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1 Department of Industrial Policy & Promotion Ministry of Commerce & Industry Government of India Investing in India.

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Presentation on theme: "1 Department of Industrial Policy & Promotion Ministry of Commerce & Industry Government of India Investing in India."— Presentation transcript:

1 1 Department of Industrial Policy & Promotion Ministry of Commerce & Industry Government of India Investing in India

2 2 Indian Economy – GDP Growth 2005-06 H1 8.1% Services share in GDP over 50% (52.4% share in GDP in 2004-05)

3 3 Indian Economy – External Trade Total External Trade (2005-06)US $ 241 billion- growing annually above 20% in real terms Exports crossed US$100 billion mark in 2005-06

4 4 Indian Economy – FDI Inflows FDI inflows grew by 72% in 2005-06 70% of FDI going into manufacturing industry

5 5 Economic Reforms: FDI Policy Most sectors including manufacturing activities permitted 100% FDI under automatic route (No prior approval required) Industrial Licensing Licensing limited to only 5 sectors (security, public health & safety considerations) Exchange Control All investments are on repatriation basis Original investment, profits and dividend can be freely repatriated Taxation Companies incorporated in India treated as Indian companies for taxation Convention on Avoidance of Double Taxation with 71 countries including Korea

6 6 Foreign Direct Investment Routes Automatic Route Prior Permission (FIPB) Investing in India General Rule No prior permission required Inform Reserve Bank within 30 days of inflow/issue of shares By Exception Prior Government Approval needed. Decision generally within 4-6 weeks

7 7 Extant Policy on FDI SECTORS UNDER AUTOMATICROUTUPTO 100% FDI Most manufacturing activities Non-banking financial services Drugs and pharmaceuticals that do not attract compulsory licensing or involve use of recombinant DNA technology Food processing Electronic hardware Software development Film industry Advertising Hospitals Private oil refineries Pollution control and management Exploration and mining of minerals other than diamonds and precious stones Management consultancy Venture capital funds/companies Setting up/development of industrial park/model town/SEZ Petroleum Products Pipeline Wholesale Trading INFRASTRUCTURE SECTORS UNDER AUTOMATIC ROUTE UPTO 100% FDI Electricity Generation (except Atomic energy) Electricity Transmission Electricity Distribution Mass Rapid Transport System Roads & Highways Toll Roads Vehicular Bridges Ports & Harbours Hotel & Tourism Townships, Housing, Built-up Infrastructure and Construction Development Project Greenfield Airports

8 8 Main Sectors with FDI Equity/Route Limit FDI equity limit- Automatic route Insurance – 26% Domestic airlines – 49% Telecom services- Foreign equity 74% Private sector banks- 74% Mining of diamonds and precious stones- 74% Exploration and mining of coal and lignite for captive consumption- 74% FDI requiring prior approval Defence production – 26% FM Broadcasting - foreign equity 20% News and current affairs- 26% Broadcasting- cable, DTH, up- linking – foreign equity 49% Trading- wholesale cash and carry, export trading, etc., 100% Tea plantation – 100% Development of airports- 100%

9 9 Foreign Technology Collaboration Policy Foreign technology agreements also allowed under Automatic route: Lump-sum fees not exceeding US$2 Million Royalty @ 5% on domestic sales and 8% on exports, net of taxes Royalty up to 2% on exports and 1% also permitted for use of Trade Marks and Brand name, without any technology transfer Payment of royalty without any restriction on the duration allowed. Wholly owned subsidiaries can also pay royalty to their parent company

10 10 India: Investment Outlook 2 nd most attractive investment destination among the Transnational Corporations: UNCTAD’s World Investment Report, 2005 2 nd most attractive investment destination – AT Kearney Business Confidence Index, 2005: Among the top 3 investment ‘hot spots’ for 2004- 07:UNCTAD Corporate Location – April 2004 Most preferred destination for services - AT Kearney’s 2005 Global Services Location Index As per FICCI FDI Survey 2005: 70 percent of the foreign companies, who participated in survey, are making profits in their Indian operations

11 11 India’s Competitive Strengths - Human Capital India’s competitive edge - its highly-skilled manpower and entrepreneurial expertise Ranks 3 rd in availability of scientist and engineers Ranks 8 th in quality of management schools Over 200,000 engineering graduates Over 300,000 post graduates from non-engineering colleges 2,100,000 other graduates Knowledge workers in software industry increased from 56,000 in 1990-91 to over 1 million by 2004- 05; India would continue to be surplus in working population for a long-time Would contribute 25% to the additional working population globally over the next 5 years. 54% of India’s population under 25 years of age

