Investment in India

Investment options in Indian energy sector

Energy plays a key factor in determining the economic development of all countries. The Indian energy sector has witnessed a rapid growth in order to meet the demands of a developing nation. Areas like resource exploration and exploitation, capacity additions, and energy sector reforms have been revolutionized.

Energy sector in India comprises of both non-renewable (coal, lignite, petroleum and natural gas) and renewable energy sources (wind, solar, small hydro, biomass, cogeneration bagasse etc.).

India has retained its position in top five world wind energy markets in 2012. The country remained the third largest market for new turbines in 2012 with capacity addition of 2,441 megawatt (MW), according to World Wind Energy Report 2012. World's wind turbine capacity addition grew at 19 per cent to 44,609 MW.

Major investments in Indian energy sector

The investment climate is very positive for investors in India. The power sector has witnessed a surge of higher investment flows than envisaged. The Ministry of Power has set a target for adding 76,000 MW of electricity capacity in the 12th Plan (2012-17) and 93,000 MW in the 13th Plan (2017-22).

Some of the major investments in the Indian energy sector:

• National Aluminium Company Ltd (Nalco) has set up its second wind power plant in Jaisalmer district of Rajasthan with a capacity of 47.6 MW. The Rs 283 crore wind power project is being executed through Gamesa Wind Turbines Private Ltd
• Coal India Ltd (CIL) plans to invest Rs 340 crore to embark on the second round of exploration at Mozambique coal blocks
• Jakson Power Solutions has won two new orders for installing solar rooftop systems in Bengaluru and Pune. The first order is to set up the 80 kilowatt peak (KWp) solar rooftop unit with a facility of battery back-up at Karnataka State Disaster Management Centre, Bengaluru, said Mr Sundeep Gupta, Joint Managing Director, Jakson Power Solutions
• Vikram Solar plans to put up a 10 MW power plant at Tamil Nadu (TN) under the second phase of the state's solar policy
• Mytrah Energy Ltd plans to acquire 59.75 MW of existing operational wind power assets in Tamil Nadu (TN) and Maharashtra. The company expects to have a capacity of 370 MW against previously anticipated 334 MW by 2013 wind season

Government Initiatives to promote investments in the energy sector

The Government has initiated several policies to attract investors in India to invest in the Indian energy sector. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power. The National Electricity Policy (NEP) in fact, stipulates power for all and annual per capita consumption of electricity to rise to 1,000 units by 2012.

Some of the major investments taken by the Government of India to garner investments in the energy sector are as follows:

• Foreign direct investments (FDI) up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading
• Under the Union Budget 2013-14, the Government of India has approved a scheme for the financial restructuring of DISCOMS to restore the health of the energy sector in India
• In a boost to power firms with plans to set up units in Special Economic Zones (SEZ), the Government has exempted them from the positive net foreign exchange (NFE) obligation applicable to regular units in such enclaves

Investment options in India, one of the most attractive economies in the world

The Indian economy continues to grow at a good pace and holds a strong position. Indiaís 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 investment opportunities with the available large manpower base, diversified natural resources and strong macroeconomic fundamentals. During April-January 2012-13, India received foreign direct investments (FDI) worth US$ 30.82 billion while FDI equity inflows during January 2013 stood at US$ 2.16 billion, according to latest data released by the Department of Industrial Policy and Promotion (DIPP).

India is the third-most attractive destination for FDI in the world. Indian markets have significant potential and a favorable regulatory regime for foreign investors, according to a survey titled World Investment Prospects Survey 2012ñ2014 by UNCTAD.

"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," according to Ms Christine Lagarde, Chief, International Monetary Fund (IMF).

Changes made by the Mr P Chidambaram, Union Minister for Finance, Government of India, in the Union Budget 2013-14 can greatly benefit high net worth individuals looking to invest in India, where returns on investments are higher than in any other market.

