Investment in India

Invest in the lucrative Energy Sector of India

The energy sector in India is one of the most diversified fields in the world. Sources for power generation range from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power to other viable non-conventional sources like wind, solar and agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to augment further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in the country is required.

Renewable energy is the new keyword in Indian energy sector and most of the public and private players are coming up with plans to tap the potential market, on the back of favourable Government policies and initiatives. To tap the underlying potential, various Indian States are focussing on those aspects of energy, in which they have an edge, such as solar power, wind power, hydro power etc.

India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity, according to a research report released by The Pew Charitable Trusts.

Investment Opportunities in Indian Energy Sector

The investment climate is very positive in the power sector. The sector has witnessed higher investment flows than envisaged and offer huge investment opportunities for non-resident Indians (NRIs)/person of Indian origin (PIOs). The Ministry of Power is believed to have sent its proposal for addition of 76,000 megawatt (MW) of power capacity in the Twelfth Five Year plan (2012-17) to the Planning Commission. Energy sector in India is expected to generate revenue of about Rs 13 lakh crore (US$ 246.27 billion) during the Twelfth Five Year plan, according to Shri P Uma Shankar, Union Power Secretary. He said that the Government is looking at revenue estimates of Rs 2.5 lakh crore (US$ 47.36 billion) from transmission and Rs 4 lakh crore (US$ 75.78 billion) from distribution, in addition to Rs 6.5 lakh crore (US$ 123.15 billion) from generation.

The Government has initiated several policies to promote and garner investments from NRIs/PIOs in the power 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. Foreign direct investment (FDI) up to 100 per cent is permitted under automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.

The power sector in India is witnessing a growth trajectory. The Government has taken several steps required to provide investment opportunities and to develop power sector infrastructure within a short span of time. In fact, the State Electricity Board is going to renovate all the current power plants with the help of private partners.

How and Where to Invest in India?

If you're thinking about investing in India to make money especially in real estate, you need to first determine your financial goals. Do you need to make money quickly, invest for your children’s college fund, or build wealth for your retirement? Once you determine your financial goals, you need to decide which type of investment strategy works for you.

The proof of an investment strategy is how it performs in bad times, not in good times! Strategy is the key, whether you are planning a war, an election campaign or buying a property. There is no such thing as a generic, one-size-fits-all strategy. It is a statement, not an essay. Not having one, is like driving a car through the woods at night without any lights on. Planning your investments in a way that suits your strategy can enable you to create and maintain a competitive advantage.

Choosing the right investment strategies is all about matching the right real estate problem with the right investment solution. Your choice of which strategy to implement depends on two factors:

• The profit outcome you want to achieve (i.e. capital gains and/or positive cash flow returns); and
• The needs of the person who'll be paying you money in exchange for the use of the property.

Your strategy will determine the extent of your success in the property investment world whether you invest in India or overseas markets. It is a crucial first step for the novice property investor and something that an experienced investor monitors and reviews in light of its performance. Strategy dictates the Why, When, Where and How of property investment.

Business Investment Opportunities in India for NRIs

In today’s global economy more and more companies are looking behind their countries borders for investment opportunities. These opportunities can be mergers and acquisitions, joint ventures or Greenfield investments. India is gaining more and more respect as a country to invest in, while it has some major advantages.

India is the second-most profitable destination, according to UNCTAD's World Investment Prospects Survey 2010-2012.

Long-term projects call for large investments, other options include individual investment avenues and products.

National priority level and state-specific projects are being implemented across the country. These offer huge potential for investors willing to invest in India. The government is in fact, promoting Public Private Partnerships (PPPs) in many projects opening up new vistas in sectors such as infrastructure, education, healthcare etc.

The health care sector of India has also opened new business investment opportunities for Non-Resident Indians (NRIs)/Person of Indian Origin (PIOs) to invest in India because of the rise in disposable income, penetration of health insurance and unhealthy lifestyle of present generation.

The returns from real estate sector in India have consistently performed well and have even outperformed other investment options. The Government of India has created many policies and schemes to maximize business investment opportunities for NRIs/PIOs looking to invest in Indian real estate sector.

