competition and promote efficiency. it was discovered that there exists a plethora of boards.  Majority investment by foreign parties is permitted. Logistics: MNC’s seek to invest on subsidiaries in foreign markets. The policy framework for FDI is as follows:  FDI in priority sectors like power and telecommunications enjoy automatic approval from the FIPB  All other proposals for foreign investment have to go through the FIPB approval route. Reports from FICCI and the Planning Commission place investor confidence and satisfaction at an all time high. A call to one agency about their mandate and scope usually results in the quintessential response to call someone else. The FERA imposed equity participation limits on foreign corporations. Factors Influencing FDI A. MNC’s locate production facilities in low wage countries. Natural resources attract many a company into international markets. As a result equity participation up to 51 % is permitted by foreign corporations. FDI up to the sectoral cap of 24% is permitted in traditional and small scale industries. India drafted two major legislations which directly address the issue of foreign capital namely the Foreign Exchange Regulation Act (FERA) and the Foreign Exchange Management Act (FEMA). Natural Resources: MNC’s tend to utilise FDI to access natural resources that are critical to them. a willingness to attract FDI has resulted in what could be termed an “FDI Industry”. The connection between the two became even stronger in the information age. committees.  To provide enhanced and sustained access to foreign capital and to encourage modernisation of traditional and small scale industries. FDI Culture Many economists in the country have now realized the advantages of FDI to India. Key Technology: technology and business have been inter wined since the industrial revolution. While researching the economic reforms on FDI. . Supply Factors     Production Costs: firms seek competitive advantage through low production costs. While the achievements of the Indian government are to be lauded. The new FEMA has retrospectively altered this policy.

brand name or technology may choose to operate in foreign countries rather than export to them. An owner of a valuable trademark. MNC’s were avoiding investment in India till 1991. Follow The Rivals: competitor analysis indicates geographic.B. Political factors  Economic priorities: developing countries want MNC’s to invest in infrastructure development areas but the international businesses seek to invest in consumer goods industries. firms can choose market for investments. Development incentives: many governments offer attractive incentives. the company may decide to locate one factory of its own nearby. Follow The Clients: often. particularly to the developing countries. clients of a company attract FDI. Demand Factors   Customer Access: certain international businesses need to be physically present in foreign markets to serve customer better. Competitive Advantage: a company enjoying great reputation may seek to establish subsidiaries in overseas countries to encash on its brand equity. From such analysis. thus enabling it to continue to supply its customer promptly and efficiently. Avoidance of trade barriers: for the reason above. strengths and weaknesses of individual rivals. If one of the clients build a foreign facility.   .   C.

FDI in sectors/activities under automatic route does not require any prior approval either by the Government or RBI. AT Kearney’s 2007 Global Services Location Index ranks India as the most preferred destination in terms of financial attractiveness. growing size of the economy and improving investment climate has attracted global corporations to invest in India. A major outcome of the economic reforms process aimed at opening up the economy and embracing globalization has led to tremendous increase in Foreign Direct investment inflows into India. The positive perception as a result of strong economic fundamentals driven by 16 years of reforms has helped FDI inflows grow at about 20 times since the opening up of the economy to foreign investment since August 1991. which accounted for 82% of the total FDI inflows in India. Mauritius has been the major route for FDI inflows into India due to the Mauritius’s stature with India as a tax haven and most volume of FDI inflows through Mauritius has been from the USA and the major investor (FDI) in India for the last 16 years has been USA. UNCTAD’s World Investment Report. The major sources of FDI in India are through both the equity route. Similarly. 2005 considers India the 2nd most attractive investment destination among the Transnational Corporations (TNCs). The investors are required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors. Investment under the Automatic Route shall continue to be .FDI IN INDIA The strong macroeconomic fundamentals. Investment in public sector units as also for EOU/EPZ/EHTP/STP units would also qualify for the Automatic Route. Acquisitions accounted for 32% of total FDI. How FDI can come into India?? Automatic route (a) New Ventures       FDI up to 100% is allowed under the automatic route in all activities/sectors except a small list that require approval of the Government. he or she may do so. According to AT Kearney. India ranks second in the world in terms of attractiveness for FDI. people and skills availability and business environment. Reinvested earnings of FDI companies accounted for 15 % of the total Direct Investment. An investor can make an application for prior Government approval even when the proposed activity is under the automatic route Whenever any investor chooses to make an application to the FIPB and not to avail of the automatic route.

the additional requirements are that (i) the increase in equity level must result from the expansion of the equity base of the existing company without the acquisition of existing shares by NRI/OCB/foreign investors. For existing companies without an expansion programme. the proposal would need Government approval through the FIPB.  All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted. however. automatic route for FDI/NRI/OCB investment is also available to the existing companies proposing to induct foreign equity.  All proposals relating to acquisition of shares in an existing Indian company in favour of a foreign/NRI/OCB investor.  All proposals in which the foreign collaborator has a previous venture/tie up in India. Government Approval For the following categories. Such companies are. (ii) the money to be remitted should be in foreign currency and (iii) proposed expansion programme should be in the sector(s) under automatic route. the additional requirements for eligibility for automatic approval are (i) that they are engaged in the industries under automatic route. The earlier SEBI requirement. and (3) all items which require an Industrial Licence in terms of the locational policy notified by Government under the New Industrial Policy of 1991. Otherwise. For this the proposal must be supported by a Board Resolution of the existing Indian company. Indian companies getting foreign investment approval through FIPB route do not require any further clearance from RBI for the purpose of receiving inward remittance and issue of shares to the foreign investors. Government approval for FDI/NRI/OCB through the FIPB shall be necessary:  All proposals that require an Industrial Licence which includes (1) the item requiring an Industrial Licence under the Industries (Development & Regulation) Act. RBI has granted general permission under Foreign Exchange Management Act (FEMA) in respect of proposals approved by the Government. (2) foreign investment being more than 24 per cent in the equity capital of units manufacturing items reserved for small scale industries. required to notify the Regional Office concerned of the RBI of receipt of inward remittances within 30 days of such receipt and to file the required documents with the concerned Regional Offices of the RBI within 30 days after issue of shares to the foreign investors. (ii) the increase in equity level must be from expansion of the equity base and (iii) the foreign equity must be in foreign currency. 1951. that shares allotted on preferential basis shall not be transferable in any manner for a period of 5 years from the date of their allotment has now been modified to the extent that not more than 20 per cent of the entire contribution brought in by promoter cumulatively in public or preferential issue shall be locked-in. applicable to public limited companies. (b) Existing Companies Besides new companies. For existing companies with an expansion programme.governed by the notified sectoral policy and equity caps and RBI will ensure compliance of the same. .