12 12 ICT Advantages IT –ITES Industry Exports US$23 billion in 2005-06, Growth=34% 2010 exports projection : US$60 billion, to be 35% of India’s total exports High quality standards 76 SEI/CMM level 5 companies, two third of world’s total, are Indian 400 of Global Fortune 500 companies are clients of Indian firms R&D base of over 100 FORTUNE 500 companies Investment Opportunities Collaborative ICT research Joint Software development in a variety of applications Hardware manufacturing Source: NASSCOM

13 13 Investment Opportunities- Power Policy & Incentives FDI up to 100% except in atomic power Ten-year tax holiday for generation and distribution or transmission and distribution of power Electricity Act 2003 de-controlled power sector  Independent Regulators Investment Opportunities Additional capacity required 100,000 MW till 2012 Investment US$120 billion needed

14 14 Investment Opportunities- Roads & Ports Policy FDI up to 100% Model agreements on Public-private partnership Investment Opportunities US$ 35 billion to develop national highways alone Road Projects for 12,000 km on offer US$22 billion to develop Ports, Shipping & Inland waterways 24 projects with investment of US$1.6 billion under implementation/award

15 15 Investment Opportunities-Telecommunications 5 million+ phones added every month Among the lowest mobile tariff in the world Share of private sector >50% Tele-density of 12.73 expected to be 20 in next three years Broad Band: 1 million connections Internet subscribers 6.1 million Investment Opportunities Setting up manufacturing facilities; Supply of hand sets and equipments Telecom & Value added service.

16 16 Investment Opportunities- Automobile Existing makers- GM, Ford, Honda, Hyundai, Toyota, Fiat, Daimler Chrysler, Suzuki, Tata Auto Component Industry- US$ 8.7 billion industry in 2004-05 Annual growth rate 30% US$17billion by 2012 (AT Kearney ) Top global vehicle manufacturers/ tier 1 suppliers sourcing components from India- General Motors, Daimler Chrysler, Volvo, Cummins, Ford, Fiat, Renault, Toyota Motors Auto Production 2005-06: > 9 million Passenger Cars: > 1 million Two wheelers: > 7.6 million Opportunities to leverage on low cost, high-skilled manpower to reduce cost of production

17 17 Investment Opportunities- Food Processing Third largest producer of food items Vision 2015: US$ 22 billion for increase in processing Fruit & vegetables from 1.4% to 15% Dairy from 13% to 30% Buffalo meat from 21% to 45% Poultry from 6% to 25% Marine products from 8% to 20% Investment opportunities in Processing and support infrastructure like cold chain

18 18 Special Economic Zones Policy Duty free zones, deemed foreign territories FDI up to 100% permitted in almost all manufacturing activities Transfer of goods from DTA to SEZ treated as exports, Units to be net foreign exchange earner within 5 years. No export commitments No limits on DTA sales Can be set up in the public, private or joint sector Single Window Clearance  Incentives  For developer: Income tax exemption for a block of 10 years in 15 years  For units: 100% Income Tax exemption for first 5 years, 50% for next 5 years and 50% of the ploughed back export profits for next 5 years  Exemption from indirect taxes; excise, sales, services tax, etc.  Freedom to raise ECB with out any maturity restrictions

19 19 Advantage INDIA Abundant availability of Skilled Human Resources -Young Demographic Profile- 54% population below 25 years - Adequate natural resources and raw materials- Iron ore, Coal, bauxite, Fruits and Vegetables. A middle class of 250 million persons growing by 20 million annually - major consumer of consumption goods, white goods and other durables. Setting up manufacturing base- low wage costs, high skilled labour availability, and low capital cost Judicial System- Established rule of law and a vibrant three tiered democracy

20 20 Indo Korea Investment Scene Cumulative FDI inflows from Korea: 0.76 billion (2.07%) Korea ranks 9th Top sectors attracting FDI inflows (from January 2000 to June 2006) from South Korea are Electrical Equipments (including computer software & electronics) (41.49%), Metallurgical Industries (26.13%), Food Processing Industries (9.81%), Transportation Industry (6.69%) & Industrial Machinery(1.69%).., Top companies include Tae Hyun Jeongl & Posco, Samsung Electronics Co. Ltd., Lotte Confectionery Co. Ltd., LG Electronics Ltd., Ezentech Co. Ltd Korea’s Investment abroad : 2002 : US$ 2.6 billion 2003 : US$ 3.4 billion 2004: US$ 4.7 billion

21 21 Thank You


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