Government’s intervention on policy issues, especially, Tax Regulations and foreign direct investment (FDI) in sectors like retail, aviation etc. will play a role in driving large transactions, especially inbound deals.

Foreign direct investments opportunities for NRIs in India

India is fast gaining importance world-wide as the country has become an investment hub over the last decade. Global investors have retained their faith in the investment opportunities in India even during the toughest of the times of the Indian Economy. Non-resident Indians (NRIs) keep looking for the investment opportunities in India. As a result, India enjoyed high foreign inflows and investments when rest of the world was struggling to even survive.

India is projected to scale higher growth in the years to come. According to Mr Brad Wall, Premier of Saskatchewan, Canada, 'India is one of world's fastest growing significant economies'.

According to a UN report, India is the third most favoured destination for investment after China and the US for major global companies. The report further expects that foreign investments in India could increase by more than 20 per cent in 2012-13.

Consolidated Foreign Direct Investment Policy of India

The Indian government is continuously working towards increasing investment opportunities for NRIs and foreign direct investment (FDI) flows into the country. The country enjoyed the second highest growth in FDI inflows in the world during 2011, which eventually generated over two lakh jobs. According to the Ernst & Young's (E&Y) 2012 India Attractiveness Survey, investors view India as an attractive investment destination. India stands as the fourth most attractive destination for FDI in the survey's global ranking.

India received FDI worth US$ 2.21 billion in February 2012, registering an annual growth of 74 per cent. Cumulative inflows for April-February 2011-12 stood at US$ 28.40 billion.

India has already emerged as one of the most preferred destinations for foreign investment and this eminent position will need to be sustained, according to a report by Department of Industrial Policy and Promotion (DIPP). The Indian government is therefore, doing every bit to ensure this. The Government of India has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible. This framework is embodied in the Circular on Consolidated FDI Policy, which may be updated every year, to capture and keep pace with the regulatory changes effected in the interregnum. The DIPP and Ministry of Commerce & Industry make policy pronouncements on FDI through Press Notes/ Press Releases which are notified by the Reserve Bank of India (RBI) as amendments to the Foreign Exchange Management (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 (notification No. FEMA 20/2000-RB dated May 3, 2000).

Key Foreign Direct Investments in India

• The Government of India has approved 21 FDI proposals worth Rs 2,410 crore (US$ 436.01 million) including that of Pfizer Inc and Sterlite Networks on September 11, 2012.
• The Government of India has approved 14 FDI proposals worth Rs 1,584.11 crore (US$ 280.91 million), including that of Abhijeet Power Ltd to bring in FDI worth Rs 674 crore (US$ 119.51 million) and CLSA Singapore's proposal to invest Rs 225 crore (US$ 39.89 million) on July 23, 2012
• FDI inflows worth US$ 341.49 million were recorded in the drugs and pharmaceuticals sector between April 2009 to February 2012. At present, the Government of India allows 100 per cent FDI for both greenfield and existing projects in the sector, according to Mr Jyotiraditya Scindia, Minister of State for Commerce and Industry.

The foreign direct investments policy of the India helped in generating huge investment opportunities in India for NRIs.

Investment in Real Estate in India

Indian real estate has huge potential in almost every sector especially commercial, residential, retail, industrial, hospitality, healthcare etc. However, the major real estate developments in India are mainly the townships, residential units, shopping malls, offices, retail stores and commercial complexes.

The major growth has come due to increasing purchasing power, favourable demographics, existence of customer friendly banks & housing finance companies, professionalism in real estate and favorable reforms initiated by the government to attract global investors.

Real estate investment in India is primarily a long term investment providing low liquidity to an investor. Investors can look at renting out their property to bring consistency in revenues. This can also reduce the burden of EMIs for a property purchased on a loan. According to a survey conducted by ASSOCHAM, 65 per cent of working individuals prefer real estate as a mode of long term investment.

There are many banks and financial institutions that provide loans at attractive rate of interest to the builders. For example, HDFC Property Fund, Kotak Mahindra Realty Fund, and India Advantage Fund (ICICI), provide the funds for real estate development to the builders and developers for construction.

