Investment in India

Power industry in India is very lucrative for NRIs

The power sector in India has undergone significant progress after Independence. When India became independent in 1947, the country had a power generating capacity of 1,362 megawatt (MW). It is now one of the fastest growing economies with ever increasing demand representing an attractive destination for the power industry. The Indian power sector will add nearly 45,000 MW to its total installed capacity by 2013-14 to the existing production, according to a RNCOS research report, 'Indian Power Sector Analysis'.

Investment options in Indian power industry

The investment climate is very positive in the power sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth Five Year Plan (2017-2022).

The industry attracted foreign direct investment (FDI) worth Rs 172.80 crore (US$ 31.57 million) in the month of May 2012.

The Government of India has initiated several reform measures to create a favourable environment for the newly added generating capacity in the country and attract investments from the overseas Indians. The policies and reforms have put in place a highly liberal framework for generation of power in the country.

Government initiatives to boost Indian power sector

The Government of India has initiated several policies to promote and garner investments in the power sector in India. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power.

In order to attract foreign investments in the power sector, the Government of India as per extant policy has permitted 100 per cent FDI under the automatic route in the power sector. Accordingly, any foreign power company and non-resident Indians (NRIs) can enter and invest in the Indian power sector through FDI route.

India and Malaysia have agreed to strengthen economic engagement and promote cooperation in renewable energies, and to take necessary steps to encourage their development for mutual benefits, as per Dr Farooq Abdullah, Union Minister for New and Renewable Energy (MNRE).

Growth scenario of Indian power sector

Development of power sector is the key to the economic engagement. The power sector has been receiving adequate priority ever since the process of planned development began in 1950. With a large swathe of rivers and water bodies, India has enormous potential for hydro power. Twelfth Five Year Plan (2012-2017) includes additional 30,000 MW of hydro-electric power generation. India currently has 4.4 gigawatt (GW) of net electricity generation capacity using nuclear fuels (across 20 reactors) and aims to increase it up to 20 GW by 2020; with one of the world's largest reserves of thorium, India has huge potential in nuclear energy.

India is set to become a global manufacturing hub with investments across the value chain. About 82 GW worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure.

Investments Opportunities in Indian Shipping Industry for NRIs

The Indian Shipping segment, with 187 minor ports and 13 major ports spread across nine maritime states, is poised to mark exponential growth in the years to come. The Government of India is geared to attract foreign investors in India by embarking on public-private partnership (PPP) route for modernisation and expansion of the Indian ports.

The total capacity of the port sector is envisaged to be 2,301.63 million tonnes (MT), to meet the overall projected traffic of 1,758.26 MT by 2016-17, as per the 12th Five Year Plan (2012-17) document. "The traffic forecast by the end of the 12th Plan would be 943.06 MT and 815.20 MT for the major and non-major ports respectively, with corresponding port capacities of 1,241.83 MT and 1,059.80 MT respectively," it added.

According to the Planning Commission, the capacity of Indian ports will have to nearly double to 2,302 MT over the next five years to be able to handle the fast growing cargo traffic.

The shipping industry of India has witnessed various deals and developments pertaining to foreign direct investment in India.

Indian Shipping Industry Goes Global

As the Government of India is determined to get Indian shipping industry at par with the global standards, it is in continuous discussions with foreign investors in India and across the world to achieve the growth targets.

The Ministry of Shipping expects that the bi-lateral co-operation would enable Indian organisations to acquire appropriate know-how, scientific knowledge and research and development (R&D) capabilities from the European country.

Moreover, India has recently shown interest to adopt new technology regarding decongestion of ports; information technology for the movement of container traffic and maritime training from Germany.

Investment Opportunities in Indian Shipping Industry

At the beginning of the financial year (2010-11), the Ministry of Shipping fixed a target of 21 projects under PPP for the major ports out of which two projects have been awarded so far at Tuticorin Port and Ennore Port.