divestment of 26% equity in favour of India partner/public within 5 years.INDIA: SECTOR SPECIFIC POLICY FOR FOREIGN DIRECT INVESTMENT Sector/Activity (a) Greenfield projects (b) Existing projects Construction Development projects including housing. upto 49% FCCBs. educational institutions. Unified Access Services. convertible preference shares. recreational facilities. commercial premises. National/International Long Distance. GDRs. setting up infrastructure for marketing in Petroleum & Natural Gas sector) (b) Refining FDI Cap/Equity 100% 100% 100% Entry Route Airports Automatic FIPB beyond 74% Automatic Other Conditions Subject to sectoral regulations notified by Ministry of Civil Aviation Subject to sectoral regulations notified by Ministry of Civil Avation minimum capitalization of US$ 10 million for wholly owned subsidiaries and US$ 5 millionfor joint venture. investment/financing. Subject to sectoral policy FIPB (a) Basic and cellular. and in the case of actual trading and marketing of petroleum products. ADRs. Automatic 100% in case of Private companies Telecommunication 74% (including Automatic FDI. FII. townships (a) Other than Refining and including market study and formulation. resorts. FIPB Subject to guidelines notified in the PN 5/2005 Series . V-Sat. NRI. The funds would have to be brought within six months of commencement of business of the Company Petroleum & Natural Gas 100% Automatic 26% in case of PSUs Subject to sectoral regulations issued by Ministry of Petroleum and Natural Gas. city and regional level infrastructure.

infrastructure provider providing dark fibre. Global Mobile Personal Communications Services (GMPCS) and other value added telecom services (b) ISP with gateways. end-toend bandwidth and proportionate foreign equity in Indian promoters/investing Company beyond 49% 74% Automatic up to 49% FIPB beyond 49% Automatic up to 49% FIPB beyond 49% Subject to licencing and security requirements notified by the Department of Telecommunication Subject to the condition that such companies shall divest 26% of their equity in favour of Indian public in 5 years. where required. distribution and Power Trading Ports Roads & Highways Shipping 100% Automatic 100% 100% 100% Automatic Automatic Automatic Subject to sectoral regulations Subject to sectoral regulations Subject to sectoral regulations . if these company are listed in other parts of the world.Public Mobile Radio Trunked Services (PMRTS). Subject to sectoral requirements Subject to provisions of the Electricity Act 2003 (c) ISP without gateway. Also subject to licensing and security requirements. radio-paging. regulations transmission. electronic mail and voice mail 100% (d) Manufacture of telecom equipment Power including generation ( Except Atomic energy).

All proposals relating to acquisition of shares in an existing Indian company by a foreign/NRI investor. Activities/items that require an Industrial Licence. Federal Ministry of Commerce and Industry. All proposals falling outside notified sectoral policy/caps or under sectors in which FDI is not permitted .FDI Inflows (as per international best practices) FISCAL YEAR (APRIL-MARCH) EQUITY FIPB Equity capital Route/ of RBI's unincorporated Automatic bodies# Route/ Acquisition Route 15483 Reinvested Other earnings+ capital+ Total FDI inflows YOY growth (%) 1991(August)-2000 15483 (March) 2000-01 2339 61 1350 279 4029 2001-02 3904 191 1645 390 6130 (+) 52 2002-03 2574 190 1833 438 5035 (-) 18 2003-04 2197 32 1460 633 4322 (-) 14 2004-05 3250 528 1904 369 6051 (+) 40 2005-06 5540 435 2760 226 8961 (+) 48 2006-07 (P)* 15585 896 5828 517 22826 (+) 146 2007-08 (P)* 24575 2292 7168 327 34362 (+) 51 2008-09 23885 334 3004 203 27426 (April-Dec) Cumulative Total 99332 4959 26952 3382 134625 (From August 1991-January 2009) SOURCE: DIPP. Government of India FDI Policy • • • • • FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the Government. Proposals in which the foreign collaborator has a previous/existing venture/tie up in India in the same or allied field.

petroleum infrastructure and warehousing of coffee and rubber. And this has also brought about a conspicuous interest by towards investments in the Indian hospitality sector. laying of natural gas pipelines. the government policies on FDI also offer opportunities for foreign investors to invest in different sectors. Industry reports suggest the inflow of about US$ 500 million into the real estate sector over the past six months and is expected to rise to a massive $ seven to eight billion over the next 18-30 month.Liberalization of FDI Beside 100 percent relaxation of FDI in real estate. Limit for telecoms services firms have been raised from 49 per cent to 74 per cent. This includes 100 percent in power trading. processing. development of new airports. The government is now set to initiate a second wave of reforms in the segment by liberalizing investment norms further. . Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet.

38.084 (Est.7 per cent (as on January 16. 33. 49.2009) Cumulative amount of FDI inflows (April 2008 to December 2008) 18.Rs.027 billion (March 1.653 crore (Est. Bangalore.804 crore (Est. Haldia.326 crore) . 2001) • Climate: mainly tropical with temperature ranging from 10o – 40o C in most parts • Time zone: GMT + 5 1/2 hours • Major international airports: New Delhi. Vizag Macro-economic Indicators Population 1.51.) 09 Industrial growth (April-December 200809) 3. Mormugoa. Kolkata. 2009) Broad Money (M3) growth (y-o-y) Forex Reserves (in the week ended February 27.) Services: 56% Industry: 22% Agriculture: 18.159 million (Rs 92. Thiruvananthapuram • Major ports of entry: Chennai.89. 25.2 Per cent Inflation (during the week ended February 2. Kochi. Chennai. Jawaharlal Nehru. 2009) US $249. Kandla.661 (Est.) Per Capita Income(constant prices) in 2008-09 Per Capita Income(current prices) in 2008. Mumbai. Hyderabad.3 billion US$ 21.) 2000) in 2008-09 GDP at Factor Cost (current prices) in 2008-09 Composition of GDP Rs. Ennore.112 Million GDP at Factor Cost (constant prices-1999. New Mangalore. Paradip and Tuticorin.INDIA AT A GLANCE General Information • India is a Union of States with parliamentary system of Government • Land area: 3.29 million square kilometers • Capital: New Delhi • Population: 1. Kolkata. Mumbai.Rs.5% Rs.43 Per cent 28.