NRI real estate business is also on the rise in India. Recession had negligible impact on this sector. Therefore, the sector is opening up more and more investment opportunities for both domestic as well as foreign investors. The real estate sector is extremely a profitable venture, as the profits of investors have almost doubled or have derived 100 per cent profits in the residential segment.

The preferable time horizon for investment in real estate is four to seven years for better returns. The industry is popular for providing the second largest employment just after agriculture. One of the major reasons for this development is the policies taken by the Government of India.

Reforms initiated by the Indian Government

The Government including reserve bank of India (RBI) and Foreign Exchange Management Act (FEMA) has liberalised the rules and regulations for the NRIs to make investment in real estate. India has emerged as a top-most favourable destination for foreign direct investment (FDI) in the world with 100 per cent relaxation of FDI regulations in real estate.

The Government of India has now allowed international and domestic companies to operate real estate funds through private equity funding. RBI has also decreased its rate of interest in the home loan division.

Tax Advantages

People can avail the huge tax benefits on investing in real estate:

• Tax exemption is available on re-investment of sale proceeds of property in eligible possibilities.
• Tax benefit is available on interest on housing loan raised in India.

Nowadays, real estate investment in India is more productive and revenue generating in comparison to other businesses. India is a safe investment destination for real estate sector with assured returns of 10 to 12 per cent.

Investment Prospects for NRI’s in India

India is considered to be the second favourite destination for investors from other countries. India's unique and vast geography, endowed with diverse topography, has made it one of the most attractive investment destinations in the world.

The healthy growth of the Indian economy also becomes evident from the inflow of the foreign direct investment (FDI). Investment opportunities in India are plentiful. It becomes evident with the numerous MNC's not only trailing their products and services into the Indian markets but also coming forward to set up their manufacturing units in India.

The vast investment opportunities available and the positive investment climate in India have become a part of every business entrepreneur’s life. The Ministry of Overseas Indian Affairs has set up an Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, in partnership with Confederation of Indian Industry (CII) to promote investment opportunities amongst the overseas Indians.

Some of the fruitful investment options in India are:

Fixed deposits: It is the most common among the investment opportunities in India. These are safe investments and provide decent return.

Insurance sector: There are a lot of insurance companies emerging these days as the health is becoming less secured because of the unhealthy life style of present generation. Some of the common insurance policies are life insurance, health insurance, home insurance and the car insurance policies.

Investment in Stock: The investment in stock market in India is one of the fastest means of earning. As the stock prices are always fluctuating, the chances of risk are also high along with high profits.

Mutual Funds: It is a collective investment scheme that pools money from many investors or foreign investors in India to purchase securities such as stocks, bonds, money market instruments and similar assets. It is an easy and safe investment with periodic withdrawals.

Real Estate: The population in India is increasing and therefore land is always in demand. Besides the need to reside, the establishment of industries also requires land. The projection of real estate includes sectors such as hospitality, manufacturing, housing, retail, commercial etc. Thus it is obvious that the cost of real estate is not going to fall down. Thus the investment opportunities in India are high and by investing in a land and selling it on demand by others is an easy source to earn money.

Also, there are many other exciting business investment opportunities in India, especially, for industrialists dealing in outsourcing technology, internet ventures, software development, e-commerce, etc.

The Government of India is trying to accommodate and utilise the conducive investment climate of the country by relaxing and even introducing new policies. The change in government policy, availability of cheap resources, strong operational units, etc. are the important reasons for FDI in India. It is important for foreign investors in India to have some trend analysis of investment scope before they plan to start or set up a business in India, thus the role of investment advisors to prepare extensive investment guides to help and direct the trade investments and the scope of foraying into a particular business in India becomes crucial.

Growing Healthcare Market in India

India is one of the most profitable healthcare markets globally. The sector is one of the largest and rapidly-growing sectors in India, in terms of revenue and employment. The Indian healthcare sector comprises the sub-sectors of hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance and medical equipment.