The Government of India is focusing on port infrastructure development in the country and is promoting private participation and foreign direct investment in India. The Government has allowed 100 per cent foreign direct investments under the automatic route for:

• Leasing of existing assets of ports
• Construction/ creation and maintenance of assets such as-container terminals bulk/ break bulk/ multi-purpose and specialised cargo berths, warehousing, container freight stations, storage facilities and tank farms, cranage/ handling equipment, setting up of captive power plants, dry docking and ship repair facilities
• Leasing of equipment for port handling and leasing of floating crafts
• Captive facilities for port based industries

Investment Policy Updates

According to a Ministry of Shipping's press communication a new programme - Perspective 2020 - will replace the existing NMDP plan. The Maritime Agenda 2010-2020 is a perspective plan of the Shipping Ministry for the present decade which has set the goals as follows:

• To create a port capacity of around 3,200 MT to handle the expected traffic of about 2,500 MT by 2020
• To bring ports at par with the best international ports in terms of performance and capacity
• To increase the tonnage under the Indian flag and Indian control and also the share of Indian ships in our EXIM trade
• To promote coastal shipping as it will help in decongesting our roads and is environment friendly

Improved Banking Services for NRIs in India

India economy is the fifth best in the world for dynamic growing businesses, according to the Grant Thornton Global Dynamism Index. The index gives a reflection of how suitable an environment it offers for dynamic businesses.

In terms of purchasing power parity (PPP) it is expected to become world’s third largest economy by 2050, according to a recent report titled, 'World in 2050 The BRICs and Beyond: Prospects, Challenges and Opportunities' by PricewaterhouseCoopers (PwC). It is one of the most attractive destinations for business investments for non-resident Indians (NRIs) and overseas Indians. It is a land of large manpower base, diversified natural resources and strong macroeconomic fundamentals.

The robust financial system boasts the economy of India. It is essential for economic growth and development. The financial services sector in India includes banking sector, capital markets, insurance sector, private equity, stock markets, etc.

Banking services in India

Banking in India is moderately consolidated, with the top 10 players accounting for approximately 60 per cent of the total industry. The Indian banking sector is majorly dominated by public sector banks.

The Indian economy has registered a rapid growth in the banking population in previous decade due to increase in demand for consumer loans, housing loans and credit cards. There will be a requirement of at least 40,000–50,000 additional bank branches and 160,000–190,000 additional ATMs in this decade.

Major services of banks in India include:

• Privatisation & Disinvestments
• Corporate & Debt Restructuring (Mergers & Acquisitions/ Takeovers)
• Insurance & Financial Institutions regulations
• Licensing and regulatory approvals
• Project / Assets Finance
• Consortium, Mortgage, Pledge & Lien Agreements
• Loan, Credit & Security Documentation
• Futures/derivatives litigation

Indian banks also provide business investments opportunity to the NRIs and person of Indian origin (PIOs). These are:

• Non-Resident (External) Rupee (NRE) Accounts: NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney
• Non-Resident Ordinary (NRO) Rupee Account: NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Account should be denominated in Indian Rupees
• Foreign Currency Non Resident (Bank) Account – FCNR (B) Account: FCNR (B) accounts are only in the form of term deposits of 1 to 5 years. All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. Account can be in any freely convertible currency

Government initiatives to boost Indian banking sector

The Government of India has provided an added advantage to the banking industry by proposing to set up an Asset Reconstruction Firm. The banks burdened with non-performing assets will ease considerably, with the setting up of such companies.

The Government of India has also permitted offshore banking units to be set up in special economic zones (SEZs).

Foreign direct investments (FDI) in private banking sector of India is allowed up to 74 per cent, where FDI up to 49 per cent is allowed through automatic route and FDI beyond 49 per cent but up to 74 per cent is allowed through government approval route.

Future of Indian banks

Indian banking industry is anticipated to grow exponentially and become the world’s third largest in asset size (projected at US$ 28,500 billion from the current US$ 1,350 billion) by 2025, according to a report by the Boston Consulting Group (BCG) India.