77/$ (as on October 29. Indian economy is expected to continue growing at the rate of 5% or more till 2050.44 • Portfolio Investment (2007): US $17. Some other conclusions are listed below: • 2nd most attractive destination .49.87 years 66.84% 63.10. Indian economy is slated to become the fourth largest economy by 2050. 2008-09) Average literacy rate (census 2001) Life expectancy for males Life expectancy for women Rs 51.645572 crore) US$ 243358 million(Rs. India has the most liberal and transparent policies on foreign direct investment (FDI) among major economies of the world.89 billion (as on 17. Growth Rate: 25. According to the study by Goldman Sachs. 2007 • India can sustain 10% growth rate-OECD Survey. and investor friendly investment climate.January.23 billion Investment Outlook A number of studies in the recent past have highlighted the growing attractiveness of India as an investment destination. March 2008 states that India will be 90% of the US economy by 2050 Doing Business in India India . India provides a liberal. 2008) Exports (April. 2008 • Price Water House Coopers report. .8 % • Imports (2007-08): US $239. 2008-09) Imports (April.91 years Basic Economic Statistics • GDP at current prices (2007-08): $ 1.ATKEARNEY Business Confidence Index. 2008) • Foreign Exchange reserves: US $273. India has a federal system of Government with clear demarcation of powers between the Central Government and the State Governments. Growth Rate : 29% • Foreign Direct Investment (2007-08): US $32.18 million tonnes US $ 144266 million (Rs.January. 2007 India is the second most attractive location for foreign direct investment-UNCTAD's World Investment Report.2008) • Exports (2007-08): US $159 billion.Exchange rate INR/1 USD Food grain stocks(as on December 01. 2009) 35.58 (As on March 03. India is the largest democracy and tenth largest economy in the world.16 trillion • GDP (PPP) (2006) = US $4156 (5th largest in the world) • GDP growth rate (2007-08) : 9% • Exchange rate: Rs.1090182 crore) 64.with its consistent growth performance and abundant highly skilled manpower provides enormous opportunities for investments. India is the fourth largest economy in the world in terms of purchasing power parity.65 billion. attractive.

CUMULATIVE FDI EQUITY INFLOWS In Rs Cumulative amount of FDI inflows (From April 2000 to March 2009) Amount of FDI inflows during 2008-9 (From April 2008 to January 2009) Cumulative amount of FDI Inflows (Up to April 2009) 3. •Imports in 2007-08 grew by 29% and exports by 25. •Rupee is almost fully convertible on capital account for non-residents. •High economic growth and rising per capita income has resulted in high growth in the domestic market. Indian economy has been growing at an average growth rate of about 8. •There are some restrictions for resident Indians on capital account on incomes earned in India.• 100% FDI is allowed under the automatic route in all sectors/activities except in few areas. •Manufacturing sector grew by 8. •For FDI.8% per annum over the last three years. dividends and proceeds out of the sale of investments are fully repatriable. • Under automatic route. which is the prime growth engine for Indian economy.728 In US$ in million 89.8% and services by 12% in 2007-2008. •Rupee is freely convertible on current account.819 23.8%.673 404. which require prior approval of the Government.158 FDI Equity Inflows (2008-09) MONTHS April 2008 May 2008 June 2008 July 2008 August 2008 September 2008 October 2008 November 2008 December 2008 January 2009 Year 2008-09 (Up to January 2009) Year 2007-08 (Up to January 2008) In Rs crore 15005 16563 10244 9627 9995 11676 7284 5305 6626 13347 105673 58203 In US$ Million 3749 3932 2392 2247 2328 2562 1497 1083 1362 2733 23885 14466 .020 105.Profits earned. investors are required to only notify the Reserve Bank of India within 30 days of receipt of inward remittances.885 92. India has liberalized and simplified foreign exchange controls. the growth rate in 2007-08 was 9%. •India has a large middle class and 55% of its population is below the age of 25.93.

the survey said that there are signs that FIIs who had recorded net outflows in 2008-09 may have returned to the Indian market in the last two months.1 per cent in foreign direct investment flows in 2008. it was found that India achieved a growth of 85. With regard to foreign institutional investors. .YOY Growth (%) (+) 81 (+) 65 Top ten investing (FDI Equity) countries (In Rs. strategic defence goods. Besides. the highest increase across all countries. in high technology.7 trillion during the period. services and systems that can help eliminate import dependence. According to this study.9 trillion to $1. the survey also suggested increasing FDI cap in the insurance sector from existing 26 per cent to 49 per cent and for specialised insurance companies 100 per cent.5 billion in 2008 even as global flows declined from $1. FDI investments into India went up from $25. the survey said. In a recent UNCTAD study on assessing the impact of the current financial and economic crisis on global flows. crore) COUNTRY 200506 2006-07 2007-08 2008-09 (from AprilMarch. 2009) 50794 (11208) 8002 (1802) 3840 (864) 15727 (3454) 3922 (883) 1889 (405) 2750 (629) 2098 (467) 5983 (1287) 1133 (257) 122919 (27309) Cumulative (From April 2000 to April 2009) 168485 (38305) 28303 (6404) 23002 (5246) 34467 (7934) 15957 (3611) 12041(2694) 9580 (2191) 5489 (1229) 11140 (2491) 4146 (948) 404728 (92158) % with total (inflows in terms of rupees) 44% 7% 6% 9% 4% 3% 3% 1% 3% 1% - Mauritius USA UK Singapore Netherlands Japan Germany France Cyprus UAE Total FDI inflows* 11441 (2570) 2210 (502) 1164 (266) 1218 (275) 340 (76) 925 (208) 1345 (303) 82 (18) 310 (70) 219 (49) 24613 (5546) 28759 (6363) 3861 (856) 8389 (1878) 2662 (578) 2905 (644) 382 (85) 540 (120) 528 (117) 266 (58) 1174 (260) 70630 (15726) 44483 (11096) 4377 (1089) 4690 (1176) 12319 (3073) 2780 (695) 3336 (815) 2075 (514) 583 (145) 3385 (834) 1039 (258) 98664 (24579) There has been an increase in foreign direct investment during 2008-09 over the previous year.1 billion in 2007 to $46. The survey has also suggested that FDI limit in defence industries be raised to 49 per cent(from 26 per cent) and allow up to 100 per cent FDI on a case by case basis. it said.