Key sectors in India where foreign investors can invest

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

• Aerospace & Defence
• Automotive
• Banking
• Biotechnology
• Information Technology
• Insurance
• Power
• Real Estate
• Retail
• Telecommunications

Government Initiatives in supporting business investments opportunities in India

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

• The Government of India has relaxed in expense ratios for mutual funds and the prospects of higher FDI limits in insurance sectors could unlock huge opportunities in these investment sectors.
• The Government has allowed Qualified Foreign Investors (QFIs) ó individuals, groups or associations ó to invest directly in Indian equities and bond markets.
• To encourage the micro, small and medium enterprises (MSMEs), the Government of Tamil Nadu (TN) has announced a special component package, which includes creation of an additional land bank for setting up new industrial estates in the state, increase in subsidy for machinery purchases and creation of a single window clearance committee to facilitate speedy approvals for industrial estates, said Ms J Jayalalithaa, Chief Minister of Tamil Nadu (TN).

Investment facilitation in India

The Ministry of Overseas Indian Affairs in partnership with Confederation of Indian Industry (CII) has set up an Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, to facilitate non-resident Indians (NRIs), overseas corporate bodies of overseas Indians and non-resident Indians who want to invest in India.

In order to ease the process for foreign investors to invest in India, OIFC has developed an online toolkit - Investment Guide to India. The toolkit serves as a simple, practical and stage-wise investment guide for the non-resident Indians wanting to invest in India.

Booming infrastructure industry of India

Infrastructure development in India has contributed majorly in the country's economic transformation and growth during the last decade. Roads, ports, railways and power are key segments of the infrastructure sector. Some of the key facts related to the same are:

• Indian Shipping segment, with 187 minor ports and 13 major ports, is spread across nine maritime states
• The Indian Railways network is spread over some 64, 000 km, with 12, 000 passenger and 7, 000 freight trains plying each day from 7, 083 stations carrying around 23 million travellers and 2.65 million tonnes (MT) of goods daily
• Indian road network is the second largest in the world with a total length of 4.1 million kilometres (km)

The total investment for the road sector is projected at Rs 9.20 lakh crore (US$ 167.55 billion) during the Twelfth Plan (2012-17), of which the Central and States would contribute Rs 3.58 lakh crore (US$ 65.19 billion) and Rs 2.66 lakh crore (US$ 48.44 billion), respectively, representing about 68 per cent of the total investments in infrastructure sector. Meanwhile, the private sector is anticipated to account for 32 per cent or Rs 2.94 lakh crore (US$ 55.6 billion) of the total investment.

Foreign investors are looking for high return on investments and are going to target Indian infrastructure companies in the coming years.

Investments options for NRIs in Indian infrastructure industry

The Cabinet has given its nod to private investment in state-run Indian Railways for building new rail lines and plants and enhance capacity. The move would allow foreign investors to connect railways with the ports, mines and industrial plants by providing last-mile connectivity and thereby reduce transportation costs

The Indian Government has also envisaged The Indian Railways Vision 2020 which aims to tackle infrastructure obstacles and deliver best services while building capacity, opening up huge investment opportunities for NRIs.

Further, the Government has recently approved nine road projects worth around Rs 11, 600 crore (US$ 2.11 billion), to be executed by State Governments under public private partnership (PPP) model. These projects, totalling up to 1, 226 km, are being bid in Andhra Pradesh, Uttar Pradesh and Bihar.

The finance ministry would provide 20 per cent of the financial requirement while another 20 per cent would come from the highways ministry in order to make these projects financially viable in the form of viability gap funding (VGF). The Government of India (GoI) has earmarked Rs 2, 295 crore (US$ 417.88 million) under VGF, wherein Rs 500 crore (US$ 91.06 million) would be released in 2012-13.

Future of infrastructure sector of India

India is betting high on private investments in infrastructure sector as the Government hopes that the private sector, through PPPs, will invest US$ 350-400 billion in infrastructure sectors (like roads, ports, railways and airports) between 2012 and 2017. This is about half the total investment in infrastructure according to the 12th Five Year Plan.

Moreover, seeking about US$ 1 trillion of investments in highways, harbours and power plants from 2012-2017 for infrastructure development in India, the Prime Minister, Manmohan Singh would lead a panel focussed at speeding up approvals of infrastructure projects. The Cabinet Committee on Investment would aim at easing bottlenecks that subdue growth and development of the country.