Invest India Policies & Opportunities Rajeeva Ratna Shah Secretary Department of Industrial Policy and Promotion Ministry of Commerce & Industry Government of India November 3, 2003, Paris 31/03/2017

India – Land of Opportunities Fourth largest Economy (PPP) - A safe place to do business Second Largest Emerging Market Largest democracy – political stability & consensus on reforms Largest reservoir of skilled/semi-skilled manpower Liberal & transparent investment policies Long-term sustainable Competitive advantage - High growth rate economy Highest returns on investment; India 19.33%, China 14.25%, Thailand 13.3%

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 Economy grew at 5.4% during the IX plan (1997-2002) Most countries would be proud of such growth. Economy expected to grow at 7 % this year. Foreign exchange reserves growing at US$ 2.5 billion every month. Have crossed US$ 91 billion. India currency is strengthening against US$. Forex reserves likely to soon touch US$ 100 billion 63000 bank branches with prudential norms. Vibrant capital market with nearly 9000 companies listed at Stock exchanges 31/03/2017

Sustained Economic Growth (Base year: 1993-94 ) The economy has witnessed some fluctuations due to adverse climatic conditions in some years. Last year despite an acute draught in large parts of the country, the economy still grew by 4.4%. Economic growth in the last 10 years has been over 5.5% The growth this year now expected at 7%. 31/03/2017

Growing Foreign Exchange Reserves Foreign Exchange Reserves (US$ billion) Exchange Rate (Rs/US$) Foreign exchange reserves are rising very sharply. Forex reserves expected to cross US$ 100 billion this year, addition of almost US$ 50 billion in just 2 years. The value of Indian currency is market determined and has of late been getting strengthened against US$. 31/03/2017

Availability of Skilled Labour Select Indicators India 8.4 Brazil 7.5 USA 7.4 Mexico 6.6 Czrch 6.3 Availability of Qualified Engineers 1=Low 10= High China Availability of Skilled Labour 1=Low 10= High 4.2 India offers high quality and skilled manpower at competitive costs. Rated second best in terms of availability of scientists and engineers Macro-economic fundamentals are sound. 31/03/2017

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; 31/03/2017

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; Golden Quadrilateral 5846 km NS-EW Corridors.7300 km 1965 km already completed 4777 km work under progress Nearly 11 Km of highways getting added every day. Airports at New Delhi and Mumbai being developed with private participation. Respective legislation amended. New Electricity Act freely permits captive power generation and allows trading of electricity. 31/03/2017

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 18 Indian Companies in the latest FORBES 200 list of most competitive small and medium enterprises Last year there were 13 Companies 31/03/2017

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) Global Competitiveness Report by UNCTAD 2002-03 Ranks 2nd in terms of availability of engineers and scientists second only to Israel. High ranking in firm level innovation and technology absorption India is a place where innovation and entrepreneurship flourishes. 31/03/2017

The Emerging Market: India Traditional & Emerging Focus Traditional MNC Business Model 5-10 million, Rich Some MNCs? PPP>$10,000, 50-60 m Local Firms PPP $ 3-10,000, 150m Future Opportunity? PPP $ 2-3,000, 150m India has a large middle class population of 300 million. The demand for better services and goods is rising. Indian markets provide immense business opportunities. PPP>$ 2000, 500m © C.K. Prahalad 31/03/2017

India a Preferred VC Destination in Asia-2001 Country 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 Sri Lanka $ 0.0 1 India is also a major destination for the venture capital funds, highlighting the strong knowledge and innovation base. The capital markets are well developed and transparent. India is also receiving substantial FII investments. 31/03/2017 Source : AVCJ

Investing in India – Entry Routes Automatic Route Prior Permission General rule No prior permission required Inform Reserve Bank within 30 days of inflow/issue of share By exception Prior Government Approval needed. Decision generally Within 4-6 weeks Foreign Direct Investment in a large number of sectors is permitted under the Automatic Route. No prior approval is required for making investment under the Automatic route. Only information to the Reserve bank of India within 30 days of inward remittance or issue of shares is required. Small number of cases requiring Government approval are considered by an Empowered Body, the FIPB, in a time bound manner. Compulsory licensing only for 6 categories Alcoholic beverages Cigarettes and cigars Electronic aerospace and defence equipments Hazardous chemicals Industrial explosives f. Drugs and pharma using recombinant technology 31/03/2017

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 31/03/2017

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 31/03/2017

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 31/03/2017

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 Prior Government approval required in the six sectors under compulsory licensing, purchase of shares in an existing Company and having previous joint venture require Government approval. In addition sectors where investment is not under automatic route would require prior Government approval. The list of FDI equity caps and the route of entry is available in the Manual circulated among the participants. 31/03/2017