The main challenge is to deliver affordable health care services to India's billion-plus population. This signifies enormous opportunities for the medical community and other service providers in India. The leading factors supporting the growth of the industry are- prevalence of various diseases, rising urbanization, untapped market, increasing life expectancy, and active private sector participation. The healthcare in India is controlled mostly by major foreign companies. The foreign companies have subsidiaries in the country, mainly because of the availability of cheap and skilled labor.

The Indian healthcare sector is a rapidly-growing sector with high potential for future growth, both in urban and rural India. In the year 2011, the sector was sized at US$ 50 billion as it employs a total of 4.5 million people directly and indirectly within India. The sector is poised to grow to US$ 100 billion by the year 2015 and further to US$ 275.6 billion by 2020, according to the estimates by ratings agency Fitch.

FDI in Hospitals and Manufacture of Medical and Surgical Appliances

The economic reforms launched by the government from 1991 onwards have resulted in significant economic growth and the integration of India into the global economy. With the opening up of the Indian capital markets to Foreign Institutional Investors, the foreign direct investment regime too has been increasingly liberalised.

The health care industry in India has been witnessing a potential upsurge for the past few years especially in the hospitals and manufacturing of medical and surgical appliances.

The total inflow of FDI in India in the hospitals and diagnostics sector was US$ 1 billion from April 2000–April 2011, according to Department for Industrial Policy and Promotion (DIPP), which is responsible for formulating the FDI policy in the country.

FDI inflows to medical and surgical appliances are estimated to be around US$ 20.5 million. Medical and Surgical Appliances is Rs 981.7 million industry with a share of 10.59 percent in the global market.

Some of the government initiatives boosting Indian healthcare sector are:

There have been a number of initiatives taken up by the Government of India for the enhancement of healthcare sector in the country. Some of them are:

100 per cent foreign direct investment is permitted for health and medical services under the automatic route.

The National Rural Health Mission had allocated US$ 10.15 billion for the up gradation and capacity enhancement of healthcare facilities. The aim of NRHM is to provide facilities of quality healthcare in India.

In March 2010, the government allocated an additional US$ 1.2 billion for six upcoming AIIMS-like institutes and upgradation of 13 existing government medical colleges in order to meet revised cost of construction.

FDI in Indian Pharmaceutical Market

The pharmaceutical industry in India is one of the largest and most advanced among the developing countries. The industry stands third in the world in terms of volume. It ranks 14 in terms of value and is expected to grow 8 to 9 per cent annually. According to a research done by Associated Chambers of Commerce and Industry (Assocham), the Indian pharma industry is expected to reach US$ 20 billion by 2015, making it one of the world's top 10 pharmaceuticals markets.

In India, there are many small sectors, medium sectors, private limited companies and public companies that have been consistently manufacturing various medicinal products to meet the increasing demands of the people. The foreign investors can invest in Indian companies through the purchase of shares, debentures, equities, or bonds from an Indian company.

Pharma industry in India is growing at a rapid pace, marked by a number of mergers and acquisitions and growth in foreign expenditure. The sector is going to be a major area of focus in the coming years as Indian medicines are increasingly becoming popular in many developed and developing countries because of the cost effectiveness and easy availability.

India saw FDI inflow of US$ 341.49 million in the drugs and pharmaceuticals sector between April 2009 and February 2012. Also, the government has liberalised investments made by registered Foreign Institutional Investors (FIIs) under the Portfolio Investment Scheme (PIS) from April 10, 2012. Earlier, these spendings required approval from the government.

There are numerous ways for foreign company to enter in to an Indian market. Different types of foreign investment in India are:

Green field investment is FDI when a company establishes a subsidiary in a new country and starts its own production. It involves construction of a new plant, rather than the purchase of an existing plant or firm. According to the latest rules of Reserve bank of India (RBI), FDI, up to 100 per cent, under the automatic route, is permitted for green field investments in the Indian pharmaceutical sector.