11 1.60 22.55 5029.43 6215.40 8876.86 1194.90 2.94 26736.12 146799.80 3.85 1324.50 0.17 6.30 0.50 760. air freight) Ceramics Rubber Goods 787420.66 1964.38 1.19 17462.13 52115.37 87008. India will offer the most attractive investment opportunities for GPs over the next three years.80 1.46 10955. Mechanical & Engineering industries Information & Broadcasting (Incl.20 3.05 34362.94 17653.38 213595.76 18118.50 0.76 0.88 240.71 409.42 27743.63 2.68 1.60 0.20 522.02 137089.96 0.81 391109. Print media) Mining Textiles (Incl.20 57379.41 217936.48 0.74 275441. which captured the views of institutional investor in 102 private equity investors around the world.79 0.63 70781.49 0.85 48647.06 1551.43 11392.77 1.92 1217.03 402.04 247.32 .85 3129.94 1112.12 7. Sector-wise FDI Inflows ( From April 2000 to January 2009) SECTOR AMOUNT OF FDI INFLOWS PERCENT OF In Rs Million In US$ Million TOTAL FDI INFLOWS (In terms of Rs) Services Sector Computer Software & hardware Telecommunications Construction Activities Automobile Housing & Real estate Power Chemicals (Other than Fertilizers) Ports Metallurgical industries Electrical Equipments Cement & Gypsum Products Petroleum & Natural Gas Trading Consultancy Services Hotel and Tourism Food Processing Industries Electronics Misc.01 2.01 3310.19 94417.81 27241.59 644.57 648. Printed) Sea Transport Hospital & Diagnostic Centres Fermentation Industries Machine Tools Air Transport ( Incl.03 2244. Dyed.47 1.88 2612.73 658.86 611.77 0.Investment Opportunities According to a survey by Coller Capital's latest Global Private Equity Barometer.23 5118.31 0.32 10552.92 1621.17 62416.07 4.50 109563.83 6.92 247.98 0.32 748.75 28310.43 52500.49 33914.90 21204.17 1480.07 63290.39 11.

07 1962.33 86395.11 0.76 11014.00 0.85 3769.80 238. Office & Household Equipments Glass Printing of Books (Incl.22 5330.11 83.35 180561.71 5683.31 0. Surveying & drawing instruments Misc.63 3391.34 5798.48 1074.84 29.44 385.82 121.20 3281.39 316.88 8087.02 0.12 3.01 0.23 0.81 1621.69 41.58 1368.36 511.37 134.18 15.79 145466.10 0.13 13748.12 0.47 11.72 0.55 81010.54 3517310.67 406.00 0.05 0.90 75.23 0.39 0.03 0.27 4162.01 0. Litho printing industry) Soaps.58 84.56 3640.27 18612.16 0.30 6.11 4282.09 96.22 132.16 0.87 50.23 4984.53 0.10 3.06 248.07 0.10 50.00 0. Leathergoods & Piackers Non-conventional energy Industrial instruments Scientific instruments Glue and Gelatine Boilers & steam generating plants Dye-Stuffs Retail Trading (Single brand) Coal Production Coir Timber products Prime Mover (Other than electrical generators Defence Industries Mathematical.12 5749.42 1.42 309.01 0.04 0. Cosmetics and Toilet Preparations Medical & Surgical Appliances Education Fertilizers Photographic raw Film & Paper Railway related components Vegetable oils and Vanaspati Sugar Tea & Coffee (Processing & warehousing coffee & rubber) Leather.14 0.54 177.97 429.80 114.15 148.19 0.01 0.17 2580.16 0.74 86.59 178.51 135.00 - .05 0.17 0.44 5.09 0.96 188.62 6649.52 25.17 139.59 63.64 3774.15 1.01 0. Industries Sub Total Stock Swapped (from 2002 to 2008) Advance of Inflows (from 2000 to 2004) RBI's NRI Schemes Grand Total 7937.64 8.60 6066.Agriculture Services Industrial Machinery Paper & Pulp Diamond & Gold Ornaments Agricultural Machinery Earth Moving Machinery Commercial.60 3757729.00 5.11 0.40 9.67 614.41 0.35 89622.87 14374.28 36.74 126.18 1836.19 100.85 0.

Power 8. House and Retail Estate 6. Telecommunications 4. It is a well known fact that a good well educated young working class can lift a nation against all odds and vice a versa. Petroleum (Oil) & Natural Gas 10. In any country. more critical for economic growth. We are of the opinion that India is likely to transform into an affluent nation in one generation or in the next thirty years. is going to have distinct advantages over other countries when it comes to building a good workforce over coming years. Mature markets across the world are aware about the importance of having a young and working population and its effect on economy.The 10 sectors attracting highest FDI into India are 1. Services 2. Metallurgy 9. The growth that both these countries are seeing now is because of their large young working population. best estimated by projecting growth in the “working-age” population (age 15-60). Leader Prospects’ observes that any entity planning to start business in India. while China’s working age population declines from 2020 to 2050. Construction 5. is the rate of growth in the labor force. Automobile 7. Computer 3. Chemicals The Population Advantage The population of India and China which have (till recently) been a problem for the two countries has now proved to be a blessing in disguise. however. here. The growth in India’s working age population is expected to exceed its already rapid population growth until 2015. India’s working age population increases until at least 2045. India’s advantages are amplified. .