Flourishing Investment Opportunities in India for NRIs

The Indian economy continues to grow at a good pace and holds a strong position on the global map. The country's gross domestic product (GDP) has been growing at an average rate of 8.5 per cent for the last five years.

India's economy is amongst the largest in the world on the basis of purchasing power parity (PPP). It is today one of the most attractive destinations for business opportunities with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. In FY 2011-12, the country attracted foreign direct investment (FDI) of around US$ 46.8 billion in various sectors.

According to UNCTAD's World Investment Prospects Survey 2012–2014, India is the third-most attractive destination for FDI in the world. Indian markets have significant potential and offer prospects of high profitability and a favorable regulatory regime for investors.

"We are keen to see FDI investment to surge in India and to that end, a favourable business climate will be helpful in going forward. We are encouraged to see there is a continued path towards fiscal consolidation. That there is a determination to improve the tax code. There is a determination to cap the subsidies at two per cent. All of those measures are good measures," according to Ms Christine Lagarde, Chief, International Monetary Fund (IMF).

Key Sectors

India has grown to become a trillion dollar economy with a largely self-sufficient agricultural sector, a diversified industrial base and a stable financial and services sector. There are numerous sectors that offer lucrative business investment opportunities in India. Some of the key sectors are:

• Aerospace & Defence
• Automotive
• Banking
• Capital markets
• Life Sciences
• Information Technology
• Insurance
• Media & Entertainment
• Mining & Metals
• Oil and Gas
• Ports
• Power and Utilities
• Real Estate
• Retail and consumer products
• Roads and highways
• Telecommunications

Government Initiatives in supporting business investments opportunities in India

In order to enable individuals to have the complete benefit of available business opportunities in India, the Government of India has taken following initiatives:

• The Government has signed memoranda of understanding (MoU) with 47 investors, attracting investments worth Rs 243.67 crore (US$ 43.83 million), according to S G Hegde, Joint Director, District Industries Centre, Mangalore
• The Small Industries Development Bank of India (SIDBI) plans to utilise the Rs 5,000 crore (US$ 899.28 million) venture fund allocated to it for investments in micro, small and medium enterprises (MSME) over the next four years. 100 MSME clusters have already been identified for the establishment of credit facilitation centres, added Mr Sushil Muhnot, Managing Director, SIDBI
• The Government of Maharashtra has decided to set up a manufacturing zone spread over 5,000 hectares under the National Manufacturing Policy. The policy seeks to give a boost to the manufacturing sector so that by 2022, it can contribute at least 25 per cent to the National GDP and add 100 million new jobs to the market. It has recognised large integrated areas called National Investment and Manufacturing Zones (NIMZ), which will be the growth drivers for the sector

India as an Investor-Friendly Country

The attractiveness of the Indian market is regularly substantiated through the investments made by various multinational corporations in the country, which demonstrate their belief in the strong fundamentals of the Indian economy. The Government of India policies backed with positive business environment, availability of talented workforce and stable outlook for the macro-economy has made India a global hub for international players to park their funds in various investment sectors.

There is a parallel process of business and industry with various countries taking note of the opportunities that recent economic developments in India have created for them.

Projections

As per the Government projections, Indian infrastructure landscape would attract investments worth Rs 49,000 billion (US$ 881.29 billion) during the 12th Five Year Plan period (2012-17), with at least 50 per cent funding from the private sector.

Sectors

For overseas Indians, India offers a tremendous opportunity for investment and wealth building as India is slated to grow at the rate of 8%-10% for the next few decades. There are various investment sectors where non-residents of Indians (NRIs) can explore money-spinning deals and do profitable business.