Brown field investment is FDI that involves the purchase of an existing plant or firm, rather than construction of a new plant. For e.g. many host countries encourage the formation of joint ventures, as a way to build international cooperation. Joint venture is an equity and management partnership between the foreign firm and a local entity in the host market. FDI, up to 100 per cent, under the government approval route, is permitted for brown field investments in the Indian pharmaceuticals sector. Under the new rules, the overseas investor will have to seek permission from the Foreign Investment Promotion Board (FIPB) for any merger or acquisition.

In India, the cost of setting up research and development laboratory, scientific equipments, administration costs, transportation cost, raw materials cost and licensing procedure is much less when compared to any developed countries. The main determinants of FDI in India are availability of huge natural resources, cheap labor, steady economic growth, huge benefits and concessions granted by government, increasing population and per capita income, etc. So, there are huge opportunities for foreign investment in India.

Investment Scenario in Indian Market

The process of reforms as part of liberalization has resulted in greater investment in Indian market. In today's economy of less income growth and highly increasing cost of living, one has to know how to use his/her savings to generate higher returns. Availability of too many options and no clear idea about these choices is creating a hostile situation for the investor to choose the best among the available alternatives.

An investor has several investment alternatives (such as stocks, bonds, precious metals, etc.) to choose from, depending on his risk profile and expectation of returns. Different investment substitutes represent a different risk-reward trade off. Low risk investments are those that offer assured, but lower returns, while high risk investments provide the potential to earn greater returns. Hence, an investor can choose the most suitable investment on the basis of his/her risk tolerance.

Best investment options in India

Some of the investment alternatives available in the Indian investment market are:

• Investment in Fixed Deposits- FD is one of the safe investment options with the current annual rate of interest of 10 per cent.
• Investments in Insurance- Insurance-cum-investment options like unit linked insurance plan (ULIPs) are beneficial for the investors. Insurance offer quality services to cover life, money and assets along with low-risk profits.
• Investment in Mutual Funds- People may select mutual funds as an investment alternative on the basis of long term performance, short term performance, consistent returns, etc.
• Investment in Equity- Private equity as an investment substitute is growing fast in India. With a business of US$ 20 billion in 2010-11, the share of equity investments is expected to increase in coming years.
• Investment in Public Provident Funds- PPF is a government guaranteed fixed income security with a minimum amount of Rs 500 and maximum of Rs 1, 00,000 in a financial year; PPFs are now a popular choice of investment in long run.

Points to be considered before taking investment decision

Risk – It is important for the investor to choose the investment option on the basis of his/her risk profile. For e.g. - A low risk investor should not invest into equities. He should look for the safe option for investment. Risky asset class causes a loss of principal.

Liquidity – Liquidity is also an important criterion for the selection of Investment Avenue. For e.g. - An investor should not invest into public provident fund (PPF), if he needs money in 3- 4 years time frame. PPF has minimum lock in period of five years.

Time horizon – Investment should be done by considering the specific time horizons. For e.g. - For short term investment, mutual fund or fix deposit could be a good option, where as for long term, real estate and regular investment into equities could be a good option.

Taxation – Taxation affects the real returns of investment, investor should always look at the tax aspect of any investment before investing into it.

The scope for business in India is vast. Indian economy has grown as one of the significant economies in the world having immense potential towards long-term growth. The growth has been backed by the various industrial sectors to a great extent. The sectors mainly include technology, manufacturing and service industry.

Business Opportunities in HealthCare Market in India

The healthcare sector in India is growing fast. The sector is currently estimated to be worth US$ 65 billion and is expected to reach US$ 100 billion by 2015, according to the rating agency Fitch. The growth in the sector comes due to- increasing population, growing lifestyle-related health issues, economic treatment, rising incomes, government initiatives, etc.

India is the first country to have a large number of multinational healthcare providers. This rapidly developing industry in India has led to a qualitative shift in patient demands. This has resulted in centers of medical excellence developing and acquiring the latest medical equipment to treat their domestic and international patients.

Due to the development in the rural areas, people even in the villages are now become more conscious about their health issues. They are opting for more health benefits for safe and diseases free existence. This will create huge investment opportunities in the sector.