FDI in West Bengal Foreign Direct Investment in various states in and around West Bengal covers West Bengal. 8. 30.0 million from January 2000 to October 2006.83 crores which comes to around USD 334.876. Dadra and Nagar Haveli.685. Maharashtra.1 million).1 million from January 2000 to October 2006.38 crores which comes to around USD 1. 1. Maharashtra (USD 5.485.780.45 crores which is approximately USD 5.73 crores which roughly comes to USD 6.876.112.780. Gujarat. during the period beginning from the year January 2000 to October 2006 corroborates the growth of Indian states in sync with the Indian economy. FDI in Delhi Foreign Direct Investment Inflows on Delhi economy has been estimated to be around Rs. Haryana ranks first in terms of receiving FDI Inflows in India. Haryana.485.650.FDI Status in Different States of India FDI in different states in India have increased steadily since the early 1990s when the Indian economy was opened up to foreign investments.673.650. FDI in Andhra Pradesh - . FDI in Maharashtra Foreign Direct Investment on Maharashtra covers Mumbai. Some of the states in India which have witnessed a massive upsurge in FDI Inflows include Delhi (USD 6. 4. Kerala. Tamil Nadu ranks third in terms of FDI Inflows in India.8 million. 25. and Uttar Pradesh. Gujarat ranks six in terms of FDI Inflows in India.73 crores which is approximately USD 6.8 million.780 million). Delhi.38 crores which approximately comes to around USD 1. Karnataka and Tamil Nadu are among the leading states that have attracted maximum FDI. 8. and Daman & Diu. Karnataka (USD 1. and Andaman & Nicobar Islands. The status of FDI in different states of India. The FDI Inflows in these states from January 2000 to October 2006 was around Rs. FDI in Tamil Nadu Foreign Direct Investment Inflows on Tamil Nadu and Pondicherry has been accounted for Rs.0 million from January 2000 to October 2006. Sikkim. FDI in Gujarat Foreign Direct Investment on Gujarat from January 2000 to October 2006 was estimated to be around Rs. and Tamil Nadu (USD 1. The total FDI Inflows in Maharashtra economy from January 2000 to October 2006 was estimated to be around Rs. 30. FDI in Haryana The total Foreign Direct Investment Inflows in Haryana. FDI in Karnataka Foreign Direct Investment on Karnataka from January 2000 to October 2006 has accounted for Rs.876.523.673.1 million). and parts of Uttar Pradesh has been estimated to be around Rs. Delhi.73 crores which comes to around USD 898.1 million. Other states which are in the receipt of FDI Inflows in India include West Bengal.1 million). Andhra Pradesh.1 million.876.

and effective policies in the industrial units. highly-skilled and trained workforce. Advantages of Maharashtra Economy Maharashtra offers a business-friendly environment.4 million as has been calculated between January 2000 and October 2006. Chemicals. • Mumbai executes around 70 percent of India's stock transactions and is claimed to be the commercial capital of India. Impact of FDI on Maharashtra Economy Impact of FDI on Maharashtra Economy has been very strong as foreign direct investments have introduced innovative technologies in various industrial units in the state. FDI in Uttar Pradesh Foreign Direct Investment Inflows on Uttar Pradesh and Uttaranchal was Rs.061. • Foreign Direct Investment Inflows has increased investment from the domestic market to a great extent.36 crores which is approximately USD 1. Automobiles and Auto Components.77 crores which is approximately USD 75.3 million from January 2000 to October 2006. FDI in Kerala Foreign Direct Investment Inflows in Kerala has also covered regions in Lakshadweep and has been estimated to be around Rs.1 million from January 2000 to October 2006. Petrochemicals. • Increase in the growth rate of agriculture can make the state achieve 10 percent growth rate. Pharmaceuticals. Mumbai was estimated to touch 8. Consumer Durables. • The industrial and service sectors have contributed largely in the robust growth of the state's economy.825. • During 2002-2006. Maharashtra has ranked first in terms of attracting maximum foreign direct investments in executing various projects • FDI Inflows in Maharashtra has brought in innovative technologies in the industrial units in the state • Foreign Direct Investment in the state has raised the competitiveness of the business units in Maharashtra.27 crores which comes to around USD 3. Electronics Hardware. 339. 15. • The export-market has got a real boost up from the FDI Inflows in the state and has also got a bonus of accessibility in the global markets. FDI Inflows in Maharashtra• The Konkan railway project has attracted huge foreign direct investments. excellence in infrastructure. 4.  The Jawaharlal Nehru Port Trust (JNPT) provides effective communication network with markets of Southern.Foreign Direct Investment Inflows on Andhra Pradesh has been estimated to be around Rs. • Sectors which have been heavily benefited from foreign investments in Maharashtra include Engineering. Northern & Western India. Information Technology and Biotechnology.4 percent GSDP growth. • FDI Inflows have also bridged the gap in the foreign exchange system which was a major issue of concern . Andhra Pradesh ranks fifth as a recipient of FDI Inflows in India.

• Location wise. real estate. and Middle East markets. It is situated in the northern part of the country. Punjab.  The state provides excellent network of roads. developed and also expanded. Uttar Pradesh. Impact of FDI on Gujarat Economy has proved to be beneficial for the various industries in the state have grown.7% out of the total foreign direct investment in India during this period. • The state is highly industrialized. FDI inflows in Gujarat have led to rapid development in the industrial sector in this state. With increasing volumes of Foreign Direct Investments (FDI) Gujarat has emerged as one of the most rapidly developing states in India. and Himachal Pradesh.3 million as foreign direct investment for the state during January 2000 to December 2006. among the Indian cities in terms of FDI inflows during 2000 to 2006. Rajasthan. Gujarat has a strategic location providing easy access to the African. Delhi has ranked second only to Mumbai.  Gujarat has the highest number of airports in the country. Impact of FDI on Delhi Economy The Impact of FDI on Delhi Economy has been impressive leading to substantial growth in sectors like IT. • Skilled manpower is abundantly available in Gujarat. Uttaranchal. retail and tourism. Industries attracting foreign direct investment in Gujarat are: • Oil and gas • Infrastructure • Food processing industries • Information technology • Gems and jewelry • Biotechnology • Chemicals • Textiles Amount of foreign direct investment in Gujarat: The regional office of Reserve Bank of India in Ahmedabad received US$ 970. . Haryana. The total percentage of foreign direct investment that the regional office of Reserve Bank of India in Ahmedabad received came to 3. Advantages of foreign direct investment in Gujarat: Foreign direct investment in Gujarat has led to the growth in trade and exports in the state. Delhi is the national capital of India.Impact of FDI on Gujarat Economy Impact of FDI on Gujarat Economy has been positive for it has led to the all round development of the state. western. Delhi serves as the gateways to all the northern states such as Jammu and Kashmir. Factors attracting foreign direct investment in Gujarat:  The state provides extensive network of railways. • Professional services to the investors are provided in Gujarat.