Investment Options

Most of the Indians who have migrated to foreign countries for professional and personal reasons, still feel the desire to be associated with their mother land in some way or the other. They try to make investments in India through different avenues. There are numerous investment options for NRIs in India that can yield them lucrative benefits and profitability both in short run as well as long run. A few of them are as follows:

• For the NRI who is looking for high returns, attention should be concentrated on the huge number of central and state sponsored projects in key infrastructural sectors like education, healthcare and construction
• In general NRI investment is made through three major sectors. These include bank accounts, investment in immovable properties and investment in securities and debts
• There are many types of bank accounts. The regulations vary according to the repatriation of the interest income
• The securities in which the NRI can invest through the automatic route include agriculture, mining, alcohol brewing, power, industrial explosives, hazardous chemicals, drugs and pharmaceuticals, transport, insurance, industrial parks, non banking financial institutions etc. You do not need the approval of the Reserve Bank of India (RBI) to invest in these securities. In some cases, the approval of the Foreign Investment Promotion Board (FIPB) may be required. These include sectors like tea, infrastructural companies except telecom, publication of newspaper and periodicals, courier service and single brand product retailing
• If you are looking for investment opportunities with repatriation benefits, you will have to invest in mutual funds, term deposits and bonds for at least three years
• A NRI can invest in proprietary and partnership firms in India, but the income will not be repatriated outside the country
• NRI can directly invest in real estate in India except if you are buying agricultural lands or plantations. Investments in housing schemes and commercial properties are free

Policies for foreign investors to do business in India

"India is clearly becoming a more and more important player on the world stage in G20 context, in terms of its role in the global economy. It is very useful for us to exchange ideas and build the basis for future collaboration," according to Mr Ben Bernanke, Chairman, US Federal Reserve.

India is the fifth best country in the world with dynamic growing businesses opportunities for non-resident Indians (NRIs). The Grant Thornton Global Dynamism Index gives a reflection of how suitable an environment it offers for dynamic businesses.

Scenario of Indian Economy

The Indian economy continues to grow at a good pace and holds a strong position on the global map. The country’s gross domestic product (GDP) has been growing at an average rate of 8.5 per cent for the last five years.

India's economy is amongst the largest in the world on the basis of Purchasing Power Parity. It is today one of the most attractive destinations for business and investment opportunities for NRIs and foreign investors with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. In FY 2011-12, the country attracted foreign direct investment (FDI) of around US$ 46.8 billion in various sectors.

The economy of India also boasts a robust financial system and deep capital markets. India’s demographic are very attractive with approximately 65 per cent of the total population falling in the age group of 15 to 64 years.

Foreign investment framework of India

The foreign direct investment (FDI) regime has been progressively liberalised during the course of the 1990s and continues to do so in the 2000s, with most restrictions on foreign investment being removed and procedures simplified. Foreign investors can invest directly and do business in India, either on their own or as a joint venture.

Some of the features of the consolidated FDI Policy of India and incentives offered by it:

• Indian companies are permitted to issue equity shares, fully, compulsorily and mandatorily convertible debentures (FCD's) and compulsorily and mandatorily convertible preference shares (CCPS) to the non-residents subject to pricing guidelines/valuation norms prescribed under FEMA
• Foreign investment is calculated on the basis of ownership and control of the Indian company.
• Use of foreign brand names/trademarks is permitted for the sale of goods in India
• "Single window" clearance facilities and "investor escort services" are available in various states to simplify the approval process for new ventures

Sole proprietorship in India

Sole proprietorship is the oldest and most common form of business. It is a one-man organisation where a single individual owns, manages and controls the whole business. An NRI or a person of Indian origin (PIO) residing outside India is allowed to do business in India through a sole proprietorship concern. The investment should be made on non–repatriation basis subject to satisfying certain other conditions.

Tax Incentives in India

The Government of India, for the purpose of accelerated growth of the Indian economy, has extended incentives in the form of tax holiday, deductions, rebates etc under the direct/indirect taxes. Primarily, such incentive relates to export promotion, new industrial undertaking, infrastructure facilities, software industry, research, promotion of backward areas etc.