Opportunities for investment in Healthcare

Healthcare infrastructure: A huge amount of private capital will be required in the coming years to meet infrastructure needs of healthcare in India. An additional 2 million beds are required for India to bridge the gap and prepare for demand estimations in 2025. The government is expected to contribute only 15-20 per cent of the total, providing a vast opportunity for private players to fill the gap.

Diagnostic & Pathology Services: High cost difference in India allows for outsourcing of pathology and laboratory tests by international hospital chains

Telemedicine: There is a vast opportunity for investment in telemedicine as it provides rural areas access to better quality healthcare.

Medical tourism: Medical tourism in India has also received a boost with the arrival of patients from different countries. According to industry estimates, the market size of medical tourism is estimated to be around US$ 2.5 billion and is growing at over 25 per cent per annum. Hence, create enormous investment opportunities in India.

Contract Research: Contract research is a rapidly growing segment in the Indian health care industry. Foreign players are entering into contract research to reduce their operational and clinical cost.

Health Insurance: Increasing healthcare cost and burden of new diseases along with low government funding has raised the demand for health insurance coverage. Less than 15 per cent of the Indian population is covered through health insurance. With the increasing demand for affordable quality healthcare in India, the penetration of health insurance is poised to grow rapidly in the coming years.

Major Growth Drivers

• 100 per cent FDI is permitted for all health-related services under the automatic route.
• Lower tariffs and higher depreciation on medical equipment.
• Income tax exemption for five years to hospitals in rural areas, Tier II and Tier III cities.
• Increasing penetration of health insurance.
• High-growth in medical tourism.

India: Hotspot Investment Destination for Foreign Investors

India is the largest democracy in the world. It ranks second in terms of population. The policy of liberalization has transformed the prospects for the Indian economy. Today India is one of the favorite destinations for global investments. The major investors in India are Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany, etc. Foreign direct investment (FDI) in India went up by 31 per cent to US$ 27.5 billion last year. The sectors that attracted maximum FDI last year include services (financial and non financial), telecom, housing and real estate, and construction and power.

The government has come up with several incentives like import of capital goods at concessional customs duty, liberalisation of external commercial borrowing norms, tax holiday to encourage investments, etc. "The government should allow 100 per cent FDI in sectors like domestic airlines and insurance sector to boost inflows and generate employment, "as per Rajiv Kumar, Secretary General, FICCI. Sectors like automobiles, chemicals, food processing, oil and natural gas, petrochemicals, power, services and telecommunications have witnessed tremendous investments.

Investment options in India

There are number of options available for foreign investment in India for both short term and long term. The major options are real estate, bonds, mutual funds, money markets, gold, and financial assets (non-marketable, LIC policies & equity shares). Today, there are businesses and industries that are even 100% open for such investment. Some of the sectors that are still not open for foreign investment include, rail transport, lottery business, tobacco business, certain agricultural activities, atomic energy, mineral oils, etc.

Who can invest in India?

There are following categories of non-Indian resident who may invest in the capital of Indian Company:

• A non-resident entity (other than citizen of Pakistan)
• A citizen or entity of Bangladesh under Government route.
• NRI resident as well as citizen of Nepal and Bhutan on repatriation basis.
• Sebi registered NRIs through a registered broker on recognised India stock exchange.
• Foreign venture capital investor registered by Sebi.
• An FII (foreign institutional investor) may invest in the capital of an Indian company under the portfolio investment scheme.

Business Opportunities in India

There are various factors that create favorable business opportunities in India are:

• There are huge business opportunities in Indian retail sector as people have become more conscious about branded products. Improvement in purchasing power and huge middle class population results in the growth of the economy.
• India's competitive advantage in information technology can be used to enhance productivity in industries.
• Availability of large number of technical manpower has led to the expansion of manufacturing base across different industries.
• India's rich natural resources, availability of better infrastructure, well established banking system, better agriculture, etc. have created more investment opportunities.
• The capital markets in India are one of the fastest growing markets in the world, attracting huge investments from foreign institutional investors.
• The economic reforms have brought in policy changes in terms of freedom of entry, investment, location, usage of technology, import and export. These changes have created an investment friendly environment.