business services.95% in 1993-94.85% in the period 1993-94. which is just next to Mumbai. • The amount of FDI inflows to Delhi during the period 2000 to 2006 was Rs 318. which was increased to 79. • Retail and Leisure • Hotel and Tourism • Healthcare Hub and Medical Tourism • Transport and Logistics • Financial Services Impact of FDI on Uttar Pradesh Economy Improved facilities in Uttar Pradesh have helped in attracting Foreign Direct Investments (FDI) in recent years.20%. transportation. in 2005 it amounted to USD 7. on the condition that the construction area should be equal to 100 acres. fishing.Development in Major Sectors • Information Technology and ITES • Real estate.09 billion. • The investments have helped in creating a strong base for the latest technology.Impact of FDI on Delhi Economy . and in 2006 it stood at USD 5. In 2004. tourism and hospitality.61 billion.31 billion • Uttar Pradesh has an abundance of land and water • Adequate power supply is available in this state. mining and quarrying. such as manufacturing activities has decreased • The tertiary sector including services like commercial trade. • Special facilities are available for both foreign investors as well as NRI investors.97% • The contribution of the secondary sector in the period 1993-94 was 25. which by the year 2004-05 came down to 0. public administration. .11% by the year 2004-05 Impact of FDI on Delhi Economy . and the secondary sector. etc has contributed to the major development of Delhi • The primary sector contributed around 3. forestry. • Delhi was able to attract a high FDI inflow in the realty sector. Advantages of Uttar Pradesh in terms of Attracting Foreign Direct InvestmentsConsidering the investment proposals achieved by the state.92% by 2004-05 • The contribution of the tertiary sector was 70. • Single table clearance system through Udyog Bandhu.22 billion. it can be inferred that the investment climate in the state is quite encouraging. which was reduced to19. the state received investment proposals amounting to USD 3. pertaining to integrated townships.Investment Overview • The inflow of FDI influences the economic growth of Delhi. FDI is being encouraged in Uttar Pradesh to ensure the economic development of the state. communication. banking and insurance. • Land is available at competitive rates. as the central government has allowed 100% FDI. livestock.Economic Overview • The economic analysis of the sectoral growth reveals that the contribution of the primary sector such as agriculture. real estate. • Various state financial institutions are being set up to provide institutional finance. Impact of FDI on Delhi Economy .

46 434. bridges etc. PUNJAB.91 1. ANDAMAN & NICOBAR ISLANDS RAJASTHAN CHANDIGARH.803. The state also has a large number of foreign banks.819. policies and systems are being reviewed in order to create a conductive environment for foreign direct investments in Uttar Pradesh.41 841. HARYANA. PONDICHERRY ANDHRA PRADESH WEST BENGAL.789.79 465. HIMACHAL PRADESH GOA KERALA. chemical complex and textile city. are in need of foreign investments.07 4. STATEMENT ON RBI’S REGIONAL OFFICES (WITH STATE COVERED) RECEIVED FDI EQUITY INFLOWS1 (from April 2000 to December 2009) S.442.531. PART OF UP AND HARYANA KARNATAKA GUJARAT TAMIL NADU.62 37.00 0.17 2.201. roads.88 1.844. The state government has set an organized plan to attract foreign investments in the state and aims at making Uttar Pradesh one of the leading states in Indian economy.73 399.987.89 91.25 27.48 186.47 0. SIKKIM. DAMAN & DIU DELHI.84 6.34 4.61 6. With regard to this. The Indians have achieved an excellence by honing their entrepreneurial skills and abilities which led to a remarkable achievement of the Indians in every field of human activity in the overseas countries.17 .506. Projects entailing large-scale investments such as power.95 5.40 29. The state government has decided to improve the environmental conditions of the state in order to attract more NRI investors for industrial developments.47 19. DADRA & NAGAR HAVELI.95 6.60 171.27 1.18 794.077.42 1.Regional Office2 State covered Amount of FDI Inflows Rupees in crores US$ in million %age with FDI inflows (in rupee terms) MUMBAI 2 NEW DELHI 3 4 5 6 7 BANGALORE AHMEDABAD CHENNAI HYDERABAD KOLKATA 8 9 JAIPUR CHANDIGARH` 10 11 12 PANAJI KOCHI BHOPAL 13 BHUBANESHWAR MAHARASHTRA .49 5.396. plastic city. leather parks.65 0.328.22 0.35 5. 1 RBI’s .12 35. LAKSHADWEEP MADHYA PRADESH. CHATTISGARH ORISSA 168.30 0.144.42 20. toy city. electronic city.48 23.297.927.299.736. integrated agro park.99 1. No.043.39 0.15 20. FDI Inflows in Uttar Pradesh EconomyThere is a lot of scope for NRI investments in the state of Uttar Pradesh.• • • Uttar Pradesh has special industrial areas for setting up of software technology parks.48 310.95 5.

00 18437.-Dec.76 5780. Equity accounted for 90 percent of the total investments and the remaining 10 percent by way of loans in 2006-07. NAGALAND.00 Total 1495.05 1.10 2006-07 11599. India's overseas investments that began with Information Technology and related services sectors has over the years spread to wider areas like manufacturing and financial and non-financial areas. brand fee. Inflows from India's outward FDI are in the form of dividend.96 11324. MANIPUR. MEGHALAYA. royalty.39 21.90 384. MIZORAM. 2006 No. of proposals 1214 1281 1395 1817 1595 1268 Amount of approved proposals Equity 822. UTTRANCHAL BIHAR.103.84 15060.03 1887. During 2006-07 total inflows from outward FDI amounted to $ 295 million.26 60.59 402.18 1768.25 260.00 19.13 2804. license fee.78 11244.74 1475.79 2005-06 3858.39 629. number of proposals approved for outward FDI from India in joint ventures and WOSs increased from 1214 in 2003-04 to 1817 in 2006-07. repayment of loans etc. APPROVED PROPOSALS (In US$ Million) Year 2003-04 2004-05 2005-06 2006-07 Apr.26 7944.14 GUWAHATI 15 KANPUR 16 17 PATNA REGION NOT INDICATED3 ASSAM. technical knowhow fee. The amount of approved proposals increased from $ 1466 million in 2003-04 to $ 15060 million in 2006-07. JHARKHAND 262.28 1331. According to a Reserve Bank of India report.08 10114.52 0.46 1008.50 1017.22 .06 220.78 93.54 The amount of outward FDI from India according to the RBI report. increased from $ 1495 million in 2003-04 to $ 12880 million in 2006-07. 2007 Apr.91 337.40 2010.09 Loan 229.-Dec.32 2339.01 1281.07 2007-08 (April9096.93 2004-05 1365.72 Guarantee Invoked 3.206.75 Total 1466.86 India's Outward Foreign Direct Investment As an outcome of liberalization policies. TRIPURA UTTAR PRADESH.70 47.67 0.33 2854.56 12880.70 Guarantee 413.99 4594. India's outward foreign direct investment witnessed an unprecedented rise in recent period.31 0.50 2079. ACTUAL OUTFLOWS (In US$ Million) Year Equity* Loan 2003-04 1234.83 409.38 4869.44 0. ARUNACHAL PRADESH.77 1270.