Country wise FDI inflows (Since July 1991) France ranks 7th Total FDI inflows from France US$ 620 million since 1991, share of 2.75% in total inflows Total FDI approvals are US$ 1.72 billion Realisation rate is 36% Total FDI inflows into India are US$ 35 billion Inflows in the last three years have been US$ 260 million 31/03/2017

Investment from France- Sectors (Since July 1991) 31/03/2017

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 31/03/2017

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. All Intellectual Property Legislations are WTO compatible. India is on its way to meeting its future commitments as well. We have recently set up the Intellectual Property Appellate Tribunal. A major programme at strengthening the IP administration under implementation. 31/03/2017

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; The FIIA periodically meets with foreign investors. FIIA met with Investors from France on 6.10.2003 An Empowered Sub-Committee of the national Development Council, comprising of many Central Ministers and Chief Ministers of the State governments has been set up to review the extant procedures and dismantle administrative barriers. 31/03/2017

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. Latest AT KEARNEY Business Confidence Index ranks India as 6th best investment destination. ATKEARNEY have also ranked India among the top 10 tourist destinations. India is rated as the best destination for Business Process Outsourcing. India is also a major destination for venture capital 31/03/2017

Opportunities and Potential Areas of Cooperation Roads $ 40 bn Power Generation $ 143 bn Transmission & Distribution $ 116 bn Coal $ 26 bn Investment Requirement in Energy & infrastructure up to 2012 Refineries $ 22 bn Cross-Country Pipelines $ 10 bn Oil & Gas $ 100 bn The investment opportunities in the infrastructure sector are immense. With investment requirement of over US$ 500 billion. Ports US $ 20 Billion LNG Terminals $ 10 bn Railways US $ 15 Billion 31/03/2017

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; Some of the specific investment Opportunities: 7000 Km of Highways will be tendered this year under the National Highways development programme. AT the State level also major projects for road development are being taken up. Many more opportunities in the development of infrastructure in the cities. 31/03/2017

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. Addition of 100,000 MW planned over the next 10 years. The existing installed capacity to be doubled. Another initiative to develop 50,000 MW of hydro electricity. Detailed project reports are being prepared to facilitate private investment. The Sagar Mala project envisages development of ports and shipping sector at an investment of over US$ 22 billion, largely in the private sector. 31/03/2017

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. Cell phones increasing at an astonishing rate of 20 million a year. Already increase of 10 million has taken place this year. Most experts expect increase of 100 million in the next 3-4 years. Provides immense opportunities for setting up manufacturing facilities. Landline phones also increasing rapidly. Tele-density could reach 20-25 by 2010. Producer of a large number of food products The demand for processed food rising with growing urbanization and changing life styles 31/03/2017

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 31/03/2017

ICT opportunities India’s inherent strengths Opportunities : JV/FDI 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 31/03/2017

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 31/03/2017

Cost savings by off shoring BPO services to India Impact* Key opportunity areas Overall cost saving Per cent Claims processing Servicing Call centre operations Insurance 10.0-15.0 Call centre operations Loan processing (consumer, corporate, mortgage) Retail financial services / Retail banking 8.0-12.0** Research and development Pharmaceuticals 5.0-6.5 Call centre operations Billing Telecom 1.5-2.5 Engineering and design Accounts payable/ receivable Automotive 1.0-2.0 40-60% cost saving for processes offshored Revenue accounting Call centre operations Frequent flyer programmes Airlines 0.8-1.8 31/03/2017

Country Advantage Likely to be Comoditized (45-55% savings) Vendor advantage (30-40% savings) Original Cost base Factor Savings Additional Telecom & manage- ment costs Off-shore Location cost Consoli-ation, Standar- Dization & superior skills Task Reengi neering Econo- mies of scale Process Reengine -ering New cost Task migration Task level improvement 100 60-65 10-15 8-13 5-7 3-5 Does not Include gains from Over-delivery and continuous 45-55 15 30-35 Task aggregation And process level improvement 31/03/2017

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 31/03/2017

Global Business Leaders - Bullish On India’s Potential “We are expanding our presence in India to take advantage of the ample R&D talent available” JOHN CHAMBERS, CISCO JACK WELCH, GE “India is a developed country as far as intellectual capital is concerned” “India is handling the most sophisticated projects in the world..I am impressed with the quality of work” MICHAEL DELL, DELL BILL GATES, MICROSOFT “India can be a major part of Dell’s operations and we are looking to capitalize on India’s human capital” 31/03/2017

Visit us at www.dipp.nic.in E-mail at rrshah@ub.nic.in Thank You Visit us at www.dipp.nic.in E-mail at rrshah@ub.nic.in 31/03/2017

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