60 732.25 549.98 256. SECTORAL (In US$ Million) PATTERN OF OUTWARD FDI DURING APRIL-DECEMBER 2007 Sector Trading Manufacturing Non Financial Services Others Financial Total Month April 54.46 1527.40 Total Approvals 620.27 876.48 milliion.34 INFLOWS FROM INDIA'S OUTWARD FDI (In US$ Million) Year 2006-07 2007-08 (April-December) 2006-07 (April-December) @ Others include dividend.55 345.26 7.11 420. 114.78 118.50 4554. royalty.48 7634.00 234.74 4122.68 337.71 7681. brand Others@ Total 272. repayment of loan.20 396.67 Nov. technical know-how fee.10 66.20 Aug.63 Sept.84 1156.09 274.74 .December) 2006-07 (AprilDecember) 8097.30 5113.22 149.47 322.00 1677.00 July 40.63 172.20 883.61 77.60 May 28.46 17645. The sectoral pattern of outward FDI is led by manufacturing during first nine months of fiscal 2007-08 with $ 7634 million followed by non-finacial services' $ 1677.07 596. 311.67 1861.09 248. Sectorwise 43 percent were bin manufacturing folowed by non-fimnancfinancial services ( 10 percent) and ytrading ( 4 percent).52 364.07 - 8973. 24. 219.16 Dec 157.40 23.00 61.48 fee.00 June 46.20 651.75 294.90 1208.78 879.57 495. etc.99 25.09 32.91 67.96 29.00 5072.93 139. Figures are provisional Dividend 21.33 294. Of the total investmemnts 96 percent were of large investments (4 5 million and above).71 million and $ 620.79 52.71 307.56 Oct.41 20.17 1339.15 licence fee.

2007.69 per cent and light commercial vehicles recorded an encouraging growth of 35. and the auto component industry has reached a turnover of $10 billion. • • • All-time highs in fuel prices and inflation have not dulled demand for automobiles. It employs 13 million people either directly or indirectly. Domestic Sales: The cumulative growth of the passenger vehicles segment during April. spanning everything from small and affordable cars to SUVs. As a result by 2010. are concerned about the economic slowdown and credit availability. good return ratios. Focus on cash flow and dominant market position. dominant market shares. utility vehicles by 12. which is about the same as China's market size today. in our view.06 . the automobile industry has achieved a turnover of $34 billion. Over the past year. India's automobile market expects to launch 12 new models by the end of this year.13 per cent. however.07 per cent.52 per cent. The contribution of the automotive industry to GDP rose from 2.82 per cent.1 million vehicles a year.January over the same period last year. The last quarter has seen a substantial growth in sales of passenger cars and commercial vehicles on a yearon-year basis. We expect the plunge in commodity prices since 1HFY09 to raise auto sector margins from 4QFY09 and the 200bps lower auto-loan rates to increase demand.EXAMPLE: SECTORS Indian Automobile Sector • Qualitative improvement. Lower commodity prices should reduce raw material costs and result in an improvement in EBITDA margins from 4QFY09. multi purpose vehicles by 23. India's low-cost manufacturing advantage combined with a robust vendor base for components make a compelling case for it to be a global leader in small cars. The government's Automotive Mission Plan calls for automotive sales to more than quadruple and for the auto sector's employment to grow from around 13 million to 25 million people by the year 2016. The two wheeler market grew by 13. Stimuli to help. Passenger cars grew by 22. The commercial vehicles segment grew at 37.77 percent in 1992-1993 to 5 percent in 2006. In addition. Rural-focused and low-price point products are best positioned to grow through this downturn.23 per cent during April. Our stock picks are those companies with strong cash flows. scooter grew by 2.37 per cent. We.45 per cent. Motorcycles grew by 15. in our view. Better margins. India's tire industry has registered a turnover of almost $3 billion. Growth of medium and heavy commercial vehicles was 38. Measures such as lower interest rates and excise duties should spur monthon-month growth in auto volumes.42 per cent. and with capacity expansion completed or nearing there (operating/financial leverage). We recommend choosing stocks with healthy cash flows and sound business fundamentals.January 2007 was 21. India's capacity could triple to 3. Both passenger car and commercial vehicle sales are up.

60 per cent Industry structure: Industry has a mix of large domestic private players such as Tata. Toyota. Honda. Daimler chrysler.46 per cent. Hero Honda and major international players like General Motors (GM). commercial vehicles exported increased by 25. Suzuki. Ford. 2000–2007 Export: Automobile exported registered an overall growth rate of 28. Bajaj. The passenger vehicles exported grew by 14.27 per cent and two wheeler exported grew by 23. . Hundai and Volvo.49 per cent during AprilJanuary 2007 as compared to the same period last year.per cent and mopeds registered a growth of 5. Mahindra. Ashok Leyland.74 per cent R&D Intensity (%) of Indian Automotive Sector by Segments.

17. o Fourth largest car market in Asia o Fifth largest commercial vehicle manufacturer in world Major Recent Policy Measures/ Initiatives for the Indian Automotive Sector Policy Quantitative import restrictions dismantled in early 2001. 150% deduction of R&D expenses from taxable income has been allowed o The National Automotive Testing and R&D Infrastructure Project. involving the government. DSIR. 2008). thus to encourage the automotive exports. Advancing the 1990’s FDI liberalization. o It involves an investment of approx. including OEM/ Tier Level exports and outsourcing of design & engineering private investment in R&D/innovation. and Tech‐intensive SMEs & automotive firms. globally competitive auto ancillary industry Established automobile testing and R & D centers Among the lowest -cost producers of steel in the world Leading Edge o Second largest two.wheeler manufacturer in world o World’ largest motorcycle manufacturer Hero Honda is in India. This Policy allows 100% automatic foreign ownership.18 billion. o It would spur the systems solution capabilities of Indian auto component Firms and Indo‐foreign JVs (Singh. industry and academia. of which the Industry would contribute Rs. and promises to encourage the R&D and vehicle designing. and establish centers of Excellence for automotive R&D. Remarks/ Details o The 2006 technology roadmap identified the priority topics for R&D. o Expected to harness the Indian strengths in automotive engineering. $380 million(Rs. was formed (under TIFAC. IT and electronics. .18 billion) over a 6‐year period. o The consortium technology projects involve the research institutes. 1. Through appropriate support measures. In 2003 a Core‐Group on Automotive Research (CAR). the March 2002 Auto Policy aims to make India a global hub for automotive components and a regional hub for Small cars. Currently this Scheme is valid till March 2012. NATRIP was approved in July 2005 to enhance and upgrade the testing and validation infrastructure. Delhi) Since July 2004.Advantage India        Technological advantage Cost competitiveness Skilled manpower Well developed.

o encouragement to establishing Development Centers for SMEs. (Note: Tata Motors have also entered into an agreement with the VCA for certification. Modernization Fund. fuel efficiency and Emissions. and is assessing the option of signing it o So far India had no homologation (vehicle road‐worthiness) certification agency which is globally accepted. o enhancing exports and related infrastructure and streamlining training/research institutions in and around auto hubs.5 billion o setting up of Automotive training Institute and outsourcing of engineering services. Technology billion total automotive turnover in 2016.K. including $20‐ 25 billion component exports and $2–2.wheeler segment Heavy truck segment .o In February 2006 India became a contracting party (voting member) of the 1998 GTR Agreement. NATRIP‐VCA MoU: In October 2006 the NATRIP Implementation Society has signed a Memorandum of Understanding with the Vehicle Certification Authority (VCA) of U. o At present India is not a signatory to the 1958 Agreement. with special emphasis on SMEs. o The AMP 2006–2016 targets $40‐45 billion automotive exports in 2016. o India has formed six ‘WP. for the issue of certificates in India after the testing at NATRIP Centres. like IT‐ Auto Design Centre. which imposes reciprocity for any Regulation adopted by a contracting party. Investment opportunities      Establishing Research & Development centers Establishing engineering centers Passenger car segment Two. The exposure to frontier technologies would facilitate global integration of the Indian automotive industry.) The ‘Automotive Mission Plan (AMP) 2006‐ 2016’ launched in January 2007 recommends: o It shall reduce the cost of certification. Special Auto Parks and intensive designing & styling. bearing on the vehicle safety. o The 1998 GTR Agreement aims at developing through wide participation the Global Technical Regulations (GTRs) for automotive products. The automotive exporters have to send the products abroad for testing and approval—costly and irksome. It also targets $145 auto component virtual SEZs.29 India Working Groups’ for different auto component categories. and. India is an Observer. especially for iterative product/ process development.

India exports IT products and IT enabled services to over 133 countries around the world.1 billion in 2005-06. are expected to increase by around 41 per cent to reach USD7. the medical transcription industry will be worth US$ 798. in the current fiscal (2008-09).08. on the other hand. exports stood at US$ 31. software development and IT enabled Services (ITeS)/ Business Processes Outsourcing (BPO). In 2007. CRIS INFAC expects the export revenues of the Indian IT services industry to touch USD15. US-based healthcare companies are expected to send more information technology projects to India. According to NASSCOM.1 million by 2010 and could employ as many as 50. the Information Technology (IT) industry has become one of the fastest growing industries in India.000 people. exports for the Information Technology (IT) and Business Process Outsourcing (BPO) sectors are expected to touch US$ 60 billion–US$ 62 billion in 201011.Policy initiatives  The Indian auto Industry with a turnover of US$ 12 billion and auto parts Industry with a turnover of US$ 3 billion offer excellent scope of FDI  Automatic approval for foreign equity investment upto 100% of manufacturer of automobile and component is permitted  The Automobile Industry is delicensed  Import of component in freely allowed IT and ITeS: The ideal workstation Over the past decade. . The export revenues of the IT-enabled Services (ITES) sector. in order to bring down their costs of operations. India has emerged as a preferred base for ITeS and investments in this sector are poised to continue to grow rapidly over the next few years. As per a NASSCOM report. registering a growth of 31 per cent over 2004-05.6 billion in 2005-06. The IT industry has two major segments. exports were likely to touch US$ 47 billion. and 80 out of the world’s 117 SEI CMM level – five companies are from India.4 billion. According to a study done by Off shoring Research Network (ORN).

They are also focusing on development of Tier-II cities to meet the needs of the ITeS industry. The government initiatives on issues such as enhancing infrastructure and trained human resources are laying the foundation for providing sustained benefits to this sector. India is in a comfortable position as the share of IT and IT-based services in China's export revenues comes to only just above three per cent. which will provide a wider location choice and enable geographical expansion. India is also likely to retain its tag as the back office of the world. At present. FDI upto 100 per cent is permitted in the ITeS sector under the automatic route without any prior approval. . compared to over 26 per cent in India.As per a report by Deutsche Bank Research. Significant measures and incentives include: • Single-window clearance facility • Income tax holiday • Customs duty exemptions • Continuing strengthening of communications infrastructure Software Technology Parks of India (STPI) and Hardware Technology Parks of India (HTPI) provide infrastructure support to this sector. The last few years have also witnessed the growth of Special Economic Zones (SEZs). Policy initiatives The Government of India is taking proactive measures to encourage investments in the IT sector. State governments too are demonstrating a proactive approach towards attracting and facilitating ITeS investments and are providing support for the development of special infrastructure for the ITeS industry. It is expected that SEZs would provide further impetus to this sector. State governments are also undertaking measures to continually enhance the Pool of welleducated and skilled human resources by facilitating the Establishment and growth of educational institutions offering special curriculum and certification for a range of IT skills. amid competition from its neighbouring country China.

South Africa and the Latin American countries. followed by Western Europe. According to business intelligence analysts. The industry is also looking at providing increasingly higher value-added services. The ITeS.Investment Opportunities ITeS exports of India are estimated to cross USD 20 billion by 2009. Intel President Paul Otellini says India can emerge as the leader in globaI IT economy. New markets aggressively being explored by Indian companies are South Korea. Off shore contact centers will be the fastest growing segment and high end services such as equity research support.BPO industry Which notched up revenues of around USD 773 billion in 2002 is expected to step up turnover to over USD 1 trillion by 2006. the ITeS. 46 per cent of the US Fortune 500 companies are stated to see India as a potential Outsourcing hub. North America continues to dominate the export revenue mix. .BPO market will be one of the fastest growing segments within the IT industry. insurance claims processing and technology research and development will see rapid expansion over the next few year. on a much larger scale. Asia Pacific is the other significant region with Japan being the Single largest market.

4%. . Skilled and managerial labor and technical man-power are such as that they match the best available in the world. A combination of these factors contributes to India having a distinct and a cutting edge in the globe. 1 It is among the largest economies in the world. GDP shoots up to 10.Conclusion Present day India enjoys the status of an emerging market. India has been termed as the ‘stealth’ miracle economy of the new millennium. There has been the advent of outsourcing which has put India on the global map. There has been the entry of many multinational corporations (MNC’